<PAGE>
SCHEDULE 13E-3
RULE 13e-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
(Amendment No. 2)
HealthCare Properties, L.P.
---------------------------
(Name of the Issuer)
Capital Realty Group Senior Housing, Inc.
Retirement Associates, Inc.
Robert L. Lankford
Capital Senior Living Corporation
Jeffrey L. Beck
James A. Stroud
Lawrence A. Cohen
Capital Senior Living Properties, Inc.
Capital Senior Living Merger, LLC
HealthCare Properties, L.P.
------------------------------------
(Name of Person(s) Filing Statement)
Units of Limited Partnership Interest
-------------------------------------
(title of Class of Securities)
N/A
-------------------------------------
(CUSIP Number of Class of Securities)
Capital Realty Group Senior Housing, Inc. 3516 Merrel Road, Dallas, Texas 75229
-------------------------------------------------------------------------------
(Names, Address and Telephone Number of Person authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a.[x] The filing of solicitation materials or an Information Statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b.[ ] The filing of a registration statement under the Securities Act of
1933.
c.[ ] A tender offer.
d.[ ] None of the above.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Check the following box if the soliciting materials or Information
Statement referred to in checking box (a) are preliminary copies. [x]
Calculation of Filing Fee
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Transaction $13,127,131 Amount of Filing Fee $2,625.43
Valuation(1)
</TABLE>
- --------------------------------------------------------------------------------
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. [x]
- ----------
1 Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Amount previously paid: $2,625.43 Filing party: HealthCare Properties L.P.
--------- --------------------------
Form or registration no.: Schedule 14C Date filed: September 2, 1998
------------ -----------------
</TABLE>
Instruction. Eight copies of this statement, including all exhibits,
should be filed with the Commission.
<PAGE>
This Amendment No. 1 to the Rule 13e-3 Transaction Statement (the
"Statement") is being jointly filed by HealthCare Properties, L.P., a Delaware
limited partnership (the "Partnership"), Capital Senior Living Properties, Inc.
(the "Company"), Capital Senior Living Merger, LLC (the "Merger Sub"), Capital
Realty Group Senior Housing, Inc. (the "General Partner"), Retirement
Associates, Inc. ("Associates"), Robert L. Lankford, Capital Senior Living
Corporation ("CSLC"), Jeffrey L. Beck, James A. Stroud, and Lawrence A Cohen in
connection with the planned adoption of the Agreement and Plan of Merger (the
"Merger Agreement") between the Partnership, Company, and Merger Sub pursuant to
which the Merger Sub will merge with and into the Partnership (the "Merger").
The Partnership will be the surviving entity with the Partnership's Unit
Holders, other than the Company, receiving cash for their Units. The Merger is
more fully described in the Partnership's Information Statement, dated October
15, 1998 (the "Information Statement").
The following Cross Reference Sheet is supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Information
Statement of the information required to be included in response to the items of
this Statement. The information in the Information Statement, a copy of which is
attached hereto as Exhibit (d), is hereby expressly incorporated herein by
reference, and the responses to each item in this Statement are qualified in
their entirety by the information contained in the Information Statement. The
Information Statement will be completed and, if appropriate, amended, prior to
the time it is first sent or given to Unit Holders of the Partnership. This
Statement will be amended to reflect such completion or amendment of the
Information Statement.
The filing of this Statement shall not be construed as an admission by the
Partnership, Company, Merger Sub, General Partner, Associates, Robert L.
Lankford, CSLC, Jeffrey L. Beck, James A. Stroud, or Lawrence A. Cohen that
either of the General Partner, Associates or Robert L. Lankford is "controlled"
by CSLC or any of its affiliates or that CSLC or any of its affiliates is an
"affiliate" of the General Partner, Associates or Robert L. Lankford within the
meaning of Rule 13e-13 under Section 13(e) of the Securities Exchange Act of
1934, as amended.
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEMS LOCATION IN INFORMATION STATEMENT
- -------------------- ---------------------------------
<S> <C>
Item 1(a) Cover Page; "The Partnership."
Item 1(b) Cover Page; "The Partnership"; "Special Factors--
Summary of the Material Terms of the Merger";
"Voting Securities and Principal Holders Thereof."
Item 1(c) *
Item 1(d) *
Item 1(e) Not Applicable.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEMS S LOCATION IN INFORMATION STATEMENT
- -------------------- - ---------------------------------
<S> <C>
Item 1(f) "The Partnership."
Item 2(a)-(d) Cover Page; "The Partnership"; "General Partner";
"Capital Senior Living Properties, Inc."; "Capital
Senior Living Merger, LLC"; "Changes in Control."
Item 2(e) and (f) *
Item 2(g) *
Item 3(a) - (b) "Special Factors--Summary of the Material Terms of
the Merger"; "--Background of the Merger;
"--Certain Related Party Transactions."
Item 4(a) and (b) Cover Page; "The Partnership"; "Information
Statement"; "Special Factors--Summary of the
Material Terms of the Merger."
Item 5(a)-(g) "Special Factors--Summary of the Material Terms of
the Merger"; "--Plans for the Partnership After
the Merger."
Item 6(a) Cover Page; "Special Factors--Summary of the
Material Terms of the Merger"; "--Source of
Funds."
Item 6(b) Cover Page; "Special Factors--Expenses"; "Special
Factors--Appraisal of the Partnership Assets."
Item 6(c)-(d) Not Applicable.
Item 7(a)-(c) Cover Page; "The Partnership"; "Information
Statement"; "Special Factors--Background of the
Merger"; "--Summary of the Material Terms of the
Merger."
Item 7(d) "Federal Income Tax Consequences"; "Effect of the
Sale on Unit Holders' Rights"; "Special Factors--
Purposes and Reasons of General Partner in
Agreeing to the Merger"; "--Purposes and Reasons
of Associates and Mr. Lankford in Agreeing to the
Merger"; "--Purposes and Reasons of Company,
Merger Sub and CSLC in Agreeing to the Merger";
"--Purposes and Reasons of Mr. Beck, in Agreeing
to the Merger"; "--Purposes and Reasons of
Mr. Stroud in Agreeing to the Merger"; "--Purposes
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEMS S LOCATION IN INFORMATION STATEMENT
- -------------------- - ---------------------------------
<S> <C>
and Reasons of Mr. Cohen in Agreeing to the Merger."
Item 8(a)-(f) "Special Factors--Summary of the Material Terms of
the Merger"; "--Appraisal of the Partnership
Assets"; "--Position of the General Partner as to
the Fairness of the Merger"; "--Position of
Associates and Mr. Lankford as to the Fairness of
the Merger"; "--Position of the Company, Merger
Sub and CSLC as to the Fairness of the Merger";
"--Position of Mr. Beck as to the Fairness of the
Merger"; "--Position of Mr. Stroud as to the
Fairness of the Merger"; "--Position of Mr. Cohen
as to the Fairness of the Merger."
Item 9 "Special Factors--Appraisal of the Partnership
Assets"; "Reports."
Item 10(a) Cover Page; "The Partnership"; "The General
Partner"; "Capital Senior Living Properties,
Inc."; "Voting Securities and Principal Holders
Thereof."
Item 10(b) Not Applicable.
Item 11 "Special Factors."
Item 12(a)-(b) Not Applicable.
Item 13(a) "Appraisal Rights."
Item 13(b) Not Applicable.
Item 13(c) Not Applicable.
Item 14(a) "Financial Information."
Item 14(b) Not Applicable.
Item 15(a) *
Item 15(b) Not Applicable.
Item 16 The Information Statement.
Item 17 *
</TABLE>
* The Item is located in this Schedule 13E-3 only.
5
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information appearing on the Cover Page and under the caption "The
Partnership" in the Information Statement is incorporated herein by
reference.
(b) The Partnership's Units of Limited Partnership Interest (the "Units").
The information appearing on the Cover Page and under the captions
"The Partnership," "Special Factors--Summary of the Material Terms of
the Merger," and "Voting Securities and Principal Holders Thereof" in
the Information Statement is incorporated herein by reference.
(c) There is no established trading market for the Units.
(d) The Partnership has made cash distributions, over the past two years,
totaling approximately $0.6 per Unit to the Unit Holders. In light of
potential lease issues and tightening Medicare and Medicaid
reimbursements, the General Partner believes that the revenues
generated by the Partnership's assets will be insufficient to allow
regular cash distributions in the future.
(e) Not Applicable.
(f) The information appearing under the caption "The Partnership" in the
Information Statement is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) This Statement is being filed jointly by the Partnership, who is the
issuer of the class of equity securities which is the subject of the
Rule 13e-3 transaction, the Company, the Merger Sub, the General
Partner, Associates, CSLC, Robert L. Lankford, Jeffrey L. Beck, James
A. Stroud, and Lawrence A. Cohen. The information appearing on the
Cover Page and under the captions "The Partnership," "The General
Partner," "Capital Senior Living Properties, Inc.," and "Capital
Senior Living Merger, LLC," and "Changes in Control" in the
Information Statement is incorporated herein by reference.
The directors of Capital Senior Living Corporation ("CSLC"), an
affiliate of the Company and the Partnership, are James A. Moore who
is currently President of Moore Diversified Services, Inc., James A.
Stroud who is Chief Operating Officer of CSLC, Jeffrey L. Beck who is
Chief Executive Officer of CSLC, Lawrence A. Cohen who is Vice
Chairman and Chief Financial Officer of CSLC, Dr. Gordon Goldstein who
is an attending anesthesiologist at Presbyterian Hospital in Dallas,
J. Frank Miller, IV who is President and Chief Executive Officer of
JPI, and Dr. Victor W. Nee who is a professor at Notre Dame
University. The officers of CSLC are Jeffrey L. Beck who is the Chief
Executive Officer, James A. Stroud who is the Chief Operating Officer,
Lawrence A. Cohen who is the Chief Financial Officer, Keith N.
Johannessen who is the President and David R. Brickman who is Vice
President and General Counsel.
6
<PAGE>
Robert L. Lankford is the sole Director and President of Retirement
Associates, Inc. ("Associates"), and the Director and President of the
General Partner. Mr. Lankford is an independent contractor with Kamco
Property Commercial Real Estate Brokerage. From 1988 to 1997, Mr.
Lankford was an independent contractor with Capital Realty Brokerage,
Inc. Wayne R. Miller is the Vice President of the General Partner. Mr.
Miller is an attorney in private practice.
The Directors of the Company are David R. Brickman who is currently
Vice President and General Counsel of CSLC, and Keith N. Johannessen
who is currently President of CSLC. The officers of the Company are
Keith N. Johannessen who is President, David R. Brickman who is Vice
President and Secretary, Robert L. Goodpaster who is Vice President,
David W. Beathard who is Vice President, and Robert F. Hollister who
is Controller.
The sole member of the Merger Sub is the Company.
(e)-(f) During the last five years, neither the Partnership nor to the best of
its knowledge, the General Partner, or any of the General Partner's
officers, directors or control persons or Associates or any of
Associates officers, directors or control persons, and neither the
Company nor to the best of its knowledge the Merger Sub, CSLC or any
of CSLC's officers, directors or control persons, (i) has been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) was 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 except James A. Stroud who in 1994 pled guilty, in the
State District Court of Dallas, Texas, to felony charges of driving
while intoxicated, and was sentenced to, among other obligations, five
years probation and aftercare obligations, and as a result, a probated
sentence in 1992 of convictions of driving while intoxicated charges
was extended. In 1993, Mr. Stroud pled guilty, in the State District
Court of Dallas, Texas, to a misdemeanor possession of marijuana and
paid a minor fine.
(g) Messrs. Beck, Stroud, Cohen, and Lankford are U.S. citizens.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)-(b) The information set forth under the captions "Special Factors--Summary
of the Material Term of Merger," "--Background of the Merger," and
"--Certain Related Party Transactions" in the Information Statement is
incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a)-(b) The information set forth on the Cover Page and under the captions
"The Partnership," "Information Statement," and "Special Factors" in
the Information Statement is incorporated herein by reference.
7
<PAGE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE
(a)-(g) The information set forth under the captions "Special Factors--Summary
of the Material Terms of the Merger," "--Background of the Merger,"
and "--Certain Related Party Transactions" in the Information
Statement is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth on the Cover Page and under the captions
"Special Factors--Summary of the Material Terms of the Merger," and
"--Source of Funds" in the Information Statement is incorporated
herein by reference.
(b) The information set forth on the Cover Page and under the captions
"Special Factors--Expenses," and "--Appraisal of the Partnership
Assets" in the Information Statement is incorporated herein by
reference.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(c) The information set forth on the Cover Page and under the captions
"The Partnership," "Information Statement," "Special
Factors--Background of the Merger," and "--Summary of the Material
Terms of the Merger" in the Information Statement is incorporated
herein by reference.
(d) The information set forth under the captions "Effect of The Sale On
Unit Holders' Rights," "Federal Income Tax Consequences," "Special
Factors--Purposes and Reasons of the General Partner in Agreeing to
the Merger," "--Purposes and Reasons of Associates and Mr. Lankford in
Agreeing to the Merger," "--Purposes and Reasons of Company, Merger
Sub and CSLC in Agreeing to the Merger," "--Purposes and Reasons of
Mr. Beck in Agreeing to the Merger"; "--Purposes and Reasons of Mr.
Stroud in Agreeing to the Merger"; and "--Purposes and Reasons of Mr.
Cohen in Agreeing to the Merger: in the Information Statement is
incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(f) The information set forth under the captions "Special Factors--Summary
of the Material Terms of the Merger," "--Certain Related Party
Transactions," "--Appraisal of the Partnership Assets, "--Position of
the General Partner as to the Fairness of the Merger," "--Position of
Associates and Mr. Lankford as to the Fairness of the Merger,"
"--Position of the Company, Merger Sub, and CSLC as to the Fairness of
the Merger," "--Position of Mr. Beck as to the Fairness of the
Merger," "--Position of Mr. Stroud as to the Fairness of the Merger,"
and "--Position of Mr. Cohen as to the Fairness of the Merger" in the
Information Statement is incorporated herein by reference.
8
<PAGE>
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth under the captions "Special
Factors--Appraisal of the Partnership Assets" and "Reports" in the
Information Statement is incorporated herein by reference. Copies of
the Appraisals shall be available for inspection and copying at the
principal executive offices of the Partnership during its regular
business hours by any interested Unit Holder of the Partnership or his
representative who has been so designated in writing.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth on the Cover Page and in the captions "The
Partnership," "General Partner," "Capital Senior Living Properties,
Inc.," and "Voting Securities and Principal Holders Thereof" in the
Information Statement is incorporated herein by reference.
(b) Not applicable.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth under the captions "Special Factors" and
"Change of Control" in the Information Statement is incorporated
herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a)-(b) Not applicable.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth under the caption "Appraisal Rights" in the
Information Statement is incorporated herein by reference.
(b)-(c) Not Applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth under the caption "Financial Information" in
the Information Statement is incorporated herein by reference.
(b) Not Applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED OR UTILIZED.
(a) The officers and employees of the Partnership will perform tasks which
would be expected to arise in connection with the transaction.
(b) Not Applicable.
9
<PAGE>
ITEM 16. ADDITIONAL INFORMATION.
Additional information concerning the Merger is set forth in the
preliminary copies of the Information Statement which is attached
hereto as Exhibit (d).
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not Applicable.
(b)(1) Appraisals of the Cane Creek Rehabilitation Center delivered by
HealthCare Property Appraiser of America, Inc. on April 10, 1997.
(b)(2) Appraisal of the Hearthstone of Round Rock delivered by HealthCare
Property Appraiser of America, Inc. on April 10, 1997.
(b)(3) Appraisal of the McCurdy Residential Center delivered by HealthCare
Property Appraiser of America, Inc. on April 10, 1997.
(b)(4) Appraisal of the Crenshaw Creek Rehabilitation Center delivered by
HealthCare Property Appraiser of America, Inc. on April 10, 1997.
(b)(5) Appraisal of the Cedarbrook Rebound Facility delivered by HealthCare
Property Appraiser of America, Inc. on April 10, 1997.
(b)(6) Appraisal of the Sandybrook Center delivered by HealthCare Property
Appraiser of America, Inc. on April 10, 1997.
(b)(7) Appraisal of the Cambridge Nursing Home delivered by HealthCare
Property Appraiser of America, Inc. on April 10,1997.
(b)(8) Appraisal of the Trinity Hills Manor delivered by HealthCare Property
Appraiser of America Inc. on April 10, 1997.
(b)(9) Restricted Update of Cedarbrook Rebound Facility Appraisal delivered
by HealthCare Property Appraiser of America, Inc. on December 20,
1997.
(b)(10) Restricted Update of Cambridge Nursing Home Appraisal delivered by
HealthCare Property Appraiser of America, Inc. on December 20, 1997.
(b)(11) Restricted Update of McCurdy Residential Center Appraisal delivered by
HealthCare Property Appraiser of America, Inc. on December 20, 1997.
(b)(12) Restricted Update of Trinity Hills Manor Appraisal delivered by
HealthCare Property Appraiser of America, Inc. on December 20, 1997.
(b)(13) Restricted Update of Crenshaw Creek Appraisal delivered by HealthCare
Property Appraiser of America, Inc. on December 20, 1997.
10
<PAGE>
(b)(14) Restricted Update of Hearthstone of Round Rock Appraisal delivered by
HealthCare Property Appraiser of America, Inc. on December 20, 1997.
(b)(15) Restricted Update of Cane Creek Rehabilitation Center Appraisal
delivered by HealthCare Property Appraiser of America, Inc. on
December 20, 1997
(b)(16) Restricted Update of Sandybrook Center Appraisal delivered by
HealthCare Property Appraiser of America, Inc. on December 20, 1997.
(c) Form of Agreement and Plan of Merger, among Healthcare Properties,
L.P., Capital Senior Living Properties, Inc., and Capital Senior
Living Merger, LLC.
(d) Preliminary copies of the Information Statement of Healthcare
Properties, L.P. filed with the SEC on the date hereof and
incorporated herein by reference.
(e) Not Applicable.
(f) Not Applicable.
11
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 5, 1998
HEALTHCARE PROPERTIES, L.P.
By: /s/ Capital Realty Group Senior Housing, Inc.
---------------------------------------------
Name: Capital Realty Senior Housing, Inc.
Title: General Partner
By: /s/ Robert Lankford
---------------------------------------------
Name: Robert L. Lankford
Title: President
CAPITAL SENIOR LIVING PROPERTIES, INC.
By: /s/ David C. Brickman
---------------------------------------------
Name: David C. Brickman
Title: Vice President
CAPITAL SENIOR LIVING MERGER, LLC
By: Capital Senior Living Properties, Inc.
---------------------------------------------
Name: Capital Senior living Properties, Inc.
Title: Sole Member
By: /s/ David C. Brickman
---------------------------------------------
Name: David C. Brickman
Title: Vice President
CAPITAL SENIOR LIVING CORPORATION
By: /s/ David C. Brickman
---------------------------------------------
Name: David C. Brickman
Title: Vice President
By: /s/ Jeffrey L. Beck
---------------------------------------------
Name: Jeffrey L. Beck
<PAGE>
By: /s/ James A. Stroud
---------------------------------------------
Name: James A. Stroud
By: /s/ Lawrence A. Cohen
---------------------------------------------
Name: Lawrence A. Cohen
CAPITAL REALTY GROUP SENIOR HOUSING, INC.
By: /s/ Robert L. Lankford
---------------------------------------------
Name: Robert L. Lankford
Title: President
RETIREMENT ASSOCIATES, INC.
By: /s/ Robert L. Lankford
---------------------------------------------
Name: Robert L. Lankford
Title: President
By: /s/ Robert L. Lankford
---------------------------------------------
Name: Robert L. Lankford
<PAGE>
The Cane Creek Rehabilitation Center
1800 Mt. Pelia Road
Martin, Tennessee
<PAGE>
HealthCare Property Appraisers J. MICHAEL BURROUGHS, MAI, SRA
Of America, Inc. PRESIDENT
Post Office Box 2227
Hwy. 64 E., Laurel Terrace, 2nd Floor
Cashiers, North Carolina 28717
Phone: 704-743-5204
Fax: 704-743-1730
April 10, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
14160 Dallas Parkway
Dallas, TX 75240
Re: The Cane Creek Rehabilitation Center
Martin, Tennessee
Dear Mr. Brickman:
HealthCare Property Appraisers of America, Inc. has inspected The Cane Creek
Rehabilitation Center for the purpose of estimating the Market Value of its
fee simple estate. All factors which might influence the value of this
property were investigated and fully considered to the best of our ability.
We have performed a Complete Appraisal and report our findings here in the
form of a Self-Contained Appraisal Report, which describes the appraisal
method and contains the information necessary for forming realistic
conclusions. The supporting data analyses and conclusions are an integral
part of this report. The maps, sketches, and statistics are included to aid
the reader in visualizing the property. Your attention is directed to the
section entitled: "Underlying Assumptions and Limiting Conditions Section"
which provides the basis for all conclusions and the Final Value Estimate.
Based on the enclosed data and analyses, we believe the Subject Property
described herein had a Maximum Market Value, as of March 24, 1997 in its
present physical condition of-
MARKET VALUE: $2,000,000
This value estimate included only real property. Any business value or
furniture, fixtures and equipment were assumed to belong to someone other
than the property owner and not valued in this analysis.
The above value includes some value for the shell of the building, assuming a
buyer can be found who can use and will pay something for the building
improvements. We rate the probability of the subject's attracting such a
buyer as VERY GOOD. If such a buyer cannot be found, then the subject's
Minimum Market Value is essentially its land value. We estimate the Land
Value to be:
LAND VALUE: $450,000
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 2
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
The value conclusions in this report assume that this property is not subject
to any existing leases or management contracts. We have assumed that any new
owner would be free to negotiate a new lease or management contract if they
so desired.
After studying the sales history of similar properties, the Appraiser
estimates a reasonable marketing period for the subject property to be twelve
months.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by the Uniform Standards of
Professional Appraisal Practice (USPAP).
I appreciate the opportunity to provide these appraisal services to you. If
you have any questions on this report or any other matters, please do not
hesitate to call.
Respectfully submitted,
HealthCare Property Appraisers of America, Inc.
/s/J. Michael Burroughs
- -----------------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
State Certified General Appraiser , #A218
President
JMB:ela
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 3
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
SUMMARY OF IMPORTANT CONCLUSIONS
Self-Contained Report of a Complete Appraisal
Subject Property: The Cane Creek
Rehabilitation Center
Property Location: 1800 Mt. Pelia Road
Martin, Tennessee
Effective Date: March 24, 1997
Report Date: April 10, 1997
Purpose of Appraisal: Market Value
Area of Site: 11.90 acres (approx.)
Highest and Best Use: For Medical Office Use
Improvements:
Number of Beds: 36 Beds
Building Size: 36,500 sf (approx.)
Building Date: 1985
Indicated Values:
Cost Approach: $2,000,000
Income Capitalization Approach: $2,010,000
Sales Comparison Approach: $1,900,000to $2,100,000
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 4
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
Maximum Market Value:
(Assumes Some Building Value)
Land $ 450,000
Building Improvements $1,550,000
----------
Total Real Estate $2,000,000
Minimum Market Value:
(Assumes No Building Value)
Land $450,000
Building Improvements 0
--------
Total Real Estate $450,000
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 5
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
TRANSMITTAL LETTER .............................................................................2
SUMMARY OF IMPORTANT CONCLUSIONS ...............................................................4
TABLE OF CONTENTS ..............................................................................6
GENERAL IDENTIFICATION OF PROPERTY .............................................................7
PROPERTY RIGHTS "PRAISED .......................................................................7
SCOPE OF APPRAISAL .............................................................................7
HISTORY OF PROPERTY ............................................................................8
THE PURPOSE OF THE APPRAISAL ...................................................................9
METHOD OF APPRAISAL ...........................................................................12
REGIONAL ANALYSIS .............................................................................14
MARKET AREA AND NEIGHBORHOOD ..................................................................34
SITE DATA .....................................................................................39
DESCRIPTION OF IMPROVEMENTS ...................................................................44
COST APPROACH TO VALUE ........................................................................49
INCOME CAPITALIZATION APPROACH TO VALUE .......................................................65
SALES COMPARISON APPROACH TO VALUE ............................................................70
RECONCILIATION AND FINAL VALUE ESTIMATE .......................................................90
SUMMARY OF VALUES .............................................................................93
UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS ................................................94
APPRAISER' S CERTIFICATION ....................................................................97
QUALIFICATIONS OF APPRAISER ..................................................................100
</TABLE>
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HealthCare Property Appraisers of America, Inc. 6
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
GENERAL IDENTIFICATION OF PROPERTY
The subject property, known as The Cane Creek Rehabilitation Center, is located
at 1800 Mt. Pelia Road, Martin, Tennessee. The subject site and improvements are
described further in subsequent sections of this report. The subject of this
analysis includes real property only.
PROPERTY RIGHTS APPRAISED
The appraiser, in completing this appraisal assignment, considered the subject
property to include all of those rights that may be lawfully owned and are
legally referred to as being held in "fee simple".
Definition of Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate; subject only to
the limitations of eminent domain, escheat, police power, and taxation. (The
Dictionary of Real Estate Appraisal, American Institute of Real Estate
Appraisers, Third Printing, October, 1987)
SCOPE OF APPRAISAL
In conducting this appraisal, our staff
- Inspected the subject property.
- Developed and analyzed significant data from primary and
secondary sources, confirming that data where possible.
- Analyzed sales, income and expense data and projected a
reasonable cash flow for the subject.
- Completed Income Capitalization, Cost and Sales Comparison
Approaches To Value and reached a Final Market Value
conclusion as reported herein.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by USPAP.
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HealthCare Property Appraisers of America, Inc. 7
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
HISTORY OF PROPERTY
To the best of the appraiser's knowledge, the subject property has not been
sold, listed or placed under contract within the past three years. The subject
property is listed at the county courthouse as being owned by Jacques Miller.
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HealthCare Property Appraisers of America, Inc. 8
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
THE PURPOSE OF THE APPRAISAL
The purpose of the Complete Appraisal contained in this Self-Contained Appraisal
Report is to estimate the Market Value of The Cane Creek Rehabilitation Center.
This report is for the internal use of Capital Realty Group.
Definition of Market Value
The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the
buyer and seller each acting prudently and knowledgeably, and assuming
the price is not affected by undue stimulus. Implicit in this
definition is the consummation of a sale as of a specified date and the
passing of title from seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated.
(2) Both parties are well informed or well advised, and acting in
what they consider their own best interests.
(3) A reasonable time is allowed for exposure in the open market.
(4) Payment is made in terms of cash in U.S. dollars or in terms
of financial arrangements comparable thereto.
(5) The price represents the normal consideration for the property
sold unaffected by special or creative financing or sales
concessions granted by anyone associated with the sale.*
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HealthCare Property Appraisers of America, Inc. 9
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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COMPETENCY
The Office of the Comptroller of the Currency has issued the following Final
Rule, which requires lenders to evaluate appraiser competency for each specific
appraisal assignment:
"Not all appraisers are competent to perform every type of appraisal
that will be needed in connection with federally related transactions.
For instance, an appraiser who is experienced in appraising shopping
centers may not possess sufficient expertise to appraise a golf course.
A financial institution should look beyond an individual's title to
determine if he or she has the experience and training needed to
perform the appraisal. This provision is not intended to prohibit, in
every circumstance, an individual from appraising a type of property
with which he or she is not familiar. However in such instances, an
appraiser may perform the appraisal only in accordance with the
Competency Provision in the USPAP."
HealthCare Property Appraisers of America, Inc. is a national appraisal firm
limiting its appraisal practice to Health Care and Senior Housing properties.
HealthCare Property Appraisers of America, Inc. has prepared over 3,000
appraisal reports in 42 states on a wide variety of health care-oriented
facilities and housing for the elderly. Property types encompass the complete
continuum of health care facilities including:
- General and Acute Care Hospitals
- Psychiatric Hospitals
- Substance Abuse Facilities
- Skilled Nursing Homes
- Assisted Living Homes
- Rest Homes, Personal Care and Homes for the Aged
- Facilities for the Developmentally Disabled
- Independent Living Apartments for Retirees
- Continuing Care Retirement Communities
Our office maintains a constant dialogue with public health departments,
medicaid reimbursement officials and healthcare licensing agencies in all 50
states. We constantly update our data bank in accordance with changes within the
various state health care programs. HealthCare Property Appraisers of America,
Inc. maintains an in-house database which currently contains in excess of 1,300
sales of health care-related and senior housing properties.
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HealthCare Property Appraisers of America, Inc. 10
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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Source of Definitions
- Title XL Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA) [Pub. L. No. 101-73, 103
Stat. 183 (1989)], 12 U.S.C. 3310, 3331-3351, and section
5(b) of the Bank Holding Company Act, 12 U.S.C. 1844(b);
Part 225, Subpart G:
Appraisals Paragraph 225.62(f).
- Uniform Standards of Professional Appraisal Practice,
Page 1-7.
- Federal Reserve System, 12 CFR Parts 208 and 225,
Sec. 225.62.
- Office of the Comptroller of the Currency, 12 CFR part 34,
Sec. 34.42.
- FDIC, 12 CFR Part 323, Sec. 323.2.
- Office of Thrift Supervision, 12 CFR Part 564, Sec. 564.2.
- NCUA, 12 CFR Part 722, Sec. 722.2.
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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METHOD OF APPRAISAL
The Appraisal Profession generally recognizes three approaches to value:
1. Cost Approach to Value: The appraiser: (a) estimates the land value as
though the site were vacant and available for development and (b)
estimates the cost to replace subject's improvements (at their same
stage of depreciation). The depreciated Replacement Cost is usually
based upon consultation with local contractors and construction cost
data services.
2. Income Capitalization Approach to Value: The Appraiser compiles and
analyzes market data to estimate subject property's economic rental and
expenses. The net income thus derived is capitalized into a value
estimate. This indicates the property's value to an investor receiving
this income stream and develops the present value of perceived future
benefits and property reversion.
3. Sales Comparison Approach to Value (also known as the Comparative
Approach or Market Data Method): The Appraiser researches sales of
Medical Offices in this market area and develops units of comparison
which are adjusted and applied to the subject property.
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HealthCare Property Appraisers of America, Inc. 12
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REGIONAL ANALYSIS
- --------------------------------------------------------------------------------
<PAGE>
[MARTIN CITY MAP]
<PAGE>
[TENNESSEE STATE MAP]
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
REGIONAL ANALYSIS
OVERVIEW
The subject property is located in the city of Martin, Weakley County,
Tennessee. Located in the northwestern region of the state, the site is
approximately 10 miles south of the state of Kentucky, 125 miles northeast of
Memphis and 80 miles southwest of Clarksville. There are five incorporated
communities in Weakley County and Martin is the county seat.
TERRAIN AND CLIMATE
The Weakley County area ranges from level to rolling with an average elevation
of 387 feet. Prevailing wind here is from the south/southwest and, although this
area is about 500 miles from the Gulf of Mexico, the weather generally resembles
that of more southerly states. Strong, cold winds sometimes blow from the north
and northwest following cold fronts. Precipitation in the form of rain averages
50 inches annually and snowfall, varying widely from year to year with rare
accumulations, averages 10 inches a year. Seasonal temperatures range from a
January low of 25 degrees to a high in July of 86 degrees, with an average
annual temperature of 57 degrees.
POPULATION AND DEMOGRAPHICS
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
CHANGE PROJECTED CHANGE
1990-1996 1996-2001
-------------------------------------- --------------------------------------
UNITED STATES 6.5% 4.9%
STATE 8.6% 6.5%
COUNTY 1.6% 1.2%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The area enjoys a broadly diversified economic base, including
commercial/industrial lighting, lawn care machinery, apparel, wood products,
aluminum products and printing industries, which contribute to the growth of
the area. According to Claritas, Inc., a demographics survey firm,
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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the estimated 1996 population of the United States has increased 6.5% since
1990, and an additional 4.9% increase can be expected by 2001.
According to the 1990 Census, Tennessee's population totaled 4,877,185
residents. Claritas estimates the current population at 5,294,786, representing
an increase of 8.6%. By 2001, the population is projected to reach 5,638,736
residents, an increase of 6.5%.
The 1990 Census indicates Weakley County's population totaled 31,972 residents.
Claritas estimates the current population at 32,469, representing an increase of
1.6%. By 2001, the population is projected to reach 32,848 residents, an
increase of 1.2%.
DEMOGRAPHICS OF THE ELDERLY POPULATION
Percentage of Change - Elderly Population
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
1990-1996 1996-2001
75-79 80-84 85 & Over 75-79 80-84 85 & Over
----- ----- --------- ----- ----- ---------
U. S. 14.4% 21.0% 32.9% 11.3% 12.4% 19.0%
STATE 15.9% 23.3% 43.8% 13.7% 13.7% 22.2%
COUNTY 7.1% 13.7% 25.6% 4.5% 7.1% 12.2%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The market segments of primary interest in this demographics study are the
age groups: (a) 75 to 79, (b) 80 to 84, and (c) 85 and over. Between 1990 and
1996, the estimated increase nationally in the 75 to 79 year old age bracket
was 14.4%. In the 80 to 84 age group the change was 21.0% and the change in
the 85 and over age group was 32.9%. By 2001, the 75 to 79 age group is
projected to increase by an additional 11.3%, the 80 to 84 group by 12.4%
and the age group 85 and over by 19.0%.
In the state of Tennessee, the 75 to 79 age group is currently estimated at
141,781 which is an increase of 15.9% since the last census. The age group 80 to
84 has shown an increase of
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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23.3% in that same time period and the 85 and over age group has shown an
increase of 43.8%. It is estimated that by 2001, there will be 12.4, 8.6 and
8.1 residents in these age groups or a change of 13.7%, 13.7%, and 22.2%
respectively.
In the Weakley County, the 75 to 79 age group is currently estimated at 1,206
which is an increase of 7.1% since the last census. The age group 80 to 84
has shown an increase of 13.7% in the time period between 1990 and 1996 and
the 85 and over age group has shown an increase of 25.6%. It is estimated
that by 2001, there will be 14.9, 10.0 and 10.5 residents in these age groups
or a change of 4.5%, 7.1%, and 12.2% respectively.
Median Household Income - Ages 75+
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
1990-1996 1996-2001
75-79 80-84 85 & Over 75-79 80-84 85 & Over
----- ----- --------- ----- ----- ---------
U.S. +$3,462 +$3,355 +$3,233 +$3,344 +$3,359 +$3,357
STATE +$2,966 +$3,070 +$3,066 +$3,070 +$2,952 +$3,006
COUNTY +$2,118 +$2,345 +$1,997 +$2,248 +$1,967 +$2,048
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Nationally, the 75 to 79 age group median household income increased $3,462
between 1990 and 1996 and is projected to increase an additional $3,344 by 2001.
The 80 to 84 age group showed an increase nationally in median household income
of $3,355 between 1990 and 1996 and is projected to increase an additional
$3,359 by 2001. The age group 85 and over showed an increase between 1990 and
1996 of $3,233 and is projected increase an additional $3,357 by 2001.
In the state of Tennessee, the median household income for the 75-79 age group
increased $2,966 between 1990 and 1996, and is projected to reach $16,694 or
increase an additional $3,070 by 2001. The median household income for the 80 to
84 age group during the time period 1990 to 1996 increased $3,070 and is
expected, to reach $16,420 or increase an additional
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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$2,952 by 2001. The age group 85 and over showed an increase of $3,066
between 1990 and current estimates and is projected to reach $16,471 or
increase an additional $3,006 by 2001.
In the Weakley County, median household income for the 75-79 age group increased
$2,118 between 1990 and 1996, and is projected to reach $13,647 or increase an
additional $2,248 by 2001. The median household income for the 80 to 84 age
group during the 1990-1996 time period increased $2,345 and is expected to reach
$13,545 or increase an additional $1,967 by 2001. The age group 85 and over
showed an increase of $1,997 between 1990 and current estimates and is projected
to reach $13,077 or an additional increase of $2,048 by 2001.
Elderly Households With Income $35,000+
(As a % of Total Household Income For 55+ population)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
1990 1996 2001
ESTIMATED PROJECTED
---------------------- ---------------------- ----------------------------------
UNITED STATES 42.4% 52.0% 58.3%
STATE 33.3% 45.6% 65.1%
COUNTY 26.4% 36.6% 43.4%
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
One of the best indicators of the ability of the subject's residents to be
self supporting (rather than government funded) is their level of affluence.
The appraiser compared the subject's potential local market with that of
Tennessee and the USA as a whole. The comparison was based upon the
percentage of population aged 55 + with an annual household income exceeding
$35,000.
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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GOVERNMENT AND SERVICES
The Weakley County area consists of five communities. The subject property falls
within the jurisdiction of Martin which has a mayor/alderman form of government
and there is a planning commission that enforces zoning regulations. Police
protection is provided by the Martin Police Department with approximately 24
officers and the Weakley County Sheriffs Department with 15 deputies. Fire
protection is provided by the Martin Fire Department with 14 full-time personnel
and 12 volunteers, carrying a fire insurance rating of 4.
UTILITIES
Water and sewer service are provided by the City of Martin. Electricity is
supplied by the TVA through the Weakley County Municipal System, gas service is
provided by Texas Gas Transmission through the City of Martin, and telephone
service by Citizens Telecom.
EDUCATION
The City of Martin school district has three public schools and an enrollment of
2,025. Vocational-Technical institutions in the area include one facility in
Dresden, 10 miles southeast. The University of Tennessee has a large modern
campus in Martin, approximately one-quarter mile from the subject.
TRANSPORTATION
The area's principal highways include U.S. Highway 45 (N-S) and State Highways
22 (E-W) and 431 (E-W). Currently, State Highways 22 and 45 are under expansion.
Work is scheduled for completion by during 1997. Airports are located throughout
the area with the major commercial airport being McKeller Field in Jackson, 50
miles south, with 6 daily flights. Airlines serving that airport include
Northwest Airlink. Passenger rail service is provided by , freight rail service
by Norfolk Southern Railroad, and bus service by N/A. Trucking companies serving
the area include seven with 3 terminals.
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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HEALTHCARE
The Volunteer General Hospital, located two blocks from subject with 100 beds,
serves the residents of Weakley County, along with four clinics, two
rehabilitation centers and three nursing homes. Medical assistance is provided
by 19 physicians and 9 dentists. The county has seven nursing homes with over
300 beds, including Cane Creek Center, Martin Health Care Center and VanAyer
Manor Nursing Center in the Martin area.
ECONOMY
Financial institutions in the area include three banks with combined assets
exceeding $1.3 billion. According to the 1995 Survey of Buying Power, by Sales &
Marketing Management, the per household retail sales for the Weakley County was
$13,478 (compared to the national average of $23,209). The median household
effective buying income was $28,099 ($37,070). The most recent employment
figures available indicate an unemployment rate of 4% for the county with
manufacturing occupying the largest segment.
Distribution by sector and percentage of employees is as follows:
<TABLE>
<CAPTION>
Sector Percentage
------ ----------
<S> <C>
Services 29.6%
Manufacturing 32.8%
Wholesale/Retail Trade 16.4%
Construction 4.5%
Transportation/Communications/Utilities 5.4%
Finance/Insurance/Real Estate 3.2%
Government 3.5%
Agriculture/Forestry/Fishing 4.3%
Mining 0.4%
</TABLE>
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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The area's major employers are:
<TABLE>
<CAPTION>
Company Name # Employees Product/Service
------------ ----------- ---------------
<S> <C> <C>
MTD Products 602 Riding Mowers/Auto Parts
Hubbell Lighting 403 Indus/Comm. Lighting
Martin Manufacturing 227 Apparel
Martin Brothers Containers 115 Wooden Wire Bound Boxes
Institutional Distributors 80 Food Distribution
Creative Label 58 Stamping & Embossing
Arrow Aluminum Industries 45 Storm Doors & Windows
Leland-Powell Fasteners 40 Metal Fasteners
Mar-Tenn Ham Company 25 Cured Country Hams
Vowell & Sons 25 Lumber Supplies
</TABLE>
United States/State/County Household Income
(General Population)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
% OF CHANGE
-----------------------------------------------------------------------------
1990-1996 1996-2001
-------------------------------------- --------------------------------------
<S> <C> <C>
UNITED STATES 15.4%
21.7%
STATE 21.2%
27.2%
COUNTY 17.6%
23.1%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
An important indicator of economic health is growth in Median Household Income.
The national increase in Median Household Income between 1990 and 1996 was
21.7%. Claritas projects the National Median Household Income will reach $42,259
(i.e. increase by 15.4%) by 2001.
Median Household Income for Tennessee in 1996 is estimated at $31,616, or an
increase of 27.2% since 1989. It is projected that by 2001 the Median Household
Income will reach $38,326, or increase by 21.2 %.
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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Median Household Income for the Weakley County in 1996 has increased to
$25,938, or 23.1% since 1989. It is projected that by 2001 the Median
Household Income will reach $30,497, or increase 17.6%.
Number of Housing Units
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
% OF CHANGE
-----------------------------------------------------------------------------
1990-1996 1996-2001
-------------------------------------- --------------------------------------
<S> <C> <C>
UNITED STATES 5.5%
7.6%
STATE 7.5%
9.5%
COUNTY 1.7%
1.6%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Growth in the number of housing units in a specified area is another good
indication of economic health. Housing units increased 7.6% nationally between
1990 and 1996. By 2001, it is projected that total housing units nationally will
have increased by an additional 5.5%.
The number of housing units in Tennessee is currently estimated at
2,218,116, which is an increase of 9.5% since the 1990 Census. It is estimated
that by 2001, this figure will reach 2,383,554,or increase by 7.5%.
The number of housing units in the Weakley County is currently estimated at
13,060, which is an increase of 1.6% since the 1990 Census. It is estimated that
by 2001, this figure will reach 13,280, or increase by 1.7%.
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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TRENDS FUTURE OUTLOOK, CONCLUSIONS
The Weakley County economy is based on industry, services, trades, retailing and
agriculture. Martin's location provides the residents with services and
employment and, coupled with a comfortable climate, contributes to affordable
living environment and the stability of the local economy. The local Chamber of
Commerce and government have encouraged the relocation of much industry to the
area, bringing with it new jobs and better working conditions. The influx of new
industry has kept unemployment low, helped maintain low housing costs and given
rise to retail sales in the area. Because of the Columbia Hospital and the
University Branch, Martin is the focus of medicine and education for northwest
Tennessee.
Although the overall population growth for the area has been well below the
national average, the largest growth will continue to be in the senior
population. As a result of the growth of industry in the area, however, income
increases for the general population will continue to increase slightly above
the national average, while senior incomes will maintain its slow growth
pattern, well below national averages. Housing increases will mirror growth of
the general population, maintaining a slow but consistent growth.
The growth and diversity in industry that the area is experiencing, coupled with
the indication that people are remaining in the area and a large growth in
population is not predicted, competition for jobs should be low and the
consistent growth of household income would indicate a stable economy for the
foreseeable future. Indications are that the largest population growth in the
area will be in the senior population maintaining a positive climate for the
development and ongoing need in the area in the senior service industry.
*All population and household income figures were taken from the most recent
U.S. Census (if actual numbers) or were provided to the appraiser by Claritas,
Inc. (if projected numbers) or by the local Chamber of Commerce.
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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(State: 47, Tennessee County: 183, Weakley County, TN)
(Weight: 100.0%)
<TABLE>
<CAPTION>
Household Trend Report
1980 1990 % Chg 1996 % Chg 2001 % Chg
Universe Census Census 80-90 (Est.) 90-96 (Proj.) 96-01
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Population............. 32896 31972 -2.8 32469 1.6 32848 1.2
Households............. 11567 11992 3.7 12297 2.5 12504 1.7
Families............... 8859 8589 -3.0 8696 1.2 8748 0.6
Housing Units.......... 12463 12857 3.2 13060 1.6 13280 1.7
Grp Qrt. Pop........... 2780 2403 -13.6 2424 0.9 2436 0.5
Household Size......... 2.60 2.47 -5.3 2.44 -0.9 2.43 -0.5
1979 1989 % Chg 1996 % Chg 2001 % Chg
Income (Census) (Census) 79-89 (Est.) 89-96 (Proj.) 96-01
- ----------------------------------------------------------------------------------------------------------------------
Aggregate($MM)......... 171 317 85.3 415 31.1 517 24.4
Per Capita............. 5203 9918 90.6 12805 29.1 15743 22.9
Avg. Household......... 14325 25810 80.2 33007 27.9 40315 22.1
Median Hhold........... 11543 21066 82.5 25938 23.1 30497 17.6
Avg. Family HH......... 16530 30881 86.8 39786 28.8 48265 21.3
Med. Family HH......... 13864 26962 94.5 33050 22.6 39105 18.3
Avg. HH Wealth......... 110585 127495 15.3
Med. HH Wealth......... 62639 71740 14.5
</TABLE>
<TABLE>
<CAPTION>
Households
--------------------------------------------------------------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
- --------------------------------- ------------------ --------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Total....................... 11992 12297 12504
Less than $5,000...... 1298 10.8% 885 7.2% 643 5.1%
$5,000 to $9,999...... 1587 13.2% 1443 11.7% 1297 10.4%
$10,000 to $14,999...... 1534 12.8% 1315 10.7% 1197 9.6%
$15,000 to $19,999...... 1265 10.5% 1200 9.8% 1059 8.5%
$20,000 to $24,999...... 1255 10.5% 1080 8.8% 1036 8.3%
$25,000 to $29,999...... 1014 8.5% 1053 8.6% 911 7.3%
$30,000 to $34,999...... 879 7.3% 832 6.8% 932 7.5%
$35,000 to $39,999...... 792 6.6% 740 6.0% 716 5.7%
$40,000 to $44,999...... 613 5.1% 690 5.6% 630 5.0%
$45,000 to $49,999...... 466 3.9% 623 5.1% 595 4.8%
$50,000 to $59,999...... 576 4.8% 1032 8.4% 1116 8.9%
$60,000 to $74,999...... 390 3.3% 713 5.8% 1165 9.3%
$75,000 to $99,999...... 212 1.8% 444 3.6% 726 5.8%
$100,000 to $124,999...... 60 0.5% 149 1.2% 306 2.4%
$125,000 to $149,999...... 10 0.1% 48 0.4% 98 0.8%
$150,000 to $249,999...... 28 0.2% 29 0.2% 53 0.4%
$250,000 to $499,999...... 13 0.1% 16 0.1% 16 0.1%
$500,000 or More.......... 0 0.0% 5 0.0% 8 0.1%
</TABLE>
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HealthCare Property Appraisers of America, Inc.
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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(State: 47, Tennessee County: 183, Weakley County, TN)
<TABLE>
<CAPTION>
(Weight: 100.0%)
Senior Life Report (Page 1 of 7)
Population Age 55 Years and Over
----------------------------------------------------------------------
Population by Age and Sex 1990 1996 Estimate 2001 Proj.
- ---------------------------------- ------------------ ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Population Age 55 +............... 7980 100.0% 8225 100.0% 8446 100.0%
55 to 59....................... 1416 17.7% 1487 18.1% 1618 19.2%
60 to 64....................... 1382 17.3% 1311 15.9% 1373 16.3%
65 to 69....................... 1466 18.4% 1297 15.8% 1240 14.7%
70 to 74....................... 1267 15.9% 1345 16.4% 1224 14.5%
75 to 79....................... 1126 14.1% 1206 14.7% 1260 14.9%
80 to 84....................... 694 8.7% 789 9.6% 845 10.0%
85+............................ 629 7.9% 790 9.6% 886 10.5%
Males Age 55+ 3332 41.8% 3429 41.7% 3538 41.9%
55 to 59....................... 681 8.5% 707 8.6% 770 9.1%
60 to 64....................... 635 8.0% 627 7.6% 650 7.7%
65 to 69....................... 633 7.9% 566 6.9% 558 6.6%
70 to 74....................... 524 6.6% 560 6.8% 512 6.1%
75 to 79....................... 450 5.6% 488 5.9% 512 6.1%
80 to 84....................... 232 2.9% 271 3.3% 298 3.5%
85+............................ 177 2.2% 210 2.6% 238 2.8%
Female Age 55+ 4648 58.2% 4796 58.3% 4908 58.1%
55 to 59....................... 735 9.2% 780 9.5% 848 10.0%
60 to 64....................... 747 9.4% 684 8.3% 723 8.6%
65 to 69....................... 833 10.4% 731 8.9% 682 8.1%
70 to 74....................... 743 9.3% 785 9.5% 712 8.4%
75 to 79....................... 676 8.5% 718 8.7% 748 8.9%
80 to 84....................... 462 5.8% 518 6.3% 547 6.5%
85+............................ 452 5.7% 580 7.1% 648 7.7%
</TABLE>
<TABLE>
<CAPTION>
Population
--------------------------------------------------------------------
Population by Age and Race 1990 1996 Estimate 2001 Proj.
- ---------------------------------- ---------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Total Population............... 31972 100.0% 32469 100.0% 32848 100.0%
White Population........... 29429 92.0% 29683 91.4% 29889 91.0%
Age 65 and Over.......... 4959 15.5% 5230 16.1% 5265 16.0%
Black Population........... 2227 7.0% 2406 7.4% 2519 7.7%
Age 65 and Over.......... 216 0.7% 192 0.6% 179 0.5%
Asian Population........... 277 0.9% 340 1.0% 400 1.2%
Age 65 and Over.......... 3 0.0% 2 0.0% 7 0.0%
Am. Indian Population...... 39 0.1% 40 0.1% 40 0.1%
Age 65 and Over.......... 4 0.0% 3 0.0% 4 0.0%
Hispanic Population........ 128 0.4% 160 0.5% 189 0.6%
Age 65 and Over.......... 9 0.0% 10 0.0% 13 0.0%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
24
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
(State: 47, Tennessee County: 183, Weakley County, TN)
<TABLE>
<CAPTION>
(Weight: 100.0%)
Senior Life Report (Page 2 of 7)
Household Income by Households with Householder Age 55 and Over
----------------------------------------------------------------------
Age of Householder 1990 1996 Estimate 2001 Proj.
- ---------------------------------- ------------------ ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 55 to 64.......... 1633 100.0% 1529 100.0% 1671 100.0%
Under $5,000................. 142 8.7% 80 5.2% 60 3.6%
$5,000 - $9,999.............. 155 9.5% 122 8.0% 123 7.4%
$10,000 - $14,999............. 237 14.5% 160 10.5% 141 8.4%
$15,000 - $24,999............. 288 17.6% 257 16.8% 263 15.7%
$25,000 - $34,999............. 320 19.6% 253 16.5% 253 15.1%
$35,000 - $49,999............. 308 18.9% 317 20.7% 298 17.8%
$50,000 - $74,999............. 143 8.8% 254 16.6% 362 21.7%
$75,000 - $99,999............. 24 1.5% 57 3.7% 110 6.6%
$100,000 - $149,999............ 7 0.4% 20 1.3% 52 3.1%
$150,000 - $249,999............ 6 0.4% 5 0.2% 5 0.3%
$250,000 - $499,999............ 3 0.2% 3 0.2% 2 0.1%
$500,000 - or More............. 0 0.0% 1 0.1% 2 0.1%
Median Income..................... 24809 30750 348222
Householder Age 65 to 69.......... 883 100.0% 861 100.0% 783 100.0%
Under $5,000................. 120 13.6% 80 9.3% 50 6.4%
$5,000 - $9,999.............. 207 23.4% 169 19.6% 130 16.6%
$10,000 - $14,999............. 155 17.6% 137 15.9% 120 15.3%
$15,000 - $24,999............. 170 19.3% 167 19.4% 158 20.2%
$25,000 - $34,999............. 114 12.9% 120 13.9% 111 14.2%
$35,000 - $49,999............. 74 8.4% 103 12.0% 93 11.9%
$50,000 - $74,999............. 24 2.7% 58 6.7% 82 10.5%
$75,000 - $99,999............. 11 1.2% 14 1.6% 21 2.7%
$100,000 - $149,999............ 4 0.5% 8 0.9% 13 1.7%
$150,000 - $249,999............ 2 0.2% 2 0.2% 4 0.5%
$250,000 - $499,999............ 2 0.2% 2 0.2% 0 0.0%
$500,000 - or More............. 0 0.0% 1 0.1% 1 0.1%
Median Income..................... 13694 17665 20791
Householder Age 70 to 74.......... 853 100.0% 854 100.0% 817 100.0%
Under $5,000................. 115 13.5% 76 8.9% 53 6.5%
$5,000 - $9,999.............. 207 24.3% 173 20.3% 142 17.4%
$10,000 - $14,999............. 146 17.1% 137 16.0% 123 15.1%
$15,000 - $24,999............. 164 19.2% 166 19.4% 162 19.8%
$25,000 - $34,999............. 109 12.8% 118 13.8% 118 14.4%
$35,000 - $49,999............. 74 8.7% 98 11.5% 101 12.4%
$50,000 - $74,999............. 23 2.7% 60 7.0% 82 10.0%
$75,000 - $99,999............. 9 1.1% 14 1.6% 23 2.8%
$100,000 - $149,999............ 3 0.4% 9 1.1% 10 1.2%
$150,000 - $249,999............ 2 0.2% 2 0.2% 2 0.2%
$250,000 - $499,999............ 1 0.1% 1 0.1% 1 0.1%
$500,000 - or More............. 0 0.0% 0 0.0% 0 0.0%
Median Income..................... 13579 17470 20586
- -------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
25
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
(State: 47, Tennessee County: 183, Weakley County, TN)
<TABLE>
<CAPTION>
(Weight: 100.0%)
Senior Life Report (Page 3 of 7)
Household Income by Households with Householder Age 55 and Over
----------------------------------------------------------------------
Age of Householder 1990 1996 Estimate 2001 Proj.
- ---------------------------------- ------------------ ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 75 to 79.......... 751 100.0% 843 100.0% 890 100.0%
Under $5,000................. 176 23.4% 137 16.3% 101 11.3%
$5,000 - $9,999.............. 233 31.0% 240 28.5% 220 24.7%
$10,000 - $14,999............. 137 18.2% 159 18.9% 170 19.1%
$15,000 - $24,999............. 111 14.8% 148 17.6% 175 19.7%
$25,000 - $34,999............. 48 6.4% 74 8.8% 97 10.9%
$35,000 - $49,999............. 22 2.9% 41 4.9% 59 6.6%
$50,000 - $74,999............. 17 2.3% 29 3.4% 43 4.8%
$75,000 - $99,999............. 3 0.4% 6 0.7% 13 1.5%
$100,000 - $149,999............ 3 0.4% 7 0.8% 9 1.0%
$150,000 - $249,999............ 1 0.1% 2 0.2% 2 0.2%
$250,000 - $499,999............ 0 0.0% 0 0.0% 1 0.1%
$500,000 - or More............. 0 0.0% 0 0.0% 0 0.0%
Median Income..................... 9281 11399 13647
Householder Age 80 to 84.......... 458 100.0% 545 100.0% 574 100.0%
Under $5,000................. 102 22.3% 81 14.9% 64 11.1%
$5,000 - $9,999.............. 150 32.8% 159 29.2% 145 25.3%
$10,000 - $14,999............. 83 18.1% 103 18.9% 110 19.2%
$15,000 - $24,999............. 67 14.6% 93 17.1% 111 19.3%
$25,000 - $34,999............. 36 7.9% 57 10.5% 66 11.5%
$35,000 - $49,999............. 12 2.6% 32 5.9% 44 7.7%
$50,000 - $74,999............. 6 1.3% 13 2.4% 25 4.4%
$75,000 - $99,999............. 0 0.0% 4 0.7% 4 0.7%
$100,000 - $149,999............ 2 0.4% 3 0.6% 4 0.7%
$150,000 - $249,999............ 0 0.0% 0 0.0% 1 0.2%
$250,000 - $499,999............ 0 0.0% 0 0.0% 0 0.0%
$500,000 - or More............. 0 0.0% 0 0.0% 0 0.0%
Median Income..................... 9233 11578 13545
Householder Age 85 +.............. 341 100.0% 403 100.0% 446 100.0%
Under $5,000................. 81 23.8% 64 15.9% 50 11.2%
$5,000 - $9,999.............. 111 32.6% 120 29.8% 117 26.2%
$10,000 - $14,999............. 67 19.6% 85 21.1% 91 20.4%
$15,000 - $24,999............. 43 12.6% 66 16.4% 84 18.8%
$25,000 - $34,999............. 21 6.2% 32 7.9% 44 9.9%
$35,000 - $49,999............. 11 3.2% 23 5.7% 30 6.7%
$50,000 - $74,999............. 5 1.5% 10 2.5% 23 5.2%
$75,000 - $99,999............. 1 0.3% 2 0.5% 5 1.1%
$100,000 - $149,999............ 1 0.3% 1 0.2% 2 0.4%
$150,000 - $249,999............ 0 0.0% 0 0.0% 0 0.0%
$250,000 - $499,999............ 0 0.0% 0 0.0% 0 0.0%
$500,000 - or More............. 0 0.0% 0 0.0% 0 0.0%
Median Income..................... 9032 11029 13077
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
26
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
(State: 47, Tennessee County: 183, Weakley County, TN)
<TABLE>
<CAPTION>
(Weight: 100.0%)
Senior Life Report (Page 4 of 7)
Total Households
----------------------------------------------------------------------
Household Income 1990 Censes 1996 Estimate 2001 Proj.
- ----------------------------------- ------------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Total............................. 11992 100.0% 12297 100.0% 12504 100.0%
Under $5,000.................. 1298 10.8% 885 7.2% 643 5.1%
$5,000 - $9,999............... 1587 13.2% 1443 11.7% 1297 10.4%
$10,000 - $14,999.............. 1534 12.8% 1315 10.7% 1197 9.6%
$15,000 - $24,999.............. 2520 21.0% 2280 18.5% 2095 16.8%
$25,000 - $34,999.............. 1893 15.8% 1885 15.3% 1843 14.7%
$35,000 - $49,999.............. 1871 15.6% 2053 16.7% 1941 15.5%
$50,000 - $74,999.............. 966 8.1% 1745 14.2% 2281 18.2%
$75,000 - $99,999.............. 212 1.8% 444 3.6% 726 5.8%
$100,000 - $124,999............. 60 0.5% 149 1.2% 306 2.4%
$125,000 - $149,999............. 10 0.1% 48 0.4% 98 0.8%
$150,000 - $249,999............. 28 0.2% 29 0.2% 53 0.4%
$250,000 - $499,999............. 13 0.1% 16 0.1% 16 0.1%
$500,000 - or More.............. 0 0.0% 5 0.0% 8 0.1%
Median Household Income........... 21066 25938 30497
</TABLE>
<TABLE>
<CAPTION>
Total Specified Owner-Occupied Housing Units
-------------------------------------------------------------------------
Housing Value 1990 Census 1996 Estimate 2001 Proj.
- ----------------------------------- -------------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total Units...................... 5457 5617 5733
Less than $15,000.......... 437 8.0% 373 6.6% 328 5.7%
$15,000 to $19 999.......... 362 6.6% 195 3.5% 139 2.4%
$20,000 to $24,999.......... 429 7.9% 320 5.7% 205 3.6%
$25,000 to $29,999.......... 494 9.1% 371 6.6% 279 4.9%
$30,000 to $34,999.......... 539 9.9% 420 7.5% 323 5.6%
$35,000 to $39,999.......... 485 8.9% 447 8.0% 367 6.4%
$40,000 to $44,999.......... 491 9.0% 433 7.7% 382 6.7%
$45,000 to $49,999.......... 349 6.4% 402 7.2% 369 6.4%
$50,000 to $59,999.......... 557 10.2% 694 12.4% 682 11.9%
$60,000 to $74,999.......... 619 11.3% 700 12.5% 807 14.1%
$75,000 to $99,999.......... 463 8.5% 700 12.5% 834 14.5%
$100,000 to $124,999.......... 140 2.6% 339 6.0% 519 9.1%
$125,000 to $149,999.......... 57 1.0% 120 2.1% 271 4.7%
$150,000 to $174,999.......... 19 0.3% 54 1.0% 115 2.0%
$175,000 to $199,999.......... 9 0.2% 25 0.4% 51 0.9%
$200,000 to $249,999.......... 6 0.1% 19 0.3% 43 0.8%
$250,000 to $299,999.......... 0 0.0% 4 0.1% 14 0.2%
$300,000 to $399,999.......... 1 0.0% 0 0.0% 4 0.1%
$400,000 to $499,999.......... 0 0.0% 1 0.0% 0 0.0%
$500,000 or More.............. 0 0.0% 0 0.0% 1 0.0%
Median Housing Value............. 39820 48103 56957
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
27
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(State: 47, Tennessee County: 183, Weakley County, TN)
(Weight: 100.0%)
Senior Life Report (Page 5 of 7)
Household Household
Type and Relationship Population 65+ Type and Relationship Population 65+
- --------------------- ---------------- --------------------- --------------
<S> <C> <C> <C> <C> <C>
Total ..................................... 5144 100.0%
In Family Households ..................... 3179 61.8% In Nonfamily Hhlds.............................. 1533 29.8%
Householder ............................. 1813 35.2% Male Householder............................... 274 5.3%
Spouse .................................. 1179 22.9% Living Alone.................................. 262 5.1%
0ther Relative .......................... 177 3.4% Not Living Alone.............................. 12 0.2%
Nonrelative ............................. 10 0.2% Female Householder............................. 1227 23.9%
Living Alone.................................. 1209 23.5%
In Group Quarters ........................ 432 8.4% Not Living Alone.............................. 18 0.3%
Institutionalized ....................... 432 8.4% Nonrelative.................................... 32 0.6%
Other ................................... 0 0.0%
</TABLE>
<TABLE>
<CAPTION>
Spec. Owner-Occ Units
by Age of Householder
Monthly Owner Costs as a -----------------------------------------
Percent of 1989 HH Inc. Total Units 65 Yrs +
- ------------------------ --------------- --------------
<S> <C> <C> <C> <C>
Total. ............................. 5397 100.0% 1680 100.0%
Less than 20%...................... 3754 69.6% 1137 67.7%
20 - 24% .......................... 621 11.5% 165 9.8%
25 - 29% ......................... 315 5.8% 119 7.1%
30 - 34% ......................... 175 3.2% 75 4.5%
35% or More ...................... 491 9.1% 177 10.5%
Not computed ..................... 41 0.8% 7 0.4%
</TABLE>
<TABLE>
<CAPTION>
Spec. Renter-Occ Units
by Age of Householders
Gross Rent as Percent ------------------------------------
of 1989 HH Income Total Units 65 Yrs +
- ------------------------ --------------- --------------
<S> <C> <C> <C> <C>
Total .............................. 3263 100.0% 526 100.0%
Less than 20% ..................... 1231 37.7% 111 21.1%
20 - 24% .......................... 321 9.8% 72 13.7%
25 - 29% .......................... 346 10.6% 57 10.8%
30 - 34% .......................... 217 6.7% 36 6.8%
35% or More ....................... 781 23.9% 161 30.6%
Not computed ...................... 367 11.2% 89 16.9%
</TABLE>
<TABLE>
<CAPTION>
Occupied Housing Units
----------------------------------------
Attribute Total Units Hhldr 65 Yrs +
- --------- ----------------- -----------------
<S> <C> <C> <C> <C>
Owner Occupied Units ............ 8453 70.5% 2701 81.2%
Renter Occupied Units ........... 3539 29.5% 627 18.8%
Complete Plumbing Facil ......... 11903 99.3% 3285 98.7%
Lacking Plumbing Facil .......... 89 0.7% 43 1.3%
With Telephone .................. 11046 92.1% 3257 97.9%
No Telephone .................... 946 7.9% 71 2.1%
One or More Vehicles ............ 11010 91.8% 2679 80.5%
No Vehicles Available ........... 982 8.2% 649 19.5%
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 28
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(State: 47, Tennessee County: 183, Weakley County, TN)
(Weight: 100.0%)
(Page 6 of 7)
Senior Life Report
------------------1990 Households by Age of Householder------------------
Poverty Status by Household Type Total Age 65-74 Age 75+
- -------------------------------- ----------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total............................ 11968 100.0% 1763 100.0% 1551 100.0%
Married Couple Family......... 7231 60.4% 1010 57.3% 550 35.5%
Other Family.................. 1361 11.4% 161 9.1% 92 5.9%
Male Householder............ 354 3.0% 23 1.3% 10 0.6%
Female Householder.......... 1007 8.4% 138 7.8% 82 5.3%
Nonfamily..................... 3376 28.2% 592 33.6% 909 58.6%
HHer Living Alone........... 2903 24.3% 584 33.1% 887 57.2%
HHer Not Living Alone....... 473 4.0% 8 0.5% 22 1.4%
Above Poverty................. 9649 80.6% 1386 78.6% 1012 65.2%
Married Couple Family....... 6701 56.0% 925 52.5% 496 32.0%
Other Family................ 946 7.9% 116 6.6% 70 4.5%
Male Householder.......... 285 2.4% 7 0.4% 10 0.6%
Female Householder........ 661 5.5% 109 6.2% 60 3.9%
Nonfamily................... 2002 16.7% 345 19.6% 446 28.8%
HHer Living Alone......... 1749 14.6% 340 19.3% 430 27.7%
HHer Not Living Alone..... 253 2.1% 5 0.3% 16 1.0%
Below Poverty................. 2319 19.4% 377 21.4% 539 34.8%
Married Couple Family....... 530 4.4% 85 4.8% 54 3.5%
Other Family................ 415 3.5% 45 2.6% 22 1.4%
Male Householder.......... 69 0.6% 16 0.9% 0 0.0%
Female Householder........ 346 2.9% 29 1.6% 22 1.4%
Nonfamily................... 1374 11.5% 247 14.0% 463 29.9%
HHer Living Alone......... 1154 9.6% 244 13.8% 457 29.5%
HHer Not Living Alone..... 220 1.8% 3 0.2% 6 0.4%
</TABLE>
- --------------------------------------------------------------------------------
1996 Estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 29
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(State: 47, Tennessee County: 183, Weakley County, TN)
(Weight: 100.0%)
(Page 7 of 7)
Senior Life Report
------------------Civilian Noninstitutionalized Persons Age 16+ --------------
Mobility and Disability Total Age 65+ Age 75+
- ----------------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Persons.......................... 25174 100.0% 4712 100.0% 2059 100.0%
With Mblty or Care Lmts....... 1932 7.7% 1220 25.9% 784 38.1%
Mobility Limits Only........ 723 2.9% 496 10.5% 348 16.9%
Self Care Limits Only....... 541 2.1% 257 5.5% 118 5.7%
Both Limits................. 668 2.7% 467 9.9% 318 15.4%
No Mblty or Care Limits....... 23242 92.3% 3492 74.1% 1275 61.9%
With a Work Disability........ 3750 14.9% 2015 42.8%
In Labor Force.............. 696 2.8% 102 2.2%
Employed.................. 600 2.4% 102 2.2%
Unemployed................ 96 0.4% 0 0.0%
Not in Labor Force.......... 3054 12.1% 1913 40.6%
Prevented from Working..... 2714 10.8% 1708 36.2%
Not Prevented from Wrk..... 340 1.4% 205 4.4%
No Work Disability............ 21424 85.1% 2697 57.2%
In Labor Force.............. 15064 59.8% 480 10.2%
Employed.................. 14290 56.8% 474 10.1%
Unemployed................ 774 3.1% 6 0.1%
Not in Labor Force.......... 6360 25.3% 2217 47.1%
</TABLE>
- --------------------------------------------------------------------------------
1996 Estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 30
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Page 1 of 2)
(State: 47, Tennessee County: 183, Weakley County, TN)
(Weight: 100.0%)
1990 Demographic Overview Report
<S> <C> <C> <C> <C> <C>
Population 31972 Housing Units 12857 Median Age 33.1
Households 11968 Group Quarters 2504 Median HH Inc 21004
Families 8592 Avg. HH Size 2.46 Median Value 40400
Vehicles 20732
</TABLE>
<TABLE>
<CAPTION>
Income in 1989 Household Family Non-Family
- ------------------------------------ ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Less than $5,000 ................ 1298 10.8% 386 4.5% 937 27.8%
$5,000 to $9,999 ................ 1596 13.3% 685 8.0% 929 27.5%
$10,000 to $12,499 ................ 826 6.9% 486 5.7% 319 9.4%
$12,500 to $14,999 ................ 697 5.8% 488 5.7% 220 6.5%
$15,000 to $17,499 ................. 695 5.8% 511 5.9% 210 6.2%
$17,500 to $19,999 ................ 580 4.8% 445 5.2% 124 3.7%
$20,000 to $22,499 ................. 727 6.1% 621 7.2% 121 3.6%
$22,500 to $24,999 ................. 525 4.4% 469 5.5% 69 2.0%
$25,000 to $27,499 ................ 508 4.2% 425 4.9% 87 2.6%
$27,500 to $29,999 ................ 507 4.2% 453 5.3% 46 1.4%
$30,000 to $32,499 ................. 478 4.0% 417 4.9% 59 1.7%
$32,500 to $34,999 ................. 394 3.3% 342 4.0% 52 1.5%
$35,000 to $37,499 ................ 412 3.4% 361 4.2% 33 1.0%
$37,500 to $39,999 ................. 377 3.2% 310 3.6% 42 1.2%
$40,000 to $42,499 ................ 330 2.8% 305 3.5% 25 0.7%
$42,500 to $44,999 ................ 278 2.3% 263 3.1% 0 0.0%
$45,000 to $47,499 ................ 323 2.7% 333 3.9% 2 0.1%
$47,500 to $49,999 ................. 139 1.2% 133 1.5% 6 0.2%
$50,000 to $54,999 ................ 353 2.9% 344 4.0% 16 0.5%
$55,000 to $59,999 ................. 215 1.8% 180 2.1% 23 0.7%
$60,000 to $74,999 ................. 391 3.3% 360 4.2% 16 0.5%
$75,000 to $99,999 ................ 211 1.8% 193 2.2% 14 0.4%
$100,000 to $124,999 ................ 59 0.5% 39 0.5% 20 0.6%
$125,000 to $149,999 ............... 11 0.1% 11 0.1% 0 0.0%
$150,000 or More ................... 38 0.3% 32 0.4% 6 0.2%
Aggregate Income ($Mil) ............. 307 260 44
Median Income ....................... 21004 26206 8512
Average Income ...................... 25693 30274 13267
</TABLE>
<TABLE>
<CAPTION>
Persons Persons
Educational Attainment 25 Yrs & Over Employment Status 16 Yrs & Over
- ---------------------- ------------- -------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Less than 9th Grade............ 4172 21.2% In Labor Force............ 15805 61.4%
9th - 12th Grade, No Dip....... 4311 21.9% Civilian................. 15760 61.3%
High School Graduate........... 6078 30.9% Employed................ 14890 57.9%
Some College, No Degree ....... 2646 13.4% Male................... 8136 31.6%
Associate Degree............... 445 2.3% Female................. 6754 26.3%
Bachelor's Degree.............. 1137 5.8% Unemployed.............. 870 3.4%
Graduate/Prof. Degree.......... 888 4.5% Not in Labor Force ....... 9922 38.6%
</TABLE>
- --------------------------------------------------------------------------------
Source: 1990 Census of the Population and Housing Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 31
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(State: 47, Tennessee County: 183, Weakley County, TN) (Page 2 of 2)
(Weight: 100.0%)
Employed Employed
Industry Persons 16+ Occupation Persons 16+
- ----------------------------------- ------------ ------------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Agriculture/Forest/Fish ........... 646 4.3% Managerial/Prof. Spec.......... 2682 18.0%
Mining ............. ............. 58 0.4% Exec/Admin/Managerial......... 1195 8.0%
Construction....................... 669 4.5% Prof. Specialty............... 1487 10.0%
Manufacture-Nondurable............. 2659 17.9% Tech./Sales/Admin. Sup......... 3486 23.4%
Manufacture-Durable ............... 2213 14.9% Technician and Related ....... 386 2.6%
Transportation ................... 491 3.3% Sales......................... 1245 8.4%
Communication/Pub. Util ........... 312 2.1% Administration Support........ 1855 12.5%
Wholesales Trade .................. 480 3.2% Service Occupation............. 1997 13.4%
Retail Trade ...................... 1959 13.2% Private Household............. 37 0.2%
Finance/Ins/Real Estate............ 472 3.2% Protective Service............ 187 1.3%
Business & Repair Serv............. 406 2.7% Other Service................. 1773 11.9%
Personal Services ................ 378 2.5% Farming/Forestry/Fish.......... 617 4.1%
Entertain/Recreation .............. 195 1.3% Precision/Craft/Repair......... 1764 11.8%
Professional & Related............. 3434 23.1% Operator/Fab./Laborer.......... 4344 29.2%
Health Services ................. 1089 7.3% Mach. Op/Assem./Inspect....... 2518 16.9%
Educational Services.............. 1861 12.5% Trans. & Material Move........ 1006 6.8%
Other Professional .............. 484 3.3% Laborers...................... 820 5.5%
Public Administration ............. 518 3.5%
</TABLE>
<TABLE>
<CAPTION>
Transportation to Work Workers 16+ Travel Time to Work Workers 16+
- ----------------------------------- ------------- ------------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Drive Alone ...................... 11583 78.7% Less than 10 Minutes........... 4688 31.9%
Carpooled ........................ 1869 12.7% 10 to 19 Minutes............... 4740 32.2%
Public Transportation ............. 48 0.3% 20 to 29 Minutes............... 2328 15.8%
All Other ......................... 1211 8.2% 30 Minutes or More............. 2955 20.1%
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Units In Structure Housing Units Year Structure Built Housing Units
- ----------------------------------- ------------- ------------------------------- ----------------
<S> <C> <C> <C> <C> <C>
1-Detached ....................... 8727 72.8% 1989 To March 1990............... 239 2.0%
1-Attached ....................... 121 1.0% 1985 To 1988..................... 950 7.9%
2 ................................ 588 4.9% 1980 To 1984..................... 1270 10.6%
3 or 4 ............................ 470 3.9% 1970 To 1979..................... 3012 25.1%
5 to 9 ............................ 126 1.1% 1960 To 1969..................... 2274 19.0%
10 to 19 .......................... 303 2.5% 1950 To 1959..................... 1551 12.9%
20 to 49 ......................... 36 0.3% 1940 To 1949..................... 1028 8.6%
50 or More ....................... 0 0.0% 1939 or before................... 1668 13.9%
Other ............................ 1621 13.5% Median Year Built................ 1968
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Year Hhlder Moved In Housing Units Vehicles Available: Housing Units
- ----------------------------------- ------------- ------------------------------- ----------------
<S> <C> <C> <C> <C> <C>
1989 To March 1990 ............... 2217 18.5% None........................... 982 8.2%
1985 To 1988 ..................... 2894 24.1% 1.............................. 4114 34.3%
1980 To 1984 ..................... 1578 13.2% 2.............................. 4703 39.2%
1970 To 1979 ..................... 2585 21.6% 3.............................. 1750 14.6%
1960 To 1969 ...................... 1395 11.6% 4.............................. 344 2.9%
1959 or Before .................... 1323 11.0% 5 or More...................... 99 0.8%
</TABLE>
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Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
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HealthCare Property Appraisers of America, Inc. 32
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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MARKET AREA AND NEIGHBORHOOD
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HealthCare Property Appraisers of America, Inc. 33
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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MARKET AREA and NEIGHBORHOOD
NEIGHBORHOOD
- ------------
In most communities, there is a tendency toward the grouping of consistent land
uses. Areas devoted to the various uses are termed "physical neighborhoods."
Neighborhood use in this context can be further defined as follows:
"A portion of a larger community, or an entire community, in which there is a
homogeneous grouping of inhabitants, buildings, or business enterprises.
Inhabitants of a neighborhood usually have a more than casual community of
interests and a similarity of economic level or cultural background.
Neighborhood boundaries may consist of well defined natural, political or
man-made barriers, or they may be, more or less, defined by distinct changes in
land use or in the character of the inhabitants."
J. Michael Burroughs of HealthCare Property Appraisers, Inc. made an inspection
of the subject property and its neighborhood on March 24, 1997. All comments
should be considered to be relative to the date of inspection.
The subject neighborhood is located approximately 1 1/2 miles west from the
center of the Central Business District of Martin, Tennessee. All of the
neighborhood lies within the municipal limits of Martin. This is primarily a
college and medical area with considerable on-going development.
We consider the subject neighborhood to include the area lying south of State
Highway 22, extending one-half mile south of Mt. Pelia Road to Highway 216
(Baker Road), east of Brooks Street, and west of the University of Tennessee at
Martin.
The area is primarily institutional in nature. The various property types found
in this neighborhood are distributed approximately as follows:
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HealthCare Property Appraisers of America, Inc. 34
<PAGE>
APPRAISAL REPORT
ON
The Cane Creek
Rehabilitation Center
1800 Mt. Pelia Road
Martin, Tennessee
PREPARED BY:
HealthCare Property Appraisers of America, Inc.
Hwy 64 East, Laurel Terrace, 2nd Floor
Post Office Box 2227
Cashiers, North Carolina 28717
Copyright 1997, HealthCare Property Appraisers of America, Inc.
<PAGE>
SUBJECT
[PICTURE]
<PAGE>
[MAP]
<PAGE>
NEIGHBORHOOD
[PICTURE]
[PICTURE]
<PAGE>
NEIGHBORHOOD
[PICTURE]
[PICTURE]
<PAGE>
NEIGHBORHOOD
[PICTURE]
[PICTURE]
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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<TABLE>
<CAPTION>
<S> <C>
Single-Family 5%
Multifamily 10%
Office 20%
Institutional 45%
and Undeveloped 20%
---
Total 100%
</TABLE>
The single-family residential structures, which constitute approximately 5%
of the neighborhood, appear to be 15 to 25 years in age. Typical homes range
in size from 1,200 square feet to 1,700 square feet. Predominant home values
are in the $65,000 to $80,000 price range. Homes are well maintained and
exhibit considerable pride of ownership. Typical residents are considered to
be in a middle income bracket and mixed in age. Owner occupancy in the
neighborhood is considered to be approximately 80%. Typical single-family
homes in the neighborhood are one-story, brick and frame construction of
average quality and condition, situated on 1/3 to 1/2 acre lots.
The multifamily properties, which make-up approximately 10% of this
neighborhood, are characterized as approximately 15 years in age and well
maintained. They serve a part of the multifamily market best described as low
income tenants. Most multifamily housing was located near the U.T.-Martin
campus for student and staff housing, and consisted of two-story, frame units
of average quality and condition.
No retail was observed in the immediate neighborhood but was available along
State Highway 22, one mile north of the subject, and consisted of a Wal-Mart,
motel, fast food restaurants, and other light, local retail known as the
University Shopping Center.
Office buildings, which represent approximately 20% of the neighborhood,
typically consist of single-story structures. They are approximately 10 to 15
years in age, and rated good in maintenance and condition. Typical office
occupants include mostly medical professional offices and clinics supporting
the nearby Columbia Volunteer General Hospital. There was also the Van Ayer
Nursing Home, an assisted living facility (Martin Residential Care) under
construction, mental health facilities, and numerous clinics and medical
offices.
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HealthCare Property Appraisers of America, Inc. 35
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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Institutional structures represent approximately 45% of the neighborhood.
They consist of the University of Tennessee at Martin, with a large, modern
campus; and the Columbia Volunteer General Hospital, one-quarter mile from
the subject. These structures are approximately 20 years in age and well
maintained. Churches of several denominations are within a five minute drive
of subject.
The subject property is joined by a two-story, brick medical building,
office, wooded undeveloped property and the Highway 45E Bypass.
Streets in the neighborhood are primarily paved and do not have curbs,
gutters, and storm drains. The area receives water and sewer service from
Martin. Electricity, gas and telephone services are provided by local utility
companies.
The subject property is considered to be in general conformity with other
properties in the neighborhood. The reputation of this area generally is
considered to be good.
The neighborhood has good access to major traffic arteries. The major traffic
arteries through the area are U.S. 45E, on which the subject fronts; and
State Route 22, one-half mile north and easily accessed from the subject.
Property values in the area appear to be stable. We expect that trend to
continue over the next few years. Neighborhoods generally evolve through a
pattern of growth and development. They evolve from vacant, unimproved land
through slow growth, steady to rapid growth, reach a built-up or stagnant
phase, and then begin to decline--with various plateaus and modernization
periods along the way. In that continuum of growth, development and aging,
the subject neighborhood is currently considered to be steadily developing.
Proximity to an educated, middle-class population facilitates employment of
professional nursing staff. The subject neighborhood's proximity to technical
or high-skilled medical personnel is considered to be good with no unusual
problems obtaining this level of staff.
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HealthCare Property Appraisers of America, Inc. 36
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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Proximity to blue collar and low-income areas facilitates employment of low
skilled, minimum wage workers who make up the majority of a Medical Office's
staff. The subject neighborhood's proximity to a labor pool of low skilled,
minimum wage workers is considered to be good with no unusual problems
obtaining this level of staff.
In summary, this neighborhood is considered to be primarily a medical and
institutional area with doctors' offices, support facilities and services
centered around the hospital, and the University of Tennessee-Martin campus.
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HealthCare Property Appraisers of America, Inc. 37
<PAGE>
SITE DATA
- --------------------------------------------------------------------------------
<PAGE>
[MAP]
<PAGE>
LEGAL DESCRIPTION
LAND in the 2nd Civil District of the County of Weakley, State of Tennessee, and
more particularly described as follows:
BEGINNING at a point where the center line of Cane Creek intersects the East
right of way line of U. S. 45-E By-Pass; thence (magnetic bearings) with the
East right of way line of said By-Pass as follows: North 16 degrees 53 minutes
West 153.31 feet to a concrete right of way marker; thence North 18 degrees 29
minutes West 770.21 feet to a concrete marker; thence North 14 degrees 57
minutes West 485.81 feet to a concrete marker; thence North 24 degrees 11
minutes East 24.00 feet to a concrete marker in the south right of way line of
Mt. Pelia Road; thence with the South right of way line of Mt. Pelia Road as
follows: North 61 degrees 17 minutes East 356.50 feet; thence North 67 degrees
00 minutes East 168.50 feet to an iron stake, said stake being 25 feet from
center line of said road; thence, making a new line through the land of Hospital
Corporation of Tennessee, South 3 degrees 20 minutes East 1653.44 feet to a
point in the center line of Cane Creek; thence North 74 degrees 13 minutes West
165.75 feet with the center line of said creek to the point of beginning,
containing 12.00 acres, more or less.
BEING the same land conveyed to Robert A. Leftwich, Jr. by deed from Hospital
Corporation of Tennessee, dated June 18, 1984 and of record in Deed Book No.
249, Page 187, Register's Office of Weakley County, Dresden, Tennessee.
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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SITE DATA
LOCATION: The Cane Creek Rehabilitation Center site is located at 1800 Mt. Pelia
Road which lies in the southeastern corner of US 45 East Bypass and Mt. Pelia
Road.
PHYSICAL CHARACTERISTICS: The subject is a corner lot with approximately 1400
front feet along the east side of US 45 E Bypass, approximately 500 front feet
along the south side of US 45 East Bypass, is slightly irregular in shape and
contains approximately 11.90 acres of gross area, based on public records.
ZONING: According to Brenda Harvey of the City or Martin City Hall, the subject
property is zoned H (Hospital), which generally permits hospitals, medical
offices, pharmacies, living quarters for doctors, nurses and interns, and
nursing, convalescent and rest homes. The subject improvements are considered to
be a legal, conforming use.
TOPOGRAPHY: The subject site lies at street grade. General area topography is
level. The subject site is basically level and gradually falls from north to
south. This tract is cleared and drainage appears adequate.
SOIL ANALYSIS: Mineral deposits, if any, were disregarded by the appraiser. No
soil analysis has been prepared as a part of this report. However, considering
the number and type of existing improvements on surrounding sites, it is assumed
the subject property has sufficient soil-bearing qualities for any type building
or construction that might be contemplated thereon. Soil and subsoil appear to
be the sandy loam typically found in this part of Tennessee. It is assumed that
soils at the site are generally of medium plasticity, with shrink/swell
potential typical of the area. Soil conditions in this part of Martin do not
appear to have limited land development.
EASEMENTS AND ENCROACHMENTS: Our site inspection of The Cane Creek
Rehabilitation Center revealed no adverse easements or encroachments. This
property is
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<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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subject to typical street and utility easements. It should be noted
that we would defer to competent legal counsel for verification of these and all
other legal matters.
ACCESS: Access to the site is considered excellent. It has two access points
from Pelia Road, a paved two-lane street.
VISIBILITY: The site's visibility is rated excellent from Highway 45 East Bypass
and Mt. Pelia Road.
DRAINAGE/FLOOD ZONE: According to National Flood Certification Services, Inc.,
the subject property is not located on a National Flood Insurance Program Map
(NFIP) designated flood hazard area. It is found on Community Panel #
4702020002C, dated 09/15/89, in an area designated as Zone X. A copy of their
certification is located in the addenda of this report. This Zone generally
refers to: "Areas of 500-year flood; areas of 100-year flood with average depths
of less than one foot or with drainage areas less than one square mile; and
areas protected by levees from 100-year flood".
UTILITIES: The site is served by all municipal utilities and services including
water, police and fire protection. Gas, telephone and electricity are provided
by public utility firms. City sewer service is approximately 500 feet south.
Currently the property utilizes its own sewer system.
TRAFFIC ARTERIES: The site has excellent proximity to major traffic arteries. It
is on US Hwy 45 Bypass, one of the major traffic arteries for the area.
TAXES: According to Diana Hoskins, Trustee's Office and Celeste Taylor of the
Martin City Hall, reported that the subject's tax identification number is
02-078-019.05. The tax assessor's reported tax value for real estate is
$3,984,900 and the assessed value is $1,593,960 or 40% of the reported tax
value. This assessed value is based on 1996 valuations. The tax assessor's
reported tax value for personal property is $98,207 and the assessed value is
$59,462 or 30% of the reported tax value. The tax rate for the combined city
and county is $3.28 per $100 of
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HealthCare Property Appraisers of America, Inc. 40
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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assessed value. This indicates an annual tax of $54,232.25 for the subject
property, calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Real Estate Tax Assessment X Tax Rate = Annual Taxes
- -------------------------- -------- ------------
$1,593,960 X $0.0328 = $52,281.89
Personal Property Assessment
- ----------------------------
$59,207 X $0.0328 = $ 1,950.35
----------
TOTAL = $54,232.24
</TABLE>
HIGHEST AND BEST USE
The Highest and Best Use of land is that use which may be reasonably expected to
produce the greatest net return to the land over a given period of time.
Moreover, it is that legal use which will yield to the land the highest present
value which is economically feasible, legally permissible and maximally
productive. The Highest and Best Use analysis is the basis for the final
conclusions drawn in this report.
Land is valued as though it were unimproved and available for whatever use would
produce the maximum return. Improved property is valued according to the
extent to which the improvements are consistent with the Highest and Best Use of
the site as if unimproved. The Highest and Best Use of the total properties "as
improved" is often determined to be different from the Highest and Best Use of
the land when considered as though unimproved" and available for development. In
most cases, the existing use will continue until the land value under its
Highest and Best Use exceeds the total value of the property in its existing
use. As long as improvements contribute to the land, they constitute the Highest
and Best Use.
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HealthCare Property Appraisers of America, Inc. 41
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
Highest and Best Use - Unimproved
- ---------------------------------
Legal uses for the subject land, if unimproved, include: Offices, Institutional,
Nursing Home and Medical Offices.
The site's physical characteristics of this site, i.e., size, shape, terrain,
etc. would permit the following uses: Apartments, Retirement Apartments,
Offices, Industrial, Commercial Retail, Institutional, Motel, Nursing Home,
Single-family Residential, Condominiums and Agricultural.
Our market analysis indicates there could be sufficient demand in the general
marketplace and in this specific location for the following uses: Apartments,
Offices, Institutional, Nursing Home and Condominiums.
The following might be economically feasible: Offices and Institutional.
The most probable and reasonable uses for the subject property, if unimproved,
might include development of: Offices and Institutional.
When considering the subject site as an unimproved tract of land, and after
considering all alternative uses, it is the appraiser's opinion that Medical
Office use would be the Highest and Best Use: (a) at this time, (b) after a time
period sufficient to allow completion of any necessary improvements and (c) at
the time of estimated stabilized occupancy.
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HealthCare Property Appraisers of America, Inc. 42
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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DESCRIPTION OF IMPROVEMENTS
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HealthCare Property Appraisers of America, Inc.
<PAGE>
SUBJECT
[PICTURE]
[PICTURE]
<PAGE>
SUBJECT
[PICTURE]
[PICTURE]
<PAGE>
SUBJECT
[PICTURE]
[PICTURE]
<PAGE>
IMPROVED SALE #95074 (continued)
SALE DATA
<TABLE>
<CAPTION>
Date of Sale: OCT 91
<S> <C>
Grantor: Comprehensive Addition Prog.
Grantee: West Star Dev. Co.
Sale Price: $900000
Financing: Cash; conventional loan.
INDICATIONS
Price/Unit (Apt/Bed) $15000
Price/S.F.: $56 s.f.
Comments: 25 semi-pvt with F/B; State of FL does not require CON for
substance abuse facility; purchased vacant with intent to
renovate at cost of $6000K for use as medical office bldg. W/
lab, X-ray and short procedure surgery.
</TABLE>
<PAGE>
IMPROVED SALE #95074
[PICTURE]
PROPERTY DATA
<TABLE>
<CAPTION>
<S> <C>
Name/Location: Capitol Medical Center
2711 Capitol Med. Ctr. Blvd.
Tallahassee, FL
Level of Care: REHAB
Improvements/Condition: Class D, metal frame, 1-story in average condition.
Age: 1989
Number of Units: 60
Gross Building Area: 16000 s.f.
S.F./Unit: 267 s.f.
</TABLE>
43
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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DESCRIPTION OF MOVEMENTS
J. Michael Burroughs of HealthCare Property Appraisers of America, Inc. made an
inspection of the subject property on March 24, 1997. The following description
of improvements the buildings as they appeared to our inspector on the date of
inspection.
SUBJECT IMPROVEMENTS
The subject site is improved with three one-story buildings currently occupied
by Health South. The structure's initial completion date is 1985. The appraiser
considers the subject building structures to contain a functional area of
approximately 36,500sf or 1,014sf per bed. The three buildings are one story
brick veneer. They are presently utilized as (1) an administration building, (2)
an inpatient rehab building and (3) an out-patient building. All are of similar
construction and architecture.
The administration building contains mostly office type space. Both residential
buildings contain a dietary area, resident bedrooms and meeting rooms. The
structure has a total possible utilization of 36 beds. There is also an
in-ground heated swimming pool
The subject's physical structure appears to be of very good quality construction
and amenities. No Physical Deterioration-Curable (deferred maintenance) was
observed. The structure contains some Functional Obsolescence in its special
purpose layout. There is no External Obsolescence.
The Effective Age of the structure is 9 years, and the Remaining Economic Life
is considered to be 41 years.
In all of our analysis, we have assumed and have described the subject
improvements as being Special Purpose buildings. In fact, the building
improvements are not so Special Purpose as to preclude alternative uses. Almost
any type of medical facility would find these buildings quite
44
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<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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adaptable. Furthermore, a general office user could also utilize this space
with substantial rehab of the interior. There is little or nothing about the
interior of these structures to preclude utilization by a commercial or
institutional occupant.
Following is a topical outline of the major improvements:
SITE PREPARATION: The building site was cleared, graded and prepared for
construction.
FOUNDATION: Foundation is concrete bearing walls.
FRAME: The frame is mill-type wood.
FLOOR STRUCTURE: The floor structure is concrete on ground.
FLOOR COVERING: Floor covering consists of carpet on pad and vinyl composition
tile.
CEILING: The ceiling is gypsum board, taped and painted with insulation.
INTERIOR CONSTRUCTION: Interior construction is framed.
PLUMBING: All patient bathrooms are two- or three-fixtured china/porcelain
fixtures including chrome hardware, grab bars and other invalid aids. Individual
bathtubs and showers feature non-slip surfaces, grab bars, shower hoses and
non-ambulatory lifts. The property's plumbing is adequate. Eleven rooms has a
rooms have a full private bath with a tub or shower.
HEATING, COOLING, VENTILATION: The property is heated with a heat pump which
also provides air conditioning. Additionally, the residents' rooms are air
conditioned with thru-the-wall heat pump units with electrical resistance
heating coils.
45
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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ELECTRICAL: Fully wired and lighted with three-phase wiring, adequate to provide
lighting and power for all equipment operation including fluorescent and
incandescent lighting, reading lights over each bed, nurse call system, fire
alarm system, and intercom system.
EXTERIOR WALLS: Exterior walls are wood or steel stud walls with face brick
veneer and insulation.
ROOF STRUCTURE: The roof structure is wood joists with composition deck.
ROOF COVER: Roof cover is composition shingle.
PARKING: Parking and drives of 2" plant mix asphalt on a crushed stone base.
Marked parking areas.
DOORS & WINDOWS: Interior doors are solid core; windows are single-hung, slider
type in aluminum frame.
EQUIPMENT: Some specialized equipment was present but was not considered in
valuing the subject property. Included in this category are institutional
kitchen equipment, stainless steel sinks, food preparation counters, ovens,
stoves, dishwashers, walk-in coolers and freezers, exhaust fans and grease
traps. Laundry equipment includes two domestic brand washers and two domestic
dryers rated good in condition.
The main kitchen is in the resident building. Kitchen equipment includes one
Hobart dishwasher, one Hobart walk-in freezer, one Hobart walk-in cooler and one
Vulcan range/oven rated good in condition. There are also kitchens in each
apartment (4) and a rehabilitation training kitchen in the
Administration/Therapy building. All are equipped with residential type stoves,
refrigerators and dishwashers.
46
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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WALKS & DRIVES: Walks are approximately 41 " wide and constructed of 2 1/2 "
concrete.
LANDSCAPING: Rated good. The lawn is well established. There is a 20' x 30'
concrete pool adjoining the Administration/Therapy building.
47
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<PAGE>
COST APPROACH TO VALUE
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<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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COST APPROACH TO VALUE
The Cost Approach is frequently a reliable indicator of a property's value. The
Principle of Substitution dictates that The Cane Creek Rehabilitation Center
will be worth no more than the cost to reproduce improvements with equal utility
on an equally desirable site. Conversely, in an active building market, most
properties are usually worth at least as much as their cost to reproduce.
Otherwise, developers would not be building comparable buildings.
The initial step in the Cost Approach was the estimation of land value. The
appraiser next estimated the current construction costs to replace subject's
building improvements. The appraiser also considered the possible existence of
the three types of depreciation: Physical Deterioration, Functional
Obsolescence, and External Obsolescence.
To estimate the actual construction cost of the improvements, the appraiser
consulted with various contractors and architects familiar with this type
construction. We also have personal knowledge of comparable structures which
have been built and are familiar with their actual costs. Finally, we checked
with Marshall and Swift Valuation Service to ascertain the current cost factors
for this type construction in Martin.
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49
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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Site Valuation
There are several methods which appraisers may use to estimate vacant land
values. These methods include the direct sales comparison, allocation, land
residual technique, direct capitalization of ground rent, and the land
development method. The direct sales comparison method is based upon the
principle of substitution. This is the best method whenever adequate quantities
of verified comparable sales data is available. We have used both the direct
sales comparison and allocation methods. For Medical Office sites, the land
residual or land development methods are not a reliable indicator of value.
Direct Sales Comparison
The direct sales comparison technique is based on the economic principle of
substitution. This principle states the value of a property tends to be fixed by
the costs of acquiring an equally desirable substitute property with the same or
similar utility and physical characteristics. Comparisons are made between the
property appraised and the sales of similar properties which have occurred in
the marketplace. Typically, units of comparison are derived such as a sales
price per square foot, sales price per front foot, or sales price per building
unit. In the case of an apartment property, the economic indicator might be cost
per apartment, whereas in the case of a nursing home, the unit of value would be
cost per patient bed. The comparables are adjusted to reflect similarities and
dissimilarities of each to the subject for such characteristics as location,
time of sale, existing market conditions, and the physical characteristics of
the property. The adjusted sales prices of the comparables then become an
indication of value for the subject. In the case of the subject, we have looked
to properties with similar zoning and land use which have sold within the Martin
area.
The comparable sales utilized in this analysis are summarized in the land sales
summary and the adjustment grid which follow this section. A complete
description of the individual sales used is also included within this section.
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50
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
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LAND SALE #1
<TABLE>
<S> <C>
LOCATION: 117 Kennedy Drive
BUYER: 0. K. Smith, Jr., et al,
dba Medical Center Properties
CONFIRMATION: Deed Book/Page 344/295
DATE OF SALE: 10/11/95
SIZE: 1.28 Acres
ZONING: Commercial
UTILITIES: All
IMPROVEMENTS: None
TOPOGRAPHY: Level
SALE PRICE: $20,000
COST/UNIT: $15,625/Acre
COMMENTS: Requires adjustment for location as well as size and shape.
</TABLE>
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51
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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LAND SALE #2
<TABLE>
<S> <C>
LOCATION: Hannings Lane
BUYER: Americare Properties, Inc.
CONFIRMATION: Deed Book/Page 350/118
DATE OF SALE: 07/12/95
SIZE: 2.9 Acres
ZONING: Residential
UTILITIES: All
IMPROVEMENTS: None
TOPOGRAPHY: Level
SALE PRICE: $69,000
COST/UNIT: $23,793/Acre
COMMENTS: Requires adjustment for interior location.
</TABLE>
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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LAND SALE #3
<TABLE>
<S> <C>
LOCATION: Mt. Pedlia Road
BUYER: KY-TN Medical Alliance
CONFIRMATION: Deed Book/Page 349/367
DATE OF SALE: 06/14/96
SIZE: 1.2 Acres
ZONING: Commercial
UTILITIES: All
IMPROVEMENTS: None
TOPOGRAPHY: Level
SALE PRICE: $60,000
COST/UNIT: $50,000/Acre
COMMENTS: No adjustments necessary.
</TABLE>
- -------------------------------------------------------------------------------
53
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
LAND SALE #4
<TABLE>
<S> <C>
LOCATION: 890 University Street
BUYER: Jerry Lewis
CONFIRMATION: Deed Book/Page 345/162
DATE OF SALE: 11/20/95
SIZE: 1.4 Acres
ZONING: Commercial
UTILITIES: All
IMPROVEMENTS: None
TOPOGRAPHY: Level
SALE PRICE: $50,000
COST/UNIT: $35,714/Acre
COMMENTS: Adjustment required for superior
location.
</TABLE>
- -------------------------------------------------------------------------------
54
<PAGE>
<TABLE>
<CAPTION>
LAND SALES SUMMARY & ADJUSTMENT GRID
- ----------------------- -------------------------- ----------------------- ------------------------ ------------------------
Comp # Subject No. 1 No. 2 No. 3
Address 180 Mt. Pelia 117 Kennedy Dr Hannings Ln Mt. Pelia Rd
Martin Martin Martin Martin
TN TN TN TN
- ----------------------- -------------------------- ----------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
SITE DATA
Size (SF) 518,364 55,757 126,324 52,272
Size (Acres) 11.90 1.28 2.90 1.20
Frontage/Visibility yes/good yes/good yes/good yes/good
Zoning Comm Comm Comm Comm
Topography Level Level Level Level
Utilities All All All All
SALE DATA
Reported Sale Price ????????? $20,000 $69,000 $60,000
Sale price/SF $0.00 $0.36 $0.55 $1.15
Sale Price/Acre $0 $15,625 $23,793 $50,000
Transaction Type ---- Closed 30 Closed
Rights Conveyed ---- Fee Simple Fee Simple Fee Simple
Financing Terms ---- Cash Cash Cash
adjustment ---- ---- ---- ----
Condition of Sale ---- Arm's Length Arm's Length Arm's Length
---- ---- ----
Recorded Sale Date ---- 10/95 7/95 6/96
adjustment ---- 15% 15% ----
Location ---- Inferior Inferior Similar
adjustment ---- 25% 25% ----
Size ---- Inferior Similar Similar
adjustment ---- 25% ---- ----
Zoning ---- Similar Similar Similar
adjustment ---- ---- ---- ----
Topography ---- Similar Similar Similar
adjustment ---- ---- ---- ----
---- Similar Similar Similar
Frontage/Visibility ---- ---- ---- ----
adjustment
Utilities ---- Similar Similar Similar
adjustment ---- ---- ---- ----
Adjstd Price/Sq Ft $0.64 $0.79 $1.15
Avg Price/Sq Ft $0.86
Adjstd Price/Acre $28,076 $34,203 $50,000
Avg Price/Acre $37,311
- ----------------------- -------------------------- ----------------------- ------------------------ ------------------------
</TABLE>
<TABLE>
<CAPTION>
LAND SALES SUMMARY & ADJUSTMENT GRID
- ----------------------- -------------------------- -------------------------
Comp # No. 4
Address 890 Univ St.
Martin
TN
- ----------------------- -------------------------- -------------------------
<S> <C>
SITE DATA
Size (SF) 60,984
Size (Acres) 1.40
yes/good
Frontage/Visibility
Zoning Comm
Topography Level
Utilities All
SALE DATA
Reported Sale Price $50,000
Sale price/SF $0.82
Sale Price/Acre $35,714
Transaction Type Closed
Rights Conveyed Fee Simple
Financing Terms Cash
adjustment ----
Condition of Sale Arm's Length
----
Recorded Sale Date 11/95
adjustment 15%
Location Superior
adjustment -10%
Size Similar
adjustment ----
Zoning Similar
adjustment ----
Topography Similar
adjustment ----
Frontage/Visibility ----
adjustment
Utilities Similar
adjustment ----
Adjstd Price/Sq Ft $0.85
Avg Price/Sq Ft
Adjstd Price/Acre $36,964
Avg Price/Acre
- ----------------------- -------------------------- -----------------------
</TABLE>
55
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
Reconciliation of Comparable Sales
The comparables have already been adjusted to the subject in respect to
location, size, zoning, topography, corner influence, and utilities. The
unadjusted sales prices range from $15,625 to $ 50,000 per acre. After the
adjustments, the comparables form a tighter range of $28,076 to $50,000 per
acre. The average adjusted price per acre was $37,311. Typically, the
comparables which have the least adjustments are most representative of the
subject. Accordingly, it is our opinion that the subject 11.90 acres site has a
market value of $450,000 or $37,815 per acre.
SITE VALUE $450,000
--------
--------
- -------------------------------------------------------------------------------
56
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
Building Costs
This appraisal firm compiles construction cost data on new and proposed
facilities throughout the United States. The hard construction costs vary
considerable depending upon geographical location and quality of improvements.
To estimate the Replacement Cost of The Cane Creek Rehabilitation Center, the
appraiser utilized the Segregated Cost Method of cost estimating. This method is
designed to give separate consideration to all the major construction components
of a building. Many parts of a building, such as floor, ceiling and lighting,
increase in cost directly as the floor area of the building increases. Other
building costs vary with relation to parameters other than the floor area.
However, most costs can be related to floor area, wall area, roof area, or
sometimes an individual count of unit installations.
To facilitate the application of these individualized costs, they are grouped so
that all costs related to floor area can be added together and applied to the
total floor area, all wall area costs can be added together and applied to the
wall area, and all roof costs can be applied to the ground floor or roof area.
The appraiser utilized the Marshall and Swift Valuation Service, which is the
most widely recognized cost estimating manual in the world. This manual
separates each type of building by occupancy, type of construction, and quality.
It also makes adjustments for current cost factors on a monthly update basis.
Using the Marshall and Swift Valuation Service, the appraiser selected the
particular construction characteristics of The Cane Creek Rehabilitation Center
building improvements and selected the appropriate quantity cost factors and
adjustments.
Using the computer program, a Replacement Cost New of subject's building
improvements as well as individual estimates of depreciation for each component
item were developed. The computer calculations included all Direct Costs. The
Marshall and Swift Valuation Service includes
- -------------------------------------------------------------------------------
57
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
architectural fees, loan interest and some other minor Indirect Costs. It
specifically excludes some of the costs of doing business, or Indirect Costs,
which we have estimated as follows:
<TABLE>
<CAPTION>
<S> <C>
Taxes 0.4%
Marketing 0.4%
Loan Points and Fees 2.0%
Legal 0.5%
Accounting 0.2%
----
Total Indirect Costs 3.5%
</TABLE>
Our estimate of Indirect Costs were based on a percentage of Total Cost-New
(depreciated at the same rate as the building improvements). The Total Cost-New
includes not only Direct Cost of construction, as developed by the Marshall and
Swift Valuation Service, but also the cost of land.
Our on-site inspection of The Cane Creek Rehabilitation Center did not reveal
any obvious Physical Deterioration-Curable (deferred maintenance). Overall, the
property appeared to be well maintained and only normal maintenance situations
were observed. The subject building improvements undoubtedly contain some
functional and/or external obsolescence. The buildings contain, to some extent,
Special Purpose improvements. Medical buildings generally contain an excess of
electrical and plumbing not found in general purpose buildings. A potential user
may not be able or willing to work with the specific office layouts or the room
configuration in the residential buildings. Therefore, a potential buyer would
probably make some discount in price to reflect the inefficiency of the room
layout and excess finish work found in the subject buildings.
How much the typical buyer would discount the property would depend upon his
specific situation. Therefore, there is no way to accurately measure functional
obsolescence of this specific property. After reviewing the experience of other
sellers of Special Purpose Properties in our Sales Comparison Approach, we have
made a judgement that the functional obsolescence in the subject property is
approximately 45%. It is our opinion that the probability of obtaining a
purchaser/user of the subject property who will allocate considerable value to
the building shell without making substantial
- -------------------------------------------------------------------------------
58
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
discount for functional and/or external obsolescence is VERY GOOD. Either the
hospital, university or some other medical user should be interested in this
property.
- -------------------------------------------------------------------------------
59
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECTION 1:
OCCUPANCY: OFFICE BUILDING
CLASS: D Frame COST RANK: 3.5 Above Average/High
EFFECTIVE AGE: 9 Years Condition: 3.5 Good
NUMBER OF STORIES: 1.0 AVERAGE STORY HEIGHTS: 10.0
FLOOR AREA: 9,250 Sq. Ft. COST AS OF: 3/97
- ------------------------------------------------------------------------------------ REPLACEMENT
COST
COMPONENT UNITS COST NEW
- --------------------------------------------------- --------------- ---------------- ---------------
<S> <C> <C> <C>
FOUNDATION:
Concrete, Bearing walls.......................... 9,250 1.91 17,667
FRAME:
Wood, Mill Type.................................. 9,250 4.22 39,035
FLOOR STRUCTURE:
Concrete on Ground............................... 9,250 3.18 29,415
FLOOR COVER:
Carpet and Pad................................... 3,700 4.13 15,281
Tile, Ceramic.................................... 462 9.51 4,398
Vinyl Composition Tile........................... 5,087 1.72 8,750
SUBTOTAL......................................... 28,429
CEILING:
Gypsum Board, Taped & Paint...................... 9,250 1.32 12,210
Ceiling Insulation............................... 9,250 0.66 6,105
SUBTOTAL......................................... 18,315
INTERIOR CONSTRUCTION:
Interior Construction, Framed.................... 9,250 18.72 173,160
PLUMBING:
Plumbing......................................... 9,250 6.12 56,610
HEATING AND COOLING:
Heat Pump........................................ 8,325 8.33 69,347
ELECTRICAL:
Electrical....................................... 9,250 10.46 96,755
Standby Generator, Diesel........................ 100 336 33,600
SUBTOTAL......................................... 130,355
EXTERIOR WALL:
Face Brick Veneer................................ 6,475 17.14 110,981
Insulation....................................... 6,475 0.56 3,626
SUBTOTAL......................................... 114,607
ROOF STRUCTURE:.....................................
Wood Joists, Composition Deck.................... 9,250 4.68 43,290
ROOF COVER:
Composition Shingle.............................. 9,250 1.56 14,430
TOTAL............................................... 734,660
ARCHITECT'S FEES.................................... 6.7% 49,590
- --------------------------------------------------- --------------- ---------------- ---------------
REPLACEMENT COST NEW................................ 9,250 84.78 784,250
- --------------------------------------------------- --------------- ---------------- ---------------
</TABLE>
60
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECTION 2:
OCCUPANCY: APARTMENT
CLASS: D Frame COST RANK: 3.5 Above Average/High
EFFECTIVE AGE: 9 Years Condition: 3.5 Good
NUMBER OF STORIES: 1.0 AVERAGE STORY HEIGHTS: 10.0
FLOOR AREA: 27,250 Sq. Ft. COST AS OF: 3/97
- ------------------------------------------------------------------------------------ REPLACEMENT
COST
COMPONENT UNITS COST NEW
- --------------------------------------------------- --------------- ---------------- ---------------
<S> <C> <C> <C>
EXCAVATION & SITE PREPARATION
Site Preparation................................. 27,250 0.21 5,722
FRAME:
Wood, Mill Type.................................. 27,250 3.83 104,367
FLOOR STRUCTURE:
Concrete on Ground............................... 27,250 3.02 82,295
FLOOR COVER:
Carpet and Pad................................... 13,625 3.50 47,688
Tile, Ceramic.................................... 1,362 8.85 12,058
Vinyl Composition Tile........................... 12,262 1.62 19,865
SUBTOTAL......................................... 79,611
CEILING:
Gypsum Board, Taped & Paint...................... 27,250 1.28 34,880
Ceiling Insulation............................... 27,250 0.73 19,892
SUBTOTAL......................................... 54,772
INTERIOR CONSTRUCTION:
Interior Construction, Framed.................... 27,250 13.58 370,055
PLUMBING:
Plumbing......................................... 27,250 6.19 168,677
FIRE PROTECTION:
Sprinklers....................................... 14,000 2.36 33,040
HEATING AND COOLING:
Heat Pump........................................ 7,500 6.12 45,900
Window Heat Pump................................. 11 1,411 15,521
SUBTOTAL......................................... 61,421
ELECTRICAL:
Electrical....................................... 27,250 5.08 138,430
EXTERIOR WALL:
Face Brick Veneer................................ 19,075 15.93 303,865
Insulation....................................... 19,075 0.53 10,110
SUBTOTAL......................................... 313,975
ROOF STRUCTURE:.....................................
Wood Joists, Composition Deck.................... 27,250 4.36 118,810
ROOF COVER:
Composition Shingle.............................. 27,250 1.44 39,240
SUBTOTAL SUPERSTRUCTURE............................. 27,250 57.63 1,570,415
</TABLE>
- -------------------------------------------------------------------------------
61
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------ REPLACEMENT
COST
COMPONENT UNITS COST NEW
- --------------------------------------------------- --------------- ---------------- ---------------
<S> <C> <C> <C>
YARD IMPROVEMENTS:
Paving, Asphalt.................................. 120,000 2.08 249,600
- --------------------------------------------------- --------------- ---------------- ---------------
TOTAL............................................... 1,820,015
ARCHITECT'S FEES.................................... 6.9% 125,278
- --------------------------------------------------- --------------- ---------------- ---------------
REPLACEMENT COST NEW................................ 27,250 71.39 1,945,293
- --------------------------------------------------- --------------- ---------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY TOTAL COST NEW
- ------- --------------
<S> <C>
1: OFFICE BUILDING 784,250
2: APARTMENT..... 1,945,293
TOTAL COST........ 2,729,543
- --------------------------------------------------------------------------------
ROUNDED TO NEAREST $100 2,729,500
Cost Data by MARSHALL & SWIFT
</TABLE>
- -------------------------------------------------------------------------------
62
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
SUMMARY OF COST APPROACH
<TABLE>
<S> <C> <C>
Bldg. Improvements-Replacement Cost $2,729,500
Indirect Costs 111,283
----------
Total Costs: $2,840,783
Less Depreciation:
Physical Deter.-Curable $ 0
Physical Deter. - Incurable
Replacement Costs 0
Physical Deter. - Incurable -
Indirect Costs 0
Functional Obsolescence &
External Obsolescence @ 45% 1,278,352
---------
Total Depreciation 1,278,352
----------
Depreciated Value $1,562,431
Land Value $ 450,000
----------
Market Value--Real Estate $2,012,430
Add Furniture, Fixtures, Equipment $ 0
Less Depreciation 0
---------
Depreciated Value of FF&E $ 0
----------
MARKET VALUE OF REAL & PERSONAL $2,012,430
PROPERTY By Cost Approach -- "As Is"
(R) $2,000,000
----------
----------
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
63
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
INCOME CAPITALIZATION APPROACH TO VALUE
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
64
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
INCOME CAPITALIZATION APPROACH TO VALUE
To estimate the Market Value of The Cane Creek Rehabilitation Center through the
Income Capitalization Approach, the appraiser attempted to project the income
the subject might generate by a lease to other healthcare and non-healthcare
users.
A major underlying premise of the Income Capitalization Approach holds that the
subject property can be rented. This premise assumes a viable rental market
sufficient to develop rates of: (1) rental, (2) occupancy, (3) expenses and (4)
capitalization. We were unable to develop sufficient data to process a
convincing Income Approach to Value. The absence of sufficient data to develop
an Income Approach suggests the buyers for this type property are users rather
than investors seeking an income stream. This tends to invalidate the use of the
Income Approach for this appraisal. Both the lack of market rental data and the
available sales data on this type property suggest that the most likely
purchaser will be an owner/occupant not an investor buying for income. It was
not deemed helpful to develop and analyze rental data in great detail. However
as a check against the other two approaches to value, an overview of rental
possibilities and alternatives was considered to see what return and capitalized
value might be expected if in fact an investor/purchaser could be found. In
attempting an Income Capitalization Analysis, this appraiser considered the
leasability of subject property to:
- Similar Residential Healthcare Tenants
- Alternative Medical Non-residential User/Lessees
- Alternative Non-medical Institutional Users
- General Office/Retail Users
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
65
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
Alternatives by type included:
1. Similar Healthcare Residential Use:
a. Nursing Home
b. Rest Home
C. Assisted Living Facility
d. Head Trauma
e. Drug/Chemical Rehab
f. Group Home
2. Alternative Health Care, Non-residential Use
a. Kidney Dialysis
b. Outpatient Services
c. Adult Care
d. Medical Office
e. Mental Health
3. Alternative Non-Medical Institutional Use
a. Correctional Facility
b. Corporate Retreat
4. General Real Property Use
a. Office
b. Retail
The subject property has limited leasability as a nursing home, assisted living
facility, or rest home for several reasons. It is configured in several
buildings which makes a nursing home operation quite inefficient. The square
feet per bed in a nursing home is also much lower (avg nursing home = 300 SF Per
Bed) than in the subject (approximately 1000 SF Per Bed). Furthermore the rental
paid per bed or per square foot for a nursing home is determined mostly from the
economics of the nursing home operation, making each facility unique and
distorting any comparison.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
66
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
The possibility of leasing the subject to another operator of head trauma rehab
facilities is probably impractical. We did not consult other operators in the
interest of confidentiality. However, the present lessee is one of the best
operators of this type. One must assume that if they cannot make the head trauma
rehab business work in this facility, any other operator would have similar
problems. The problems in the head trauma industry and the rehab industry
generally evolve from tightening up of HMO's and other managed care operations.
These same problems are also a concern for drug/chemical rehab operations and
all other rehab operators. Therefore, most operators of this type are not
seeking to expand and certainly not into marginal markets or locations where
other medical operators have had difficulty. When they do, the rent is dictated
by the business potential of the specific operation in that specific location.
Comparisons of other special use rehab buildings in other locations were of
little assistance in establishing fair market rental for the subject in .
There is some potential for leasing the subject to some type of group home
operator, i.e., homes for troubled teens, halfway houses, mentally retarded,
etc. This is an expanding market. However, the rentals paid by this type
operation are dictated by politics, altruism, and the construction cost of the
facility, rather than by market competition. Therefore, analysis of this type
rental is of limited use in attempting to establish a fair market rental for the
subject in Martin.
In looking at alternative healthcare in non-residential settings, we did find
that there has been considerable expansion of this type service. Those uses most
often encountered include kidney dialysis, outpatient services, adult care,
medical offices and mental health services. However, as in residential
healthcare operations, we found that rentals were not determined by market
competitive factors. Most often they were a function of the cost of the special
use property and the rent necessary to service the debt.
There is some market for the subject for rental to an alternative non-medical
institutional user such as a correctional facility. The privatization of the
penal system is a slowly evolving phenomena but certainly a trend. However, the
instances are scarce and riddled with politics making comparison of rentals
useless. The other non medical use would be for a corporate retreat. While there
are buyers for this type use, they generally require an even more remote site
than subject's and are bought by
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
67
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
owner/occupants not for investment. We do feel there is some potential for
selling the subject as an owner/occupant corporate retreat -- but not much as a
rental corporate retreat.
Some properties like subject have been purchased for conversion to general
office or retail use. The rentals here are usually dictated by market forces as
there are other alternatives available.
The subject probably has average potential for acquisition by an investor
intending to rent out for retail use. Its location is on the ByPass has
excellent frontage and visibility. Local Realtors tell us that well located
retail space in the Martin area can generally be expected to bring from $4.50
to $5.00 per square foot on a net basis. The subject probably has very good
potential for rental for office use. Its location near the hospital and
university is highly desirable. Office properties in Martin are currently
bringing $5.00 to $6.00 per square foot on a net basis. The subject might
then be expected to have a theoretical potential to develop net income of
$200,750 (36,500 sf x $5.50). Utilizing a capitalization rate of 10% would
suggest a value by the Income Capitalization Approach of
<TABLE>
CAPITALIZATION
NET INCOME DIVIDED BY RATE = VALUE
- ---------- --------------- -----
<S> <C> <C> <C> <C>
$200,750 DIVIDED BY 10% = $2,010,000
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
68
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
SALES COMPARISON APPROACH TO VALUE
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
69
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
SALES COMPARISON APPROACH TO VALUE
The sales comparison approach is defined as "a set of procedures in which an
appraiser derives a value indication by comparing the property being appraised
to similar properties that have been sold recently, applying appropriate units
of comparison, and making adjustments, based on the elements of comparison, to
the sales prices of the comparables." (This information taken from The
Dictionary of Real Estate Appraisal , American Institute of Real Estate
Appraisers, second edition.)
In this approach, the market value of the subject is estimated by comparing it
to similar properties that have sold recently. This approach is predicated on
the direct relationship between subject property's market value and the sale
prices of comparable properties.
The accurate application of this approach is based, in part, on the choice of an
appropriate unit of comparison, as shown on the summary grid. The income
multiplier was not considered appropriate as the potential buyers for this type
property come from several dissimilar industries with different income
characteristics. The physical indicators included sales price per revenue
generating unit (beds) and sales price per square foot of building area. Both
the sales price per bed and per square foot were considered appropriate with the
price per square foot viewed as having the highest correlation to market value.
The appraiser researched sales of Special Purpose medical use buildings that
have re-sold for a different use. The following section presents information on
the sales analysis of comparables for an indicated value of the subject
property.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
70
<PAGE>
Floor Plan
[Map]
<PAGE>
Floor Plan
[Map]
<PAGE>
Floor Plan
[Map]
<PAGE>
IMPROVED SALE #1778 (continued)
SALE DATA
<TABLE>
<S> <C>
Date of Sale: SEP 94
Grantor: New Orleans Health Care
Grantee: Prestige Care, L.L.C.
Sale Price: $6503473
Financing: $1,534,723 cash; Note for
$,968,750 at 8.5%.
</TABLE>
INDICATIONS
<TABLE>
<S> <C>
Price/Unit (Apt/Bed) $30390
Price/S.F.: $69 s.f.
</TABLE>
Comments: Sale at RTC sealed bid auction; grantee proposed to partially
convert to adolescent psyc facility.
<PAGE>
IMPROVED SALE #1778
PICTURE
PROPERTY DATA
<TABLE>
<S> <C>
Name/Location: Ferncrest Maner Nursing Home
14500 Hayne Blvd.
New Orleans, LA
Level of Care: NH
Improvements/Condition: 1-story, masonary in good
condition
Age: 1987
Number of Units: 214
Gross Building Area: 94840 s.f.
S.F./Unit: 443 s.f.
Occupancy: 0.61
</TABLE>
<PAGE>
IMPROVED SALE #95078 (continued)
SALE DATA
<TABLE>
<S> <C>
Date of Sale: JUL 90
Grantor: Town of Danvers
Grantee: Beverly Hospital Corp.
Sale Price: $3000000
Financing: Cash
</TABLE>
INDICATIONS
<TABLE>
<S> <C>
Price/Unit (Apt/Bed) $25000
Price/S.F.: $25 s.f.
</TABLE>
Comments: Sold with all FF&E; After sale 50% was converted to outpatient,
day surgery, Phys. & Occ. therapy and EMER. room at cost of
$322K. Remainder converted to SNF licensed for 60 beds;
Conversion cost was $950K with $200K for F&F; Plus $350K to repair
roof, parking and other maint.
<PAGE>
IMPROVED SALE #95078
PICTURE
PROPERTY DATA
<TABLE>
<S> <C>
Name/Location: Hunt Hospital
75 Lindall Street
Danvers, MA
Level of Care: HOSP
Number of Units: 120
Gross Building Area: 120000 s.f.
S.F./Unit: 1000 s.f.
</TABLE>
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
IMPROVED SALE #95077 (continued)
SALE DATA
<TABLE>
<S> <C>
Date of Sale: DEC 92
Grantor: City of Peabody
Grantee: Lahey Clinic
Sale Price: $2800000
Financing: Cash to seller
</TABLE>
INDICATIONS
<TABLE>
<S> <C>
Price/Unit (Apt/Bed) $47458
EGIM: 0.19
Overall Rate: -1.1670
</TABLE>
Comments: Inc/Exp adjusted YE 1991; Purchased for conversion to rehab
hospital.
<PAGE>
IMPROVED SALE #95077
Picture
PROPERTY DATA
<TABLE>
<S> <C>
Name/Location: Josiah B. Thomas Hospital
15 King Street
Peabody, MA
Level of Care: HOSP
Number of Units: 59
Occupancy: 0.76
Effective Gross Income: $15016254
Expenses: $18283314
Net Income: -$3267060
</TABLE>
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
IMPROVED SALE #95076 (continued)
SALE DATA
<TABLE>
<S> <C>
Date of Sale: OCT 93
Grantor: Koala North Carolina, Inc.
Grantee: J. Chapman and F. Blackwell
Sale Price: $640000
Financing: All Cash
</TABLE>
INDICATIONS
<TABLE>
<S> <C>
Price/Unit (Apt/Bed) $15238
Price/S.F.: $28 s.f.
</TABLE>
Comments: Opened in '86, closed in '92; Purchased for conversion to ALF;
Of the 9.17 acre site, 6.42 is considered undevelopable; all
equipments included.
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
IMPROVED SALE #95076
Picture #95076
PROPERTY DATA
<TABLE>
<S> <C>
Name/Location: Chaps Koala Center
5010 Alston Avenue
Durham, NC
Level of Care: REHAB
Improvements/Condition: 1-story, steel frame, vinyl
siding in good condition.
Age: 1986
Number of Units: 42
Gross Building Area: 22812 s.f.
S.F./Unit: 543 s.f.
</TABLE>
<PAGE>
IMPROVED SALE #95075 (continued)
SALE DATA
<TABLE>
<S> <C>
Date of Sale: MAY 92
Grantor: Comprehensive Addiction Pro.
Grantee: Peter C. Kern
Sale Price: $850000
Financing: Cash to seller; conventional
financing.
</TABLE>
INDICATIONS
<TABLE>
<S> <C>
Price/Unit (Apt/Bed) $14167
Price/S.F.: $19 s.f.
</TABLE>
Comments: Purchased vacant w/ no license to renovate into a ALF; TX has not
required CON since 1985; all utilities and on-site septic.
<PAGE>
IMPROVED SALE #95075
PICTURE
PROPERTY DATA
<TABLE>
<S> <C>
Name/Location: Melbourne Hotel & Conference Ctr.
4611 Bee Caves Road
Austin, TX
Level of Care: Hotel
Improvements/Condition: Class D, wood frame w/ masonary
interior walls in average
condition.
Age: 1985
Number of Units: 60
Gross Building Area: 44000 s.f.
S.F./Unit: 733 s.f.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SALES COMPARISON SUMMARY GRID
- ------------------------- ------------------------- ----------------------- ------------------------ -------------------------
Comp # SUBJECT #95074 #95075 #95076
Name HealthSouth Bowling Green Bowling Green Chaps
Of Tallahassee Of the Hills Koala
City Martin Tallahassee Austin Durham
State TN FL TX NC
- ------------------------- ------------------------- ----------------------- ------------------------ -------------------------
<S> <C> <C> <C> <C>
PROPERTY DATA
Year Built 1988 1989 1985 1986
# Beds 36 50 60 42
GBA (sf) 36,500 16,000 44,000 22,812
SF Per Bed/Apt 1014 320 733 543
SALE DATA
Date of Sale 10/91 5/92 10/93
Sale Price $900,000 $850,000 $640,000
Price/Bed $18,000 $14,167 $15,238
Price/SF $56.25 $19.32 $28.06
CUMULATIVE ADJUSTMENTS
Rights Conveyed 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238
$56 $19 $28
Financing Terms 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238
$56 $19 $28
Conditions of Sale 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238
$56 $19 $28
Market Conditions 17% 15% 0%
Adjusted Price $20,970 $16,292 $16,838
$66 $22 $31
NON-CUMULATIVE
ADJUSTMENTS
Physical 15% 15% 15%
Characteristics:
Location 20% 30% 30%
Economic Factors 0% 0% 0%
Non-Cumulative 35% 45% 45%
Adjustments
ADJUSTED VALUE
INDICATORS
Sale Price/Bed $28,310 $23,623 $24,415
Sale Price/SF $88 $32 $45
Average Sale Price/Bed $30,409
Average Sale Price/SF $55
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SALES COMPARISON SUMMARY GRID
- ------------------------- ----------------------- ------------------------ ------------------------
Comp # #95077 #95078 #1778
Name Joseph B Hunt Ferncrest
Thomas Hsp Hospital Manor
City Peabody Danvers New Orleans
State MA MA LA
- ------------------------- ----------------------- ------------------------ ------------------------
<S> <C> <C> <C>
SITE DATA
Year Built N/A N/A 1987
# Beds 59 120 214
GBA (sf) 40,474 120,000 94,840
SF Per Bed/Apt 686 1000 443
SALE DATA
Date of Sale 12/92 7/90 9/94
Sale Price $2,800,000 $3,000,000 $6,503,000
Price/Bed $47,458 $25,000 $30,388
Price/SF $69.18 $25.00 $68.57
CUMULATIVE ADJUSTMENTS
Rights Conveyed 0% 0% 0%
Adjusted Price $47,458 $25,000 $30,388
$69 $25 $69
Financing Terms 0% 0% 0%
Adjusted Price $47,458 $25,000 $30,388
$69 $25 $69
Conditions of Sale 0% 0% 0%
Adjusted Price $47,458 $25,000 $30,388
$69 $25 $69
Market Conditions 14% 21% 8%
Adjusted Price $53,864 $30,250 $32,895
$79 $30 $74
NON-CUMULATIVE
ADJUSTMENTS
Physical -25% 0% -35%
Characteristics:
Location 5% 5% 30%
Economic Factors 0% 0% 0%
Non-Cumulative -20% 5% -5%
Adjustments
ADJUSTED VALUE
INDICATORS
Sale Price/Bed $43,092 $31,763 $31,250
Sale Price/SF $63 $32 $71
Average Sale Price/Bed
Average Sale Price/SF
- ------------------------- ----------------------- ------------------------ ------------------------
</TABLE>
<PAGE>
[Graph]
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
COMPARISON OF COMPARABLES TO SUBJECT
In our final and most detailed analysis and comparison to subject, the appraiser
selected comparable sales with the highest combination of important similar
characteristics. The sales selected were all special use medical facilities that
were sold for a different use than that of the previous tenant.
Explanation of Adjustments
All sales are of Special Purpose medical buildings. Each sale has been adjusted
for differences, both economic and physical, in relation to the subject.
Following is a discussion of each characteristic of the property with an
explanation of the adjustments made to each comparable sale.
Cumulative Adjustments
"Cumulative Adjustments" were applied to the sales prior to other adjustments in
order to reconcile the sales prices for intangible occurrences which could alter
the sales prices. Additional noncumulative adjustments for physical and economic
considerations are analyzed thereafter. Cumulative adjustments considered
included:
Property Rights Conveyed
------------------------
This adjustment is for sales which had rights conveyed differently than
the subject's. In this appraisal, the Fee Simple Going Concern is being
appraised. All of the sales were also sold as Going Concerns, none of
which were leased facilities. As the appraiser, at this point in this
analysis, is seeking Fee Simple Value of Going Concern, no adjustment
was made.
Financing
---------
No adjustment is applied for financing, as all sales are reported to be
cash to seller or cash equivalent transactions. We are not aware of
atypical financing that would require an adjustment for cash
equivalency.
Conditions of Sale
------------------
No adjustments were considered necessary to reflect any special
conditions or terms of sale.
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The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
Market Conditions (Date of Sale)
--------------------------------
Adjustments for recorded sales date, or time, is reflective of
differences in the market at different times. An upward adjustment of
approximately 3% annually was made to the comparables sale prices.
Non-Cumulative Adjustments
Location
--------
Locational adjustments reflect the difference in value attributed to a
property's specific location. An upward adjustment was made to each
comparable to reflect the subject's superior location in an established
medical/educational neighborhood.
Quality/Design
--------------
This adjustment reflects physical differences of specific properties
for varying qualities of building materials, layout, building finish,
etc. The subject was considered 15% superior to Comparables #95074,
#95075, and #95076; 25% inferior to Comparable #95077 and 35% inferior
to Comparable #1778.
Condition/Age
-------------
Many older facilities receive renovations and on going maintenance due
to State requirements and market expectations. However, their appeal to
the private pay market is less than newer facilities. In addition,
newer facilities are generally more efficient to operate, thus
increasing profit. No adjustment was made for age.
Average Square Footage Per Bed
------------------------------
The comparables presented a range of 320 s.f. to 1000 s.f. per bed. The
subject, at 1035 s.f., is at the upper end of the range at. The area
per bed is an indication of the existence, or at least the potential,
for better support areas which can positively affect profitability. As
these properties do not appear to be selling on a per bed basis, this
adjustment was considered unnecessary.
- --------------------------------------------------------------------------------
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The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
Sales Price Per Bed
HealthCare Property Appraisers maintains a nationwide data bank on long term
health care facilities, which currently includes sales of over 1,200 facilities.
Facilities which are of good quality but predominantly medicaid funded are
selling on a nationwide basis for approximately $25,000 to $50,000 per bed. The
higher quality homes, which offer better care services, more amenities, and
therapy areas (or homes which show unusual profit potential), are generally sold
for $45,000 to $75,000 per bed.
The comparables selected for close analysis have an unadjusted sales price per
bed range from $14,167 to $47,458 with an average of $25,042. The factors which
affect the sales price per bed include unit mix, number of residents per room,
project amenities, and average area per bed. Typically, a property which has a
larger average area per bed will sell at a higher unit price.
After adjusting the comparables to the subject the sales price per bed formed a
range of $23,623 to $43,092 with an average of $30,409. Giving further
consideration to subject's average bed area and other physical characteristics,
the value range on a per bed basis is estimated at $30,000 to $31,000.
Applying this range to the subject's 36 indicates a value range of $1,080,000 to
$1,116,000.
<TABLE>
<CAPTION>
#BEDS X SALE PRICE PER BED = INDICATED VALUE
----- ------------------ ---------------
<S> <C> <C> <C> <C>
36 X $30,000 to $31,000 = $1,080,000 to $1,116,000
</TABLE>
Sales Price Per Square Foot
The unadjusted comparables formed a sales price range from $19 to $69 per square
foot with an average of $44. An inverse relationship usually exists between the
sales price per square foot and the average area per bed, assuming all amenities
and services are similar. A smaller unit usually generates more income on a per
square foot basis than a larger unit. This is reflective of the staffing costs
as, typically, the per resident day costs are not directly influenced by the
unit size. It is also
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- --------------------------------------------------------------------------------
reflective of the fixed costs of furniture, fixtures, and equipment, which are
spread over the total square footage. After economic adjustments, the
comparables formed a sales price per square foot range of $32 to $88 with an
average of $55.
Considering the subject's functional utility, area per resident, quality and
condition, we believe a value range of $52.50 to $57.50 per square foot to be
indicated. Applying the unit values to the subject's 36,500 of gross building
area indicates a value range of $1,916,250 to $2,098,750.
<TABLE>
<CAPTION>
BUILDING SIZE X SALE PRICE PER SF = INDICATED VALUE
- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
36,500 X $52.50 to $57.50 = $1,916,250 to $2,098,750
</TABLE>
Reconciliation of Sales Comparison Indicators
The value ranges developed by both of the physical indicators are summarized
below:
<TABLE>
<CAPTION>
INDICATORS OF VALUE VALUE RANGE
- ------------------- -----------
<S> <C>
SALES PRICE PER BED $1,080,000 to $1,116,000
SALES PRICE PER SQUARE FOOT $1,916,250 to $2,098,750
</TABLE>
The sales price per bed tends to be a good indicator if the comparables have
similar rates, per patient day occupancy, and self pay ratios. Due to the
uniqueness of each of the comparables, the price per bed is not considered to be
a strong indicator. The sales price per square foot is considered a stronger
indicator. Giving consideration to current market conditions and the subject's
physical characteristics, the sales comparison approach suggests a narrower
range of $1,900,000 to $2,100,000.
The Sales Comparison Approach has a limited use in providing a value range.
Differences in location and many other variables make a precise comparison
between the comparable sales and the subject property extremely difficult.
- --------------------------------------------------------------------------------
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The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
Summary
The validity of the Sales Comparison Approach depends upon whether a buyer can
be found who would be willing to pay some amount for the building improvements.
In our opinion, the chance of that happening are very good. Either the
university, the hospital or some other medical or institutional user should find
the subject suitable to its use.
The reconciled market value range indicated by the Sales Comparison Approach:
$1,900,000 to $2,100,000
- --------------------------------------------------------------------------------
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The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
RECONCILIATION AND FINAL VALUE ESTIMATE
<TABLE>
<S> <C>
INDICATED VALUE BY $2,000,000
COST APPROACH
INDICATED VALUE BY $2,010,000
INCOME APPROACH
INDICATED VALUE BY
SALES COMPARISON APPROACH $1,900,000 to $2,100,000
</TABLE>
To estimate the final Market Value for The Cane Creek Rehabilitation Center, it
is necessary to reconsider all three approaches, correlate the data, and
determine what emphasis to give each approach.
The Cost Approach was based upon a component cost breakdown prepared by a
computer utilizing the Marshall and Swift Valuation Service Cost Data Bank. This
nationally recognized building costs service prepared a very accurate estimate
of replacement costs for subject's improvements. From replacement costs (direct
and indirect) was deducted depreciation based upon observation and age of the
improvements and sales data as well as consideration of Functional and External
Obsolescence. Subject's 11.90 acres of land were valued at $37,815 per acre or
$450,000. This approach indicated a market value for The Cane Creek
Rehabilitation Center of $2,000,000.
The value indicated by the Cost Approach is an important consideration for a
potential buyer as it provides a starting point for estimating value in use.
However, most purchasers of a special use property will make a fairly
substantial deduction from cost new to reach their offering price. The amount of
that deduction is dependent upon a number of factors that vary from investor to
investor and property to property and cannot be predicted or quantified with any
high degree of accuracy. If a buyer can be found who can use the building
improvements it is my opinion that this deduction would be a minimum of 50% but
in many cases could be as much as 100%. We believe this
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
depreciated value by our Cost Approach of $2,000,000, which assumes
depreciation of 45% probably sets the upper limit of value for the subject
property.
Under the Income Approach to value, the appraiser analyzed the subject property
from the standpoint of a potential investor who would be most interested in its
income stream. This approach was considered to be the weakest of the three as it
is based on the least data and has the weakest correlation to the actual thought
process of the typical buyer. Few buyers of this type property would be
acquiring it for its investment potential, but rather for its value in use in a
business. The projected Net Income to Real Estate of $200,750 was capitalized at
10%. Based upon a consideration of current financing, available alternatives,
and equity demands, the Market Value of The Cane Creek Rehabilitation Center was
indicated by the Income Approach to be $2,010,000.
Under the Sales Comparison Approach, the appraiser reviewed a considerable
number of sales of former medical facilities that have been converted to other
uses. Analysis of this data after adjustments for property differences indicated
a Market Value for The Cane Creek Rehabilitation Center of $1,900,000 to
$2,100,000, based on $52.50 to $57.50 per square foot.
We believe equal value can be placed on the Sales Comparison and Cost Approachs.
Based on the enclosed data and analyses,, I believe the Subject Property
described herein has the following estimated Final Market Value as of March 24,
1997 at Stabilized Census, Occupancy and Rates:
FINAL MARKET VALUE OF SUBJECT PROPERTY: $2,000,000
- --------------------------------------------------------------------------------
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<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
MARKETING PERIOD
Due to the weak market for Medical Offices, The Cane Creek Rehabilitation Center
may not be saleable to a health care user. The appraiser has reviewed sales of a
number of Medical Offices that have taken place over the past five years. The
average sales time for those properties was approximately three years. If the
subject property were priced to include "some" value for the improvements and
adequately marketed, we believe it could be sold at our appraised value within
approximately three years. However, it must be recognized that there may be very
little demand for this property as improved and it may be necessary to sell it
for land value alone -- which could also take three years.
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- --------------------------------------------------------------------------------
SUMMARY OF VALUES
It was our opinion that the Subject Property described herein had a Maximum
Market Value, as of March 24, 1997 in its present physical condition, subject to
the Underlying Assumptions and Limiting Conditions contained in this report:
<TABLE>
<S> <C>
Land $450,000
Building Improvements $1,550,000
----------
Total Real Estate $2,000,000
</TABLE>
The price above will be achieved only if a buyer can be found who can make some
use of the subject's existing building improvements. After considering the
subject's functional utility, neighborhood and general market conditions, we
would estimate that probability as only VERY GOOD. If no buyer can be found who
would pay something for the building shell, or if the owner chooses not to
attempt marketing the property "as improved" but rather seeks a buyer for the
land only, then the Minimum Market Value of the subject is estimated to be:
Land $450,000
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- --------------------------------------------------------------------------------
UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS
1. The Appraiser assumes no responsibility for legal matters nor renders
an opinion of title. Good title to The Cane Creek Rehabilitation Center
is assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to appear
in court, commission, or in any other capacity without prior
arrangements and additional compensation.
This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc.. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report without the preparer's written consent is an
unintended user, and does so at his own risk.
3. The factual information in this report--furnished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
4. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each
appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared. However, selected portions of
this appraisal report shall not be given to third parties without prior
written consent of the signatories of this appraisal report. Further,
neither all nor any part of this appraisal report shall be disseminated
to the general public by use of advertising, public relations, news,
sales, or other media for public communication without the prior
written consent of the signatories of this appraisal report.
5. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not responsible
for any adverse condition that may be found in these matters.
6. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters (including
but not limited to termites, dry rot, wet rot, and other
wood-destroying organisms) are not present or have been detected and
properly corrected.
7. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations and mechanical, plumbing, electrical, heating, ventilation,
air conditioning, and roof systems are assumed to be adequate, in good
working order and capable of performing the function for which they
were designed. The appraiser has no expertise in this area and cannot
certify the condition
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- --------------------------------------------------------------------------------
or functional adequacy of these items. A qualified inspector should be
utilized for that purpose. The appraiser assumes no responsibility for
any hidden or unapparent conditions of the property, soil, subsoil, or
structures that would affect its value.
8. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
9. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
10. The appraiser has not researched the subject property for liens nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value. The property is therefore appraised as though it were free and
clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
11. The value estimate and estimated income and expenses assume responsible
ownership and typical, competent management.
12. The appraiser was not furnished with construction plans or physical
surveys and due to the confidential nature of this assignment, did not
measure the building improvements. Gross area of land and improvements
is estimated by methods and from sources considered reliable and the
data is believed to be accurate. However, no responsibility is assumed
for its accuracy and it is recommended that a licensed surveyor be
employed for that purpose. Any substantial difference in the subject's
actual land or improvement size would have some effect on its true
market value. Any statement by the appraiser contained herein as to the
size of land or building improvements is for descriptive purposes and
is a statement of the appraiser's opinion as to the property's
functional utility and not a statement of fact as to its physical size.
13. The appraiser's projections of income and expenses are not predictions
of the future. They are our best estimates of current market thinking
about what future income and expenses might be. We make no warranty or
representations that these projections will materialize.
14. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale.
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The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
15. To the best of the Appraiser's knowledge, this report conforms to the
current requirements prescribed by the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation as required by the Financial Institutions Reform,
Recovery and Enforcement Act (FIRREA) and the Appraisal Institute.
16. The Americans with Disabilities Act "ADA" became effective January 26,
1992. We have 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
we have no direct evidence relating to this issue, I (we) did not
consider possible noncompliance with the requirements of ADA in
estimating the value of the property. Based on our personal inspection,
we are not aware of any irregular or apparent non-compliant handicap
items.
17. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
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- --------------------------------------------------------------------------------
APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- The statements of fact contained in this appraisal report are
true and correct.
- The reported appraisal 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 personal interest or bias
with respect to the parties involved.
- My compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the
cause of the client, the amount of the value estimate, the
attainment of a stipulated result, or the occurrence of a
subsequent event.
- My analyses, opinions and conclusions were developed, and this
report has been prepared, in conformity with the Uniform
Standards of Professional Appraisal Practice of the Appraisal
Standards Board of the Appraisal Foundation as required by the
Financial Institutions Reform, Recovery and Enforcement Act
(FIRREA) and the Code of Professional Ethics and Standards of
Professional Appraisal Practice of the Appraisal Institute.
- As of the date of this report, J. Michael Burroughs, MAI, SRA
has completed the requirements of the continuing education
program 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.
- The subject property was inspected by Franklin M. Ramsey and
was not inspected by J. Michael Burroughs.
- Eve L. Burroughs and Bonny J. Sinclair provided valuable
assistance in compiling data for this report. No one else
provided significant professional assistance to the
undersigned. The appraiser gratefully acknowledges the
contribution of data from several sources.
- The appraiser has complied with the USPAP competency
provision.
- The USPAP departure provision does not apply.
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The Cane Creek Rehabilitation Center, Martin, Tennessee
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- This appraisal assignment was not based on a requested minimum
or maximum valuation, a specific valuation, or the approval of
a loan.
I do not authorize the out-of-context quoting from or partial reprinting of this
appraisal report. Further, neither all nor any part of this appraisal report
shall be disseminated to the general public by the use of media for public
communication without the prior written consent of the appraiser(s) signing this
appraisal report.
J. MICHAEL BURROUGHS, MAI, SRA
-----------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
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REFERENCES
The appraiser would like to acknowledge the following resources:
1. Laventhol & Horwath, Retirement Housing Industry 1989 (Laventhol &
Horwath, Philadelphia, PA 1990).
2. Laventhol & Horwath, Nursing Home Industry 1988 (Laventhol & Horwath,
Philadelphia, PA 1989).
3. Marshall and Swift Computerized Services, Los Angeles, CA.
4. National Planning Data Corporation, Ithaca, NY.
5. SMG Marketing Group, Inc. -C-1993.
6. Ernst & Young and American Association of Homes for the Aging Study.
Continuing Care Retirement Communities: An Industry in Action, Analysis
and Developing Trends, 1989.
7. The Dictionary of Real Estate Appraisal, American Institute of Real
Estate Appraisers, second edition.
8. The Appraisal of Real Estate, ninth edition.
9. The Guide to the Nursing Home Industry, 1993. A joint publication of
Health Care Investment Analysts, Inc. and Arthur Andersen & Co.
10. U. S. Bureau of Census.
11. Marion Merrell Dow Managed Care Digest Long Term Care Edition 1993.
Marion Merrell Dow, Inc.
12. An Overview of The Assisted Living Industry, October 1993, Coopers &
Lybrand and The Assisted Living Facilities Association of America.
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QUALIFICATIONS OF APPRAISER
J. MICHAEL BURROUGHS, MAI & SRA
POST OFFICE BOX 2227
HWY 64 EAST, LAUREL TERRACE, 2ND FLOOR
CASHIERS, NORTH CAROLINA 28717
BUSINESS EXPERIENCE
- -------------------
J. Michael Burroughs has been engaged in the preparation of appraisals,
feasibility studies, economic analyses, and general consulting on all types
of properties for various clients. In the mid-1970s, Mr. Burroughs began
specializing in the appraisal of long-term health care facilities and housing
for the elderly. Since 1985, Mr. Burroughs has worked exclusively with
long-term health care and housing for the elderly in the areas of appraising,
brokerage, and finance.
Assignments have been in more than 44 of the 50 United States. Current
assignments include all types of healthcare and senior housing real estate:
Nursing Homes
Continuing Care Retirement Communities (Both Rental and Endowment)
Assisted Living Facilities
Acute Care Hospitals
Psychiatric Hospitals
Congregate Living Facilities
Properties appraised total approximately 3,000 in number and exceed $7 Billion
in appraised value. Mr. Burroughs has also been active as a general partner in
five successful apartment to condominium conversion projects and is actively
engaged in the buying and selling of investment real estate for his own account
and for clients. He is a nationally recognized convention speaker and published
author on healthcare appraising and financing.
EMPLOYMENT
- ----------
HealthCare Property Appraisers of America, Inc. - President
June, 1973 to Present
Atlantic Mortgage and Investment Company - First Vice President
January, 1972 to July, 1973, Winston-Salem, NC
Wachovia Mortgage Company - Asst.VP and Manager of the Charlotte Income Property
Loan Department
May, 1970 to January, 1972, Charlotte, NC
Prudential Insurance Company - Real Estate and Mortgage Loan Department Regional
Appraiser
December, 1964 to
April, 1969, Montgomery, Alabama
May 1969 to May, 1970, Charlotte, N. C.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 100
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
GENERAL EDUCATION
- -----------------
Mars Hill College-Associate of Arts --- 1962
University of North Carolina at Chapel Hill-B.S. in Business Administration
(Major: Banking and Finance) 1964
REAL ESTATE EDUCATION
American Institute of Real Estate Appraisers-Real Estate Valuation-Course
1-University of Mississippi, 1966.
American Institute of Real Estate Appraisers-Real Estate Valuation-Course
11-Tulane University, 1967.
Various Seminars in Tax Deferred Exchanging and Computer Applications
for Real Estate Analysis.
PROFESSIONAL CONTRIBUTIONS
- --------------------------
Mr. Burroughs has authored articles for national industry periodicals and is a
nationally recognized speaker on the valuation of healthcare and senior living
properties.
MEMBERSHIPS AND PROFESSIONAL DESIGNATIONS
- -----------------------------------------
The Appraisal Institute-MAI, SRA
Licensed Real Estate Broker
The Academy of Real Estate Exchangers
State Certified General Appraiser
AREA OF SPECIALTY-LONG-TERM HEALTH CARE
Healthcare and Nursing Home Facilities
Facilities Appraised: 2500
Location: Located in 44 States
Type: Skilled, ICF, Personal Care, Head Trauma, Long-Term
Pediatric Care, Substance Abuse, Mentally Retarded
(MR), Rehabilitation, Alzheimers, Acute, Sub-Acute,
Rehab, and Psychiatric Hospitals
Retirement Housing
------------------
Facilities Appraised: 60+
Location: Located in over 14 States
Type: Lease Rental, Condo Ownership, Retirement Apartments
with or without Nursing Home, Assisted Living, and
Luxurious Hotel-type for the well elderly. Housing
for the elderly requiring some personal care and
services.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 101
<PAGE>
The Cane Creek Rehabilitation Center, Martin, Tennessee
- --------------------------------------------------------------------------------
TYPICAL NURSING HOME CLIENTS (Partial List)
Mortgage/Bond Lenders
Bank One, Indianapolis, IN
Bear Sterns Investment Bankers, New York, NY
Dominion Bank, Richmond, VA
First American National Bank, Nashville, TN
First National of Maryland, Baltimore, MD
Grove Capital, Atlanta, GA
Healthcare REIT, Toledo, OH
Hibernia National Bank, New Orleans, LA
J. C. Bradford, Nashville TN and Pensacola, FL
Maryland National Bank, Baltimore, MD
Society Bank, Dayton, Ohio
Southtrust Bank, N.A., Birmingham, AL
Van Kampen Merritt, Philadelphia, PA
Wachovia Bank & Trust, Raleigh, NC
Wright One Financial, Dayton, OH
Healthcare Management Companies
American Retirement Corporation, Nashville,
TN The Angell Group, Winston-Salem, NC
Asheville Psychiatric Hospital, Asheville, NC
Beverly Enterprises, Ft. Smith, AR
Brian Management Group, Hickory, NC
The Brunner Companies, Dayton, OH
Charlotte Memorial Hospital, Charlotte, NC
Convalescent Services, Atlanta, GA
Cumberland Health Systems, Nashville, TN
Denver Health Group, Denver, CO
Diversicare Corporation of America, Franklin, TN
Elmhurst Psychiatric Hospital, Portland, CT
Genesis Health, West Point, PA
Health Care Capital, Atlanta, GA
Health Care Concepts, Atlanta, GA
Health Prime, Atlanta, GA
Meridian Healthcare, Towson, MD
Multicare Management, Inc., Hackensack, NJ
National Health Corporation, Murfreesboro, TN
Nomura, New York, NY
Quest Rescue, Atlanta, GA
Quorum Health Services, Inc., Wellesley, MA
Regency Health Care, Ormond Beach, FL
Resource Housing of America, Atlanta, GA
Royal Care, Inc., Cleveland, TN
Southern Care Enterprises, Atlanta, GA
TheraTx, Baltimore, MD
Total Care Systems, Inc., West Point, PA
WellCare, Inc., Atlanta, GA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 102
<PAGE>
ADDENDA
- ------------------------------------------------------------------------------
<PAGE>
[form]
- --------------------------------------------------------------------------------
FEDERAL EMERGENCY MANAGEMENT AGENCY
STANDARD FLOOD HAZARD DETERMINATION
See the Attached Instructions
O.M.B. No. 3887 0264
Expires April 30, 1998
Section I - LOAN INFORMATION
- -------------------------------------------------------------------------------
1. LENDER NAME AND ADDRESS
HEALTHCARE PROPERTY APPRAISERS
HWY 68 EAST BOX 2237
CASHIERS, NC 28717
2. COLLATERAL (Building/Mobile Home/Personal Property) PROPERTY ADDRESS
(Legal Description may be attached)
1800 MOUNT PELIA ROAD
MARTIN, TN 38237-5455
3. LENDER ID. NO.
4. LOAN IDENTIFIER
5
5. AMOUNT OF FLOOD INSURANCE REQUIRED
$0
Section II
- ------------------------------------------------------------------------------
A. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) COMMUNITY JURISDICTION
NFIP Community Name
Martin, City of
County(ies)
Weakley
State
TN
NFIP Community Number
470202
B. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) DATA AFFECTING BUILDING/MOBILE HOME
NFIP Map Number or Community Panel Number (Community name, if not the same as
"A")
470202??02C
NFIP Map Panel Effective/Revised Date
09/15/89
LOBAL/LOHR
- ----- ------------
Yes Date
Flood Zone
X
No. NFIP Map
C. FEDERAL FLOOD INSURANCE AVAILABILITY (Check all that apply)
X Federal Flood Insurance is available (community participates in NFIP).
- --- X Regular Program Emergency Program of NFIP
--- ---
Federal Flood Insurance is not available because community is not
- --- participating in the NFIP
Building/Mobile Home is in a Coastal Barrier Resources Area (CBRA),
- --- Federal Flood Insurance may not be available. CBRA designation date:
----------------
D. DETERMINATION
IS BUILDING/MOBILE HOME IN SPECIAL FLOOD HAZARD AREA (ZONES BEGINNING WITH
LETTERS "A" OR "V")? YES X NO
----- -----
If yes, flood insurance is required by the Flood Disaster Protection Act of
1973.
(If no, flood insurance is not required by the Flood Disaster Protection Act
of 1973.
E. COMMENTS (Optional):
Name:
Type: REGULAR
Property: REGULAR
Cert No: 1405438-0
Client ID: 7425
BFE: UNSHADED
Requested By: EVE OR BONNY
Fax 1-(704) 743-1730
This determination is based on examining the NFIP map, any Federal Emergency
Management Agency revisions to it, and any other information needed to locate
the building/mobile home on the NFIP map.
F. PREPARER'S INFORMATION
NAME, ADDRESS, TELEPHONE NUMBER (if other than Lender)
BANKERS HAZARD DETERMINATION SERVICES - BHDS
P.O. BOX 33001
ST. PETERSBURG, FL 33733
PHONE: 1-800-723-6327
DATE OF DETERMINATION
03/19/97
FEMA Form 81-93 JUN 95
<PAGE>
The Heartstone of Round Rock
401 Oakwood Blvd
Round Rock, TX 78681-4067
<PAGE>
APPRAISAL REPORT
ON
THE HEARTHSTONE
OF ROUND ROCK
401 OAKWOOD BOULEVARD
ROUND ROCK, TEXAS
PREPARED BY:
HealthCare Property Appraisers of America, Inc.
Hwy 64 East, Laurel Terrace, 2nd Floor
Post Office Box 2227
Cashiers, North Carolina 28717
Copyright 1997, HealthCare Property Appraisers of America, Inc.
<PAGE>
SUBJECT
[Picture of the front of the Property]
<PAGE>
[Letterhead]
April 10, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
14160 Dallas Parkway
Dallas, TX 75240
Re: The Hearthstone of Round Rock
Round Rock, Texas
Dear Mr. Brickman:
HealthCare Property Appraisers of America, Inc. has inspected The Hearthstone of
Round Rock for the purpose of estimating the Market Value of its fee simple
estate as a Going Concern. All factors which might influence the value of this
property were investigated and fully considered to the best of our ability. We
have performed a Complete Appraisal and report our findings here in the form of
a Self-Contained Appraisal Report, which describes the appraisal method and
contains the information necessary for forming realistic conclusions. The
supporting data analyses and conclusions are an integral part of this report.
The maps, sketches, and statistics are included to aid the reader in visualizing
the property. Your attention is directed to the section entitled: "Underlying
Assumptions and Limiting Conditions Section" which provides the basis for all
conclusions and the Final Value Estimate.
Based on the enclosed data and analyses, we believe the Subject Property
described herein had a Market Value, as of March 20, 1997, at current occupancy
and in its present physical condition of:
$5,900,000
This value estimate included all real and personal property, as well as the
business value as a Going Concern. Furniture, fixtures and equipment were
estimated to have a contributory value of approximately $399,000 and intangible
business assets were estimated to contribute $1,000,000 to the total value. The
real estate alone was estimated to contribute $4,501,000. These estimated
contributory values are allocations of the Going Concern and may not represent
the amount that would be realized if components were sold separately.
The value conclusions in this report assume that this property is not subject to
any existing leases or management contracts. We have assumed that any new owner
would be free to negotiate a new lease or management contract if they so
desired.
<PAGE>
After studying the sales history of similar properties, the Appraiser estimates
a reasonable marketing period for the subject property to be twelve months.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by the Uniform Standards of
Professional Appraisal Practice (USPAP).
SPECIAL CONDITION
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home even if the current leasee does ot extend his lease. The reader is
cautioned that the appraiser is not an expert on nursing home or medicaid legal
matters and this critical assumption should be confirmed by legal counsel. If
this assumption is not accurate it could have a dramatic impact on the
property's value.
I appreciate the opportunity to provide these appraisal services to you. If you
have any questions on this report or any other matters, please do not hesitate
to call.
Respectfully submitted,
HealthCare Property Appraisers of America, Inc.
/s/ J. Michael Burroughs [SEAL]
J. MICHAEL BURROUGHS, MAI, SRA
State Certified General Appraiser, #A218
President
JMB:ela
3
<PAGE>
SUMMARY OF IMPORTANT CONCLUSIONS
SELF-CONTAINED REPORT OF A COMPLETE APPRAISAL
<TABLE>
<CAPTION>
<S> <C>
Subject Property: The Hearthstone of Round Rock
Property Location: 401 Oakwood Boulevard
Round Rock, Texas
Effective Date: March 20, 1997
Report Date: April 10, 1997
Purpose of Appraisal: Market Value
Area of Site: 4.58 sf acres (approx.)
Highest and Best Use: For Nursing Home Use
Improvements:
Number of Units: 120 Beds
Building Size: 47,000 sf (approx.)
Building Date: 1988
Economics:
Effective Gross Income: $4,919,327
Expenses: (4,114,757)
----------
Net Income: $ 804,569
Indicated Values:
Cost Approach: $6,360,000
Income Capitalization Approach: $5,750,000
Sales Comparison Approach: $5,800,000 to $6,250,000
4
<PAGE>
FINAL ESTIMATED MARKET VALUE:
Land $ 500,000
Building Improvements $4,001,000
----------
Total Real Estate $4,501,000
Personal Property $ 399,000
Business Value $1,000,000
----------
Total Property $5,900,000
</TABLE>
5
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
TRANSMITTAL LETTER . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SUMMARY OF IMPORTANT CONCLUSIONS . . . . . . . . . . . . . . . . . . . . .4
TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
GENERAL IDENTIFICATION OF PROPERTY . . . . . . . . . . . . . . . . . . . .7
PROPERTY RIGHTS APPRAISED. . . . . . . . . . . . . . . . . . . . . . . . .7
SCOPE OF APPRAISAL . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
HISTORY OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
THE PURPOSE OF THE APPRAISAL . . . . . . . . . . . . . . . . . . . . . . .9
METHOD OF APPRAISAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
REGIONAL ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
MARKET AREA AND NEIGHBORHOOD . . . . . . . . . . . . . . . . . . . . . . 38
SITE DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
DESCRIPTION OF IMPROVEMENTS. . . . . . . . . . . . . . . . . . . . . . . 49
COST APPROACH TO VALUE . . . . . . . . . . . . . . . . . . . . . . . . . 55
INCOME CAPITALIZATION APPROACH TO VALUE. . . . . . . . . . . . . . . . . 71
SALES COMPARISON APPROACH TO VALUE . . . . . . . . . . . . . . . . . . . 87
RECONCILIATION AND FINAL VALUE ESTIMATE. . . . . . . . . . . . . . . . .106
ALLOCATION OF VALUE BETWEEN REAL PROPERTY, PERSONAL PROPERTY
AND BUSINESS ENTERPRISE . . . . . . . . . . . . . . . . . . . . . .109
SUMMARY OF VALUES. . . . . . . . . . . . . . . . . . . . . . . . . . . .118
UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS . . . . . . . . . . . . .119
APPRAISER'S CERTIFICATION. . . . . . . . . . . . . . . . . . . . . . . .123
QUALIFICATIONS OF APPRAISER. . . . . . . . . . . . . . . . . . . . . . .126
</TABLE>
6
<PAGE>
GENERAL IDENTIFICATION OF PROPERTY
The subject property, known as The Hearthstone of Round Rock, is located at 401
Oakwood Boulevard, Round Rock, Texas. The subject site and improvements are
described further in subsequent sections of this report. The subject of this
analysis includes all real, personal and business property necessary to operate
as a Nursing Home.
PROPERTY RIGHTS APPRAISED
The appraiser, in completing this appraisal assignment, considered the subject
property to include all of those rights that may be lawfully owned and are
legally referred to as being held in "fee simple".
DEFINITION OF FEE SIMPLE ESTATE
Absolute ownership unencumbered by any other interest or estate; subject
only to the limitations of eminent domain, escheat, police power, and
taxation. (THE DICTIONARY OF REAL ESTATE APPRAISAL, American Institute of
Real Estate Appraisers, Third Printing, October, 1987)
SCOPE OF APPRAISAL
In conducting this appraisal, our staff
- Inspected the subject property.
- Developed and analyzed significant data from primary and secondary
sources, confirming that data where possible.
- Analyzed sales, income and expense data and projected a reasonable
cash flow for the subject.
- Completed Income Capitalization, Cost and Sales Comparison Approaches
To Value and reached a Final Market Value conclusion as reported
herein.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by USPAP.
7
<PAGE>
[TEXAS STATE MAP]
<PAGE>
[ROUND ROCK CITY MAP]
<PAGE>
HISTORY OF PROPERTY
To the best of the appraiser's knowledge, the complete subject property (land,
building, equipment and business) has not been sold, listed or placed under
contract within the past three years.
8
<PAGE>
THE PURPOSE OF THE APPRAISAL
The purpose of the Complete Appraisal contained in this Self-Contained Appraisal
Report is to estimate the Market Value of The Hearthstone of Round Rock. This
report is intended for the internal use of the property owner.
DEFINITION OF MARKET VALUE
The most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated.
(2) Both parties are well informed or well advised, and acting in what
they consider their own best interests.
(3) A reasonable time is allowed for exposure in the open market.
(4) Payment is made in terms of cash in U. S. dollars or in terms of
financial arrangements comparable thereto.
(5) The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale. *
9
<PAGE>
DEFINITION OF GOING CONCERN VALUE
As most properties of subject's type are usually owned, operated, and sold as
one entity including the real estate, personal property, and business, in this
report Market Value is considered to be synonymous with the Going Concern Value,
which includes any intangible enhancement attributable to the operation of the
property. The physical real estate assets are such integral parts of the
business that the market values for the land and building or the business
aspects are difficult, if not impossible, to segregate from the total value of
the property.
10
<PAGE>
COMPETENCY
The Office of the Comptroller of the Currency has issued the following Final
Rule, which requires lenders to evaluate appraiser competency for each specific
appraisal assignment:
"Not all appraisers are competent to perform every type of appraisal that
will be needed in connection with federally related transactions. For
instance, an appraiser who is experienced in appraising shopping centers
may not possess sufficient expertise to appraise a golf course. A financial
institution should look beyond an individual's title to determine if he or
she has the experience and training needed to perform the appraisal. This
provision is not intended to prohibit, in every circumstance, an individual
from appraising a type of property with which he or she is not familiar.
However in such instances, an appraiser may perform the appraisal only in
accordance with the Competency Provision in the USPAP. "
HealthCare Property Appraisers of America, Inc. is a national appraisal firm
limiting its appraisal practice to Health Care and Senior Housing properties.
HealthCare Property Appraisers of America, Inc. has prepared over 3,000
appraisal reports in 42 states on a wide variety of health care-oriented
facilities and housing for the elderly. Property types encompass the complete
continuum of health care facilities including:
- General and Acute Care Hospitals
- Psychiatric Hospitals
- Substance Abuse Facilities
- Skilled Nursing Homes
- Assisted Living Homes
- Rest Homes, Personal Care, and Homes for the Aged
- Facilities for the Developmentally Disabled
- Independent Living Apartments for Retirees
- Continuing Care Retirement Communities
Our office maintains a constant dialogue with public health departments,
medicaid reimbursement officials and healthcare licensing agencies in all 50
states. We constantly update our data bank in accordance with changes within the
various state health care programs.
11
<PAGE>
HealthCare Property Appraisers of America, Inc. maintains an in-house database
which currently contains in excess of 1,300 sales of health care-related and
senior housing properties.
SOURCE OF DEFINITIONS
- TITLE XI, FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT
OF 1989 (FIRREA), [Pub. L. No. 101-73, 103 Stat. 183 (1989)], 12
U.S.C. 3310, 3331-3351, and section 5(b) of the Bank Holding Company
Act, 12 U.S.C. 1844(b); Part 225, Subpart G: Appraisals Paragraph
225.62(f).
- UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE, Page I-7.
- FEDERAL RESERVE SYSTEM, 12 CFR Parts 208 and 225, Sec. 225.62.
- OFFICE OF THE COMPTROLLER OF THE CURRENCY, 12 CFR part 34, Sec. 34.42.
- FDIC, 12 CFR Part 323, Sec. 323.2.
- OFFICE OF THRIFT SUPERVISION, 12 CFR Part 564, Sec. 564.2.
- NCUA, 12 CFR Part 722, Sec. 722.2.
12
<PAGE>
METHOD OF APPRAISAL
The Appraisal Profession generally recognizes three approaches to value:
1. COST APPROACH TO VALUE: The appraiser: (a) estimates the land value as
though the site were vacant and available for development and (b) estimates
the cost to replace subject's improvements (at their same stage of
depreciation). The depreciated Replacement Cost is usually based upon
consultation with local contractors and construction cost data services.
2. INCOME CAPITALIZATION APPROACH TO VALUE: The Appraiser compiles and
analyzes market data to estimate subject property's economic rental and
expenses. The net income thus derived is capitalized into a value estimate.
This indicates the property's value to an investor receiving this income
stream and develops the present value of perceived future benefits and
property reversion.
3. SALES COMPARISON APPROACH TO VALUE (also known as the Comparative Approach
or Market Data Method): The Appraiser researches sales of Nursing Homes in
this market area and develops units of comparison which are adjusted and
applied to the subject property.
13
<PAGE>
REGIONAL ANALYSIS
- --------------------------------------------------------------------------------
14
<PAGE>
REGIONAL ANALYSIS
OVERVIEW
The subject property is located in the city of Round Rock, Williamson County,
Texas. Located in the central region of the state, the site is approximately
fifteen miles north of Austin, Texas, and 180 miles south of Dallas, Texas. The
only other town in Williamson County comparable to Round Rock in size is
Georgetown, the county seat.
Williamson County rests in the northern section of the Austin-San Marcos, Texas
Metropolitan Statistical Area (hereafter referred to as the Austin MSA), which
is composed of the following counties: Bastrop, Caldwell, Hays, Travis and
Williamson.
TERRAIN AND CLIMATE
The Williamson County area is primarily rolling, typical of central Texas. The
Colorado River, running through Austin, crosses the Balcones escarpment, which
separates the Texas hill country from the blackland prairies of East Texas.
Elevations in the area can range from 400 to 900 feet above sea level. A
subtropical climate, prevailing winds are southerly but occasionally strong
northers may bring cold spells lasting only a few days. Precipitation is well
distributed with two annual peaks in the spring and fall, averaging 32 inches
annually and snowfall is inconsequential. Temperatures averaging a low
temperature of 39 degrees in January and a high of 95 degrees in July and
August, producing a freeze-free season of 270 days, encourage growth in the
area.
15
<PAGE>
POPULATION AND DEMOGRAPHICS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
CHANGE PROJECTED CHANGE
1990-1996 1996-2001
-----------------------------------------
<S> <C> <C>
UNITED STATES 6.5% 4.9%
STATE 11.5% 8.5%
MSA 19.8% 13.8%
- ------------------------------------------------------------------
- ------------------------------------------------------------------
</TABLE>
The area enjoys a broadly diversified economic base, including computers,
electronics, metal fabrication, lighting products and health care products
industries, which contribute to the growth of the area. According to Claritas,
Inc., a demographics survey firm, the estimated 1996 population of the United
States has increased 6.5% since 1990, and an additional 4.9% increase can be
expected by 2001.
According to the. 1990 Census, Texas's population totaled 16,986,510 residents.
Claritas estimates the current population at 18,942,934,representing an increase
of 11.5%. By 2001, the population is projected to reach 20,555,216 residents,
an increase of 8.5%.
The 1990 Census indicates Austin-San Marcos MSA's population totaled 846,227
residents. Claritas estimates the current population at 1,013,839, representing
an increase of 19.8%. By 2001, the population is projected to reach 1,154,252
residents, an increase of 13.8%.
16
<PAGE>
DEMOGRAPHICS OF THE ELDERLY POPULATION
PERCENTAGE OF CHANGE - ELDERLY POPULATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1990-1996 1996-2001
--------- ---------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
----- ----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
U. S. 14.4% 21.0% 32.9% 11.3% 12.4% 19.0%
STATE 17.9% 23.5% 38.5% 18.3% 11.5% 21.9%
MSA 27.0% 33.1% 46.9% 26.0% 21.2% 27.3%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The market segments of primary interest in this demographics study are the
age groups: (a) 75 to 79, (b) 80 to 84, and (c) 85 and over. Between 1990 and
1996, the estimated increase nationally in the 75 to 79 year old age bracket
was 14.4%. In the 80 to 84 age group the change was 21.0% and the change in
the 85 and over age group was 32.9%. By 200 1, the 75 to 79 age group is
projected to increase by an additional 11.3%, the 80 to 84 group by 12.4% and
the age group 85 and over by 19.0%.
In the state of Texas, the 75 to 79 age group is currently estimated at
392,973 which is an increase of 17.9% since the last census. The age group 80
to 84 has shown an increase of 23.5% in that same time period and the 85 and
over age group has shown an increase of 38.5%. It is estimated that by 2001,
there will be 11.7, 7.8 and 7.2 residents in these age groups or a change of
18.3%, 11.5%, and 21.9% respectively.
In the Austin-San Marcos MSA, the 75 to 79 age group is currently estimated
at 16,058 which is an increase of 27.0% since the last census. The age group
80 to 84 has shown an increase of 33.1 % in the time period between 1990 and
1996 and the 85 and over age group has shown an increase of 46.9%. It is
estimated that by 2001, there will be 10.8, 7.2 and 7.0 residents in these
age groups or a change of 26.0%, 21.2%, and 27.3% respectively.
17
<PAGE>
<TABLE>
<CAPTION>
MEDIAN HOUSEHOLD INCOME - AGES 75+
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1990-1996 1996-2001
--------- ---------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
U. S. +$3,462 +$3,355 +$3,233 +$3,344 +$3,359 +$3,357
STATE +$3,752 +$3,675 +$3,446 +$3,790 +$3,785 +$3,813
MSA +$7,050 +$6,741 +$6,107 +$6,168 +$6,124 +$5,672
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Nationally, the 75 to 79 age group median household income increased $3,462
between 1990 and 1996 and is projected to increase an additional $3,344 by 2001.
The 80 to 84 age group showed an increase nationally in median household income
of $3,355 between 1990 and 1996 and is projected to increase an additional
$3,359 by 2001. The age group 85 and over showed an increase between 1990 and
1996 of $3,233 and is projected increase an additional $3,357 by 2001.
In the state of Texas, the median household income for the 75-79 age group
increased $3,752 between 1990 and 1996, and is projected to reach $20,326 or
increase an additional $3,790 by 2001. The median household income for the 80 to
84 age group during the time period 1990 to 1996 increased $3,675 and is
expected to reach $19,925 or increase an additional $3,785 by 2001. The age
group 85 and over showed an increase of $3,446 between 1990 and current
estimates and is projected to reach $19,392 or increase an additional $3,813 by
2001.
In the Austin-San Marcos MSA, median household income for the 75-79 age group
increased $7,050 between 1990 and 1996, and is projected to reach $29,670 or
increase an additional $6,168 by 200 1. The median household income for the 80
to 84 age group during the 1990-1996 time period increased $6,741 and is
expected to reach $28,436 or increase an additional $6.124 by 2001. The age
group 85 and over showed an increase of $6,107 between 1990 and current
estimates and is projected to reach $26,434 or an additional increase of $5,672
by 2001.
18
<PAGE>
ELDERLY HOUSEHOLDS WITH INCOME $35,000+
(AS A % OF TOTAL HOUSEHOLD INCOME FOR 55+ POPULATION)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1996 2001
1990 ESTIMATED PROJECTED
-------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES 42.4% 52.0% 58.3%
STATE 38.0% 50.0% 42.2%
MSA 39.5% 53.3% 62.5%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
One of the best indicators of the ability of the subject's residents to be self
supporting (rather than government funded) is their level of affluence. The
appraiser compared the subject's potential local market with that of Texas and
the USA as a whole. The comparison was based upon the percentage of population
aged 55 + with an annual household income exceeding $35,000.
GOVERNMENT AND SERVICES
The Williamson County area consists of communities. The subject property falls
within the jurisdiction of Round Rock which has a mayor/council form of
government. Police protection is provided by the Round Rock Police Department
with approximately 72 officers. Fire protection is provided by the Round Rock
Fire Department with full-time personnel and 30 volunteers. Emergency care is
coordinated with Williamson County and facilities in Austin.
UTILITIES
Water and sewer service are provided by the City of Round Rock. Electricity is
supplied by Texas Utilities Electric Company, gas service is provided by Lone
Star Gas Company, and telephone service by Southwestern Bell.
19
<PAGE>
EDUCATION
The Round Rock Independent School District has 31 public schools and an
enrollment of 26,000. There is one private/parochial school.
Vocational-Technical institutions in the area include Austin Community
College, 15 miles south in Austin and Temple Community College in the
neighboring county to the north. Among the area's facilities for higher
education are University of Texas at Austin, Southwest Texas State University
in San Marcos, 90 miles south and several private institutions including St.
Edward's University and Southwestern University.
TRANSPORTATION
The area's principal highways include Interstate 35 (N-S) and State Highway 79
(East). Currently, there are no roads under expansion or renovation. It is
anticipated that State Highway 35N, from County Road 3406 north for 20 miles,
will be expanded in the near future. Work is tentatively scheduled for
completion in about 18 months.
Airports are located throughout the area with the major commercial airport
being Robert Mueller Airport, 15 miles south in Austin, with 100 daily
flights. Airlines serving that airport include America West, American,
Continental, Northwest, Southwest, TWA and U.S. Air.
Passenger rail service is provided by AMTRAK and freight rail service by Union
Pacific and Georgetown railroads. Trucking companies serving the area include
over 30 carriers.
HEALTHCARE
There is one hospital, Columbia Medical Center of Round Rock with a total of 75
beds and two adjacent medical offices, serving the southern Williamson County
area. Medical assistance is provided by three clinics, providing services for
all age groups from family practice and minor emergencies to diagnosis and
treatment for routine and various medical problems. Round Rock has 21 dentists
in the city. The county has nine nursing homes with a total of 1,208 beds.
20
<PAGE>
Round Rock has two nursing homes, Trinity Lutheran Home (157) and Hearthstone at
Round Rock (120).
ECONOMY
Financial institutions in the area include NorWest Bank, lst State, Boatmen's
Bank, lst Texas Bank of Round Rock. According to the 1995 SURVEY OF BUYING
POWER, by Sales & Marketing Management, the per household retail sales for the
Austin-San Marcos MSA, ranking 115th in the nation, was $25,180 (compared to the
national average of $23,209). The median household effective buying income,
ranking 123rd in the nation, was $36,972 ($37,070). Household expenditures for
health care ranked 55th in the nation with $7.2 million. Figures for Williamson
County were $19,172 and $44,005 respectively.
According to the PLACES RATED ALMANAC the Austin-San Marcos MSA ranks 39th of
the nation's 343 MSAs in the area of employment opportunity. The area is
projected to show a growth of 8.15% in new jobs, with of 32,001 white collar and
10,301 blue collar positions expected. Distribution by sector and percentage of
employees is as follows:
<TABLE>
<CAPTION>
Sector Percentage
- ------ ----------
<S> <C>
Services 37.4%
Manufacturing 13.1%
Wholesale/Retail Trade 19.5%
Construction 5.7%
Transportation/Communications/Utilities 5.5%
Finance/Insurance/Real Estate 7.6%
Government 9.0%
Agriculture/Forestry/Fishing 1.8%
Mining 0.4%
</TABLE>
21
<PAGE>
The area's major employers are:
<TABLE>
<CAPTION>
Company Name #Employees Product/Service
- ------------ ---------- -----------------
<S> <C> <C>
Dell Computers 4800 Telemarketing
Abbott Laboratories 1600 Intravenous Solutions
Texas Instruments 1400 Computer Components
State Farm Insurance 1000 Insurance
Radian 920 Environmental Services
Intermedics Orthopedics 700 Prosthesis Manufacturer
Wayne Division-Dresser Ind. 600 Electronic Pump Controls
Cypress Semiconductor 520 Semiconductors
Sysco Food Services 400 Food Distributor
Columbia Medical Center 350 Health Care
</TABLE>
UNITED STATES/STATE/MSA HOUSEHOLD INCOME
(GENERAL POPULATION)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
% OF CHANGE
-----------------------------------
1990-1996 1996-2001
-----------------------------------
<S> <C> <C>
UNITED STATES 21.7% 15.4%
STATE 29.1% 19.9%
MSA 33.9% 24.6%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
An important indicator of economic health is growth in Median Household
Income. The national increase in Median Household Income between 1990 and
1996 was 21.7%. Claritas projects the National Median Household Income will
reach $42,259 (i.e. increase by 15.4%)by 2001.
22
<PAGE>
Median Household Income for Texas in 1996 is estimated at $34,943, or an
increase of 29.1% since 1989. It is projected that by 2001 the Median
Household Income will reach $41,899, or increase by 19.9%.
Median Household Income for the Austin-San Marcos MSA in 1996 has increased to
$37,536, or 33.9%, since 1989. It is projected that by 2001 the Median Household
Income will reach $46,786, or increase 24.6 %.
NUMBER OF HOUSING UNITS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
% OF CHANGE
-----------------------------------
1990-1996 1996-2001
-----------------------------------
<S> <C> <C>
UNITED STATES 7.6% 5.5%
STATE 8.5% 8.8%
MSA 17.9% 14.8%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
Growth in the number of housing units in a specified area is another good
indication of economic health. Housing units increased 7.6% nationally between
1990 and 1996. By 2001, it is projected that total housing units nationally will
have increased by an additional 5.5 %.
The number of housing units in Texas is currently estimated at 7,604,503,which
is an increase of 8.5% since the 1990 Census. It is estimated that by 2001,
this figure will reach 8,272,049,or increase by 8.8%.
The number of housing units in the Austin-San Marcos MSA is currently estimated
at 436,633, which is an increase of 17.9% since the 1990 Census. It is estimated
that by 2001, this figure will reach 501,348, or increase by 14.8%.
23
<PAGE>
METROPOLITAN STATISTICAL AREA (MSA) DATA
The economy of Round Rock and Williamson County are strongly effected by the
Austin-San Marcos, Texas Metropolitan Statistical Area.
The appraiser considered the cost of living in Round Rock, as this factor
affects The Hearthstone of Round Rock in two ways: (a) the likelihood of
retirees remaining in the area or being attracted to it and (b) payroll costs.
The PLACES RATED ALMANAC Cost of Living Index ranks the subject MSA 206th of the
343 MSAs nationwide (with the first place MSA having the lowest cost of living).
Ranked against the national average of 100, the Austin-San Marcos MSA indexes
are:
<TABLE>
<S> <C>
Housing:
Median Price: 96
Utilities: 80
Property Taxes: 191
Miscellaneous Living Cost Indexes:
College Tuition: 54
Food: 101
Health Care: 104
Transportation: 104
</TABLE>
The PLACES RATED ALMANAC rates and ranks 343 metropolitan areas on ten factors
that greatly influence the quality of an area: costs of living, job outlook,
housing, transportation, education, health care, crime, the arts, recreation,
and climate. The Austin-San Marcos MSA is ranked as follows:
24
<PAGE>
<TABLE>
<S> <C>
Costs of Living 206
Job Outlook 39
Housing 227
Transportation 123
Education 22
Health Care 268
Crime 260
The Arts 95
Recreation 141
Climate 285
</TABLE>
Based on these factors, the Austin-San Marcos MSA had an overall rank of 152nd
of the 343 Metropolitan Statistical Areas.
TRENDS, FUTURE OUTLOOK, CONCLUSIONS
Williamson County is one of the fastest growing areas in the country. Its
proximity to Austin affords the residents many economical and cultural
advantages with the ability to maintain the advantages of a smaller city.
Manufacturing in the Round Rock area has grown 900% since the 1970s.
Demographics indicators show the Austin-San Marcos MSA has doubled its
population over the last five years and may double it again by the year 2001.
The elderly population is growing well above state and national rates and
housing is expected to double again over the next 5-year period. Incomes for the
area are also increasing faster than the national average, possibly due to the
positive economic development incentives and growth in industry in the area.
The growing economy anticipated from demographic indicators, the pleasant
climate and the advantages afforded to the Round Rock area from proximity to
Austin, combine to make a very positive climate for the Round Rock area. With
the growth in the elderly population and their
25
<PAGE>
incomes to be above state and national averages, indications are that the
Williamson County area would be a positive climate for the senior service
industry.
*All population and household income figures were taken from the most recent
U.S. Census (if actual numbers) or were provided to the appraiser by
Claritas, Inc. (if projected numbers) or by the local Chamber of Commerce.
26
<PAGE>
(MSA 640) Austin et al, TX (Weight: 100.0%)
Household Trend Report
<TABLE>
<CAPTION>
1980 1990 % Chg 1996 % Chg 2001 % Chg
Universe Census Census 80-90 (Est.) 90-96 (Proj.) 96-01
- ------------------ ---------- ----------- --------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Population........... 585051 846227 44.6 1013839 19.8 1154252 13.8
Households........... 212026 325995 53.8 397587 22.0 456641 14.9
Families............. 140695 203994 45.0 246643 20.9 281008 13.9
Housing Units. ...... 236652 370310 56.5 436633 17.9 501348 14.8
Grp Qrt. Pop ........ 28575 30720 7.5 29909 -2.6 30066 0.5
Household Size....... 2.62 2.50 -4.7 2.47 -1.1 2.46 -0.5
1979 1989 % Chg 1996 % Chg 2001 % Chg
Income (Census) (Census) 79-89 (Est.) 89-96 (Proj.) 96-01
- ------------------ ------------ ----------- --------- ---------- --------- --------- --------
Aggregate($MM)....... 4183 11986 186.6 20234 68.8 30325 49.9
Per Capita........... 7150 14165 98.1 19958 40.9 26273 31.6
Avg. Household ...... 19431 36217 86.4 49426 36.5 63418 28.3
Median Hhold......... 15691 28037 78.7 37536 33.9 46786 24.6
Avg. Family HH ...... 23213 44340 91.0 60617 36.7 77422 27.7
Med. Family HH ...... 20072 36194 80.3 48236 33.3 59191 22.7
Avg. HH Wealth ...... 113864 136673 20.0
Med. HH Wealth ...... 33510 42835 27.8
</TABLE>
<TABLE>
<CAPTION>
---------------------------------- Households --------------------------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
- ----------------------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total 325995 397587 456641
Less than $5,000....... 25540 7.8% 19144 4.8% 15242 3.3%
$5,000 to $9,999....... 28087 8.6% 28341 7.1% 26775 5.9%
$10,000 to $14,999....... 31085 9.5% 25715 6.5% 24817 5.4%
$15,000 to $19,999....... 31100 9.5% 28374 7.1% 23342 5.1%
$20,000 to $24,999....... 30258 9.3% 30191 7.6% 27766 6.1%
$25,000 to $29,999....... 25852 7.9% 27628 6.9% 26581 5.8%
$30,000 to $34,999....... 25625 7.9% 26441 6.7% 26711 5.8%
$35,000 to $39,999....... 21427 6.6% 22761 5.7% 23810 5.2%
$40,000 to $44,999....... 19059 5.8% 24253 6.1% 24537 5.4%
$45,000 to $49,999....... 15447 4.7% 20247 5.1% 21497 4.7%
$50,000 to $59,999....... 23788 7.3% 38124 9.6% 43039 9.4%
$60,000 to $74,999....... 21306 6.5% 38851 9.8% 51660 11.3%
$75,000 to $99,999....... 15125 4.6% 35576 8.9% 57537 12.6%
$100,000 to $124,999....... 5796 1.8% 15167 3.8% 29713 6.5%
$125,000 to $149,999....... 2116 0.6% 7804 2.0% 14431 3.2%
$150,000 to $249,999....... 2794 0.9% 5945 1.5% 13772 3.0%
$250,000 to $499,999....... 1150 0.4% 2102 0.5% 3830 0.8%
$500,000 or More .......... 440 0.1% 923 0.2% 1581 0.3%
- ------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: When the median household wealth for an area is less than $25,000 it
will be listed on this report as $24,999.
Data on income are expressed in "current" dollars for each year.
Decennial Census data reflects prior year income.
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
27
<PAGE>
(MSA 640) Austin et al, TX
(Weight: 100.0%)
Senior Life Report (Page 1 of 7)
<TABLE>
<CAPTION>
------------- Population Age 55 Years and Over -------------
Population by Age and Sex 1990 1999 Estimate 2001 Proj.
- ------------------------- ---------------- -------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Population Age 55+ ......... 116685 100.0% 149429 100.0% 188016 100.0%
55 to 59.................. 26744 22.9% 35456 23.7% 50552 26.9%
60 to 64.................. 23887 20.5% 28909 19.3% 36633 19.5%
65 to 69.................. 21917 18.8% 25436 17.0% 29267 15.6%
70 to 74.................. 16042 13.7% 22034 14.7% 24595 13.1%
75 to 79.................. 12644 10.8% 16058 10.7% 20237 10.8%
80 to 84.................. 8388 7.2% 11164 7.5% 13527 2%
85 + ..................... 7063 6.% 10372 6.9% 13205 7.0%
Males Age 55+............... 50790 43.5% 65686 44.0% 83773 44.6%
55 to 59.................. 13153 11.3% 17314 11.6% 24801 13.2%
60 to 64.................. 10973 9.4% 13853 9.3% 17596 9.4%
65 to 69.................. 9979 8.6% 11696 7.8% 13729 7.3%
70 to 74.................. 6970 6.0% 9456 6.3% 10873 5.8%
75 to 79.................. 4913 4.2% 6562 4.4% 8068 4.3%
80 to 84.................. 2879 2.5% 3940 2.6% 4995 2.7%
85 + ..................... 1923 1.6% 2865 1.9% 3711 2.0%
Female Age 55 +............. 65895 56.5% 83743 56.0% 104243 55.4%
55 to 59.................. 13591 11.6% 18142 12.1% 25751 13.7%
60 to 64.................. 12914 11.1% 15056 10.1% 19037 10.1%
65 to 69.................. 11938 10.2% 13740 9.2% 15538 8.3%
70 to 74.................. 9072 7.8% 12578 8.4% 13722 7.3%
75 to 79.................. 7731 6.6% 9496 6.4% 12169 6.5%
80 to 84.................. 5509 4.7% 7224 4.8% 8532 4.5%
85 + ..................... 5140 4.4% 7507 5.0% 9494 5.0%
</TABLE>
<TABLE>
<CAPTION>
------------------------- Population -------------------------
Population by Age & Race 1990 1996 Estimate 2001 Proj.
- ------------------------ -------------------- ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Total Population 846227 100.0% 1013839 100.0% 1154252 100.0%
White Population 741049 87.6% 880232 86.8% 995220 86.2%
Age 65 and Over 59646 7.0% 77163 7.6% 91146 7.9%
Black Population 81950 9.7% 100910 10.0% 117440 10.2%
Age 65 and Over 5889 0.7% 6826 0.7% 8057 0.7%
ASI an Population 19734 2.3% 28660 2.8% 37074 3.2%
Age 65 and Over 404 0.0% 791 0.1% 1289 0.1%
Am. Indian Population. 3494 0.4% 4037 0.4% 4518 0.4%
Age 65 and Over 115 0.0% 284 0.0% 339 0.0%
Hispanic Population 176827 20.9% 254489 25.1% 333904 28.9%
Age 65 and Over 7090 0.8% 11233 1.1% 16664 1.4%
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
28
<PAGE>
(MSA 640) Austin et al, TX (Weight: 100.0%)
Senior Life Report (Page 2 of 7)
<TABLE>
<CAPTION>
Household Income by ------------ Households with Householder Age 55 and Over --------------
Age of Householder 1990 1996 Estimate 2001 Proj.
- ------------------------- ------------------ -------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 55 to 64. 29965 100.0% 33996 100.0% 42996 100.0%
Under $5,000...... 1985 6.6% 1208 3.6% 1038 2.4%
$5,000-$9,999...... 2159 7.2% 1752 5.2% 1788 4.2%
$10,000-$14,999...... 2281 7.6% 1620 4.8% 1729 4.0%
$15,000-$24,999...... 4945 16.5% 4069 12.0% 3834 8.9%
$25,000-$34,999...... 4520 15.1% 4175 12.3% 4315 10.0%
$35,000-$49,999...... 5376 17.9% 5707 16.8% 6301 14.7%
$50,000-$74,999...... 4747 15.8% 7152 21.0% 9324 21.7%
$75,000-$99,999...... 2156 7.2% 4153 12.2% 6271 14.6%
$100,000-$149,999...... 1134 3.8% 2952 8.7% 13.3%
$150,000-$249,999...... 429 1.4% 810 2.4% 1924 4.5%
$250,000-$499,999...... 176 0.6% 280 0.8% 551 1.3%
$500,000 or More ...... 57 0.2% 118 0.3% 212 0.5%
Median Income ........... 32992 45970 56684
Householder Age 65 to 69. 13372 100.0% 15501 100.0% 15922 100.0%
Under $5,000...... 974 7.3% 663 4.3% 487 3.1%
$5,000-$9,999...... 1690 12.6% 1450 9. 4% 1168 7.3%
$10,000-$14,999...... 1441 10.8% 1165 7.5% 1068 6.7%
$15,000-$24,999...... 2593 19.4% 2399 15.5% 1935 12.2%
$25,000-$34,999...... 1942 14.5% 2016 13.0% 1865 11.7%
$35,000-$49,999...... 1991 14.9% 2400 15.5% 2286 14.4%
$50,000-$74,999...... 1610 12.0% 2691 17.4% 3005 18.9%
$75,000-$99,999...... 590 4.4% 1353 8.7% 1857 11.7%
$100,000-$149,999...... 337 2.5% 959 6.2% 1539 9.7%
$150,000-$249,999...... 124 0.9% 254 1.6% 497 3.1%
$250,000-$499,999...... 56 0.4% 105 0.7% 145 0.9%
$500,000 or More ...... 24 0.2% 46 0.3% 70 0.4%
Median Income ........... 24954 35359 44436
Householder Age 70 to 74. 10920 100.0% 13259 100.0% 14186 100.0%
Under $5,000...... 831 7.6% 607 4.6% 456 3.2%
$5,000-$9,999...... 1465 13.4% 1348 10.2% 1125 7.9%
$10,000-$14,999...... 1173 10.7% 1006 7.6% 954 6.7%
$15,000-$24,999...... 2172 19.9% 2109 15.9% 1799 12.7%
$25,000-$34,999...... 1569 14.4% 1723 13.0% 1698 12.0%
$35,000-$49,999...... 1991 14.6% 2008 15.1% 2051 14.5%
$50,000-$74,999...... 1281 11.7% 2289 17.3% 2661 18.8%
$75,000-$99,999...... 436 4.0% 1101 8.3% 1586 11.2%
$100,000-$149,999...... 254 2.3% 751 5.7% 1271 9.0%
$150,000-$249,999...... 92 0.8% 204 1.5% 412 2.9%
$250,000-$499,999...... 38 0.3% 81 0.6% 124 0.9%
$500,000 or More ...... 13 0.1% 32 0.2% 49 0.3%
Median Income ........... 24167 34051 42760
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
29
<PAGE>
(MSA 640) Austin et al, TX (Weight: 100.0%)
Senior Life Report (Page 2 of 7)
<TABLE>
<CAPTION>
Household Income by ------------ Households with Householder Age 55 and Over --------------
Age of Householder 1990 1996 Estimate 2001 Proj.
- ------------------------- ------------------ -------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 75 to 79... 8214 100.0% 11326 100.0% 14148 100.0%
Under $5,000........ 1049 12.8% 952 3.6% 842 2.4%
$5,000-$9,999........ 1699 20.7% 1939 5.2% 1938 4.2%
$10,000-$14,999........ 1140 13.9% 1206 4.8% 1502 4.0%
$15,000-$24,999........ 1508 18.4% 1842 12.0% 2043 8.9%
$25,000-$34,999........ 918 11.2% 1279 12.3% 1604 10.0%
$35,000-$49,999........ 865 10.5% 1381 16.8% 1718 14.7%
$50,000-$74,999........ 607 7.4% 1381 21.0% 1992 21.7%
$75,000-$99,999........ 194 2.4% 596 12.2% 1091 14.6%
$100,000-$149,999........ 147 1.8% 524 8.7% 915 13.3%
$150,000-$249,999........ 48 0.6% 128 2.4% 343 4.5%
$250,000-$499,999........ 22 0.3% 55 0.8% 91 1.3%
$500,000 or More........ 17 0.2% 43 0.3% 69 0.5%
Median Income.............. 16452 23502 29670
Householder Age 80 to 84... 5502 100.0% 8121 100.0% 9929 100.0%
Under $5,000........ 717 13.0% 694 8.5% 609 6.1%
$5,000-$9,999........ 1223 22.2% 1497 18.4% 1455 14.7%
$10,000-$14,999........ 753 13.7% 889 10.9% 1083 10.9%
$15,000-$24,999........ 1016 18.5% 1341 16.5% 1431 14.4%
$25,000-$34,999........ 600 10.9% 904 11.1% 1125 11.3%
$35,000-$49,999........ 546 9.9% 937 11.5% 1175 11.8%
$50,000-$74,999........ 381 6.9% 951 11.7% 1367 13.8%
$75,000-$99,999........ 133 2.4% 437 5.4% 767 7.7%
$100,000-$149,999........ 83 1.5% 339 4.2% 612 6.2%
$150,000-$249,999........ 31 0.6% 83 1.0% 210 2.1%
$250,000-$499,999........ 12 0.2% 35 0.3% 61 0.6%
$500,000 or More........ 7 0.1% 14 0.2% 34 0.3%
Median Income.............. 15571 22312 28436
Householder Age 85+........ 3794 100.0% 5645 100.0% 7563 100.0%
Under $5,000........ 532 14.0% 525 9.3% 502 6.6%
$5,000-$9,999........ 866 22.8% 1092 19.3% 1165 15.4%
$10,000-$14,999........ 536 14.1% 646 11.4% 858 11.3%
$15,000-$24,999........ 707 18.6% 971 17.2% 1127 14.9%
$25,000-$34,999........ 407 10.7% 629 11.1% 903 11.9%
$35,000-$49,999........ 351 9.3% 627 11.1% 894 11.8%
$50,000-$74,999........ 225 5.9% 602 10.7% 965 12.8%
$75,000-$99,999........ 90 2.4% 262 4.6% 515 6.8%
$100,000-$149,999........ 53 1.4% 206 3.6% 414 5.5%
$150,000-$249,999........ 14 0.4% 52 0.9% 156 2.1%
$250,000-$499,999........ 6 0.2% 13 0.2% 35 0.5%
$500,000 or More........ 7 0.2% 20 0.4% 29 0.4%
Median Income ............. 14655 20762 26434
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
30
<PAGE>
(MSA 640) Austin et al, TX (Weight: 100.0%)
Senior Life Report (Page 4 of 7)
<TABLE>
<CAPTION>
---------------------------- Total Households --------------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
- ---------------------- ----------------------- --------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Total .................. 325995 100.0% 397587 100.0% 456641 100.0%
Under $5,000 ...... 25540 7.8% 19144 4.8% 15242 3.3%
$5,000 to $9,999.. 28087 8.6% 28341 7.1% 26775 5.9%
$10,000 to $14,999.. 31085 9.5% 25715 6.5% 24817 5.4%
$15,000 to $24,999.. 61358 18.8% 58565 14.7% 51108 11.2%
$25,000 to $34,999.. 51477 15.8% 54069 13.6% 53292 11.7%
$35,000 to $49,999.. 55933 17.2% 67261 16.9% 69844 15.3%
$50,000 to $74,999.. 45094 13.8% 76975 19.4% 94699 20.7%
$75,000 to $99,999.. 15125 4.6% 35576 8.9% 57537 12.6%
$100,000 to $124,999.. 5796 1.8% 15167 3.8% 29713 6.5%
$125,000 to $149,999.. 2116 0.6% 7804 2.0% 14431 3.2%
$150,000 to $249,999.. 2794 0.9% 5945 1.5% 13772 3.0%
$250,000 to $499,999.. 1150 0.4% 2102 0.5% 3830 0.8%
$500,000 or More ..... 440 0.1% 923 0.2% 1581 0.3%
Median Household Income. 28037 37536 46786
</TABLE>
<TABLE>
<CAPTION>
--------------Total Specified Owner-Occupied Housing Units -------------
Housing Income 1990 Census 1996 Estimate 2001 Proj.
- ---------------------- ----------------------- --------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Total Units............. 134389 167033 193552
Less than $15,000.. 2200 1.6% 1994 1.2% 1838 0.9%
$15,000 to $19,999.. 1294 1.0% 799 0.5% 653 0.3%
$20,000 to $24,999.. 1862 1.4% 1230 0.7% 819 0.4%
$25,000 to $29,999.. 2280 1.7% 1694 1.0% 1165 0.6%
$30,000 to $34,999.. 3261 2.4% 2098 1.3% 1565 0.8%
$35,000 to $39,999.. 4152 3.1% 2648 1.6% 1874 1.0%
$40,000 to $44,999.. 5457 4.1% 3390 2.0% 2314 1.2%
$45,000 to $49,999.. 6136 4.6% 4159 2.5% 2768 1.4%
$50,000 to $59,999.. 14904 11.1% 10838 6.5% 7372 3.8%
$60,000 to $74,999.. 26055 19.4% 21360 12.8% 15898 8.2%
$75,000 to $99,999.. 30502 22.7% 39558 23.7% 34973 18.1%
$100,000 to $124,999.. 12511 9.3% 30191 18.1% 36320 18.8%
$125,000 to $149,999.. 8170 6.1% 13910 8.3% 28810 14.9%
$150,000 to $174,999.. 5321 4.0% 9637 5.8% 14750 7.6%
$175,000 to $199,999.. 3225 2.4% 7021 4.2% 10580 5.5%
$200,000 to $249,999.. 3081 2.3% 7823 4.7% 13987 7.2%
$250,000 to $299,999.. 1550 1.2% 3207 1.9% 7342 3.8%
$300,000 to $399,999.. 1328 1.0% 2915 1.7% 5265 2.7%
$400,000 to $499,999.. 478 0.4% 1204 0.7% 2492 1.3%
$500,000 and over..... 622 0.5% 1357 0.8% 2767 1.4%
Median Housing Value . 74766 96049 117578
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 Projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
31
<PAGE>
(MSA 640) Austin et al, TX (Weight: 100.0%)
Senior Life Report (Page 5 of 7)
<TABLE>
<CAPTION>
Household Household
Type and Relationship Population 65+ Type and Relationship Population 65+
- --------------------- ---------------- ------------------------ -----------------
<S> <C> <C> <C> <C> <C>
Total .................. 65478 100.0%
In Family Households . 41809 63.9% In Nonfamily Hhlds ... 19080 29.1%
Householder......... 22823 34.9% Male Householder ... 3778 5.8%
Spouse ............. 14600 22.3% Living Alone ..... 3565 5.4%
0ther Relative...... 4113 6.3% Not Living Alone.. 213 0.3%
Nonrelative ........ 273 0.4% Female Householder.. 14932 22.8%
Living Alone ..... 14464 22.1%
In Group Quarters..... 4589 7.0% Not Living Alone.. 468 0.7%
Institutionalized... 4333 6.6% Nonrelative......... 370 0.6%
Other .............. 256 0.4%
</TABLE>
<TABLE>
<CAPTION>
----------- Spec. Owner-Occ Units -----------
Monthly Owner Costs as a by Age of Householder
Percent of 1989 HH Inc. Total Units 65 Yrs +
- ------------------------ ------------------- ---------------------
<S> <C> <C> <C> <C>
Total................ 135951 100.0% 26437 100.0%
Less than 20% ....... 64657 47.6% 17659 66.8%
20 - 24% ............ 22808 16.8% 2316 8.8%
25 - 29% ............ 16922 12.4% 1712 6.5%
30 - 34% ............ 10278 7.6% 1021 3.9%
35% or More ......... 20295 14.9% 3395 12.8%
Not computed ........ 991 0.7% 334 1.3%
</TABLE>
<TABLE>
<CAPTION>
----------- Spec. Owner-Occ Units -----------
Gross Rent as Percent by Age of Householder
of 1989 HH Income Total Units 65 Yrs +
- ------------------------ ------------------- ---------------------
<S> <C> <C> <C> <C>
Total................. 156652 100.0% 9645 100.0%
Less than 20% ........ 44976 28.7% 1719 17.8%
20 - 24% ............. 23616 15.1% 1169 12.1%
25 - 29% ............. 17116 10.9% 1231 12.8%
30 - 34% ............. 13512 8.6% 1072 11.1%
35% or More .......... 49601 31.7% 3686 38.2%
Not computed ......... 7831 5.0% 768 8.0%
</TABLE>
<TABLE>
<CAPTION>
------------ Occupied Housing Units -----------
Attribute Total Units 65 Yrs +
- ------------------------ ------------------- ----------------------
<S> <C> <C> <C> <C>
Owner Occupied Units.... 167084 51.3% 32715 76.9%
Renter Occupied Units... 158911 48.7% 9818 23.1%
Complete Plumbing Facil. 323879 99.4% 42081 98.9%
Lacking Plumbing Facil.. 2116 0.6% 452 1.1%
With Telephone.......... 302621 92.8% 40743 95.8%
No Telephone............ 23374 7.2% 1790 4.2%
One or More Vehicles.... 302643 92.8% 35247 82.9%
No Vehicles Available... 23352 7.2% 7286 17.1%
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
(MSA 640) Austin et al, TX
(Weight: 100.0%)
Senior Life Report (Page 6 of 7)
Poverty Status by ------------------- 1990 Households by Age of Householder --------------------
Household Type Total Age 65-74 Age 75 +
- --------------------- ----------------- --------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Total...................... 326124 100.0% 24105 100.0% 17428 100.0%
Married Couple Family.... 162873 49.9% 13250 55.0% 5799 33.3%
Other Family............. 42252 13.0% 2143 8.9% 1631 9.4%
Male Householder....... 10267 3.1% 395 1.6% 288 1.7%
Female Householder..... 31985 9.8% 1748 7.3% 1343 7.7%
Nonfamily................ 120999 37.1% 8712 36.1% 9998 57.4%
HHer Living Alone...... 92434 28.3% 8228 34.1% 9801 56.2%
HHer Not Living Alone.. 28565 8.8% 484 2.0 197 1.1%
Above Poverty.............. 275752 84.6% 21010 87.2% 13501 77.5%
Married Couple Family.... 151862 46.6% 12627 52.4% 5246 30.1%
Other Family............. 31865 9.8% 1630 6.8% 1367 7.8%
Male Householder....... 8450 2.6% 291 1.2% 235 1.3%
Female Householder..... 23415 7.2% 1339 5.6% 1132 6.5%
Nonfamily................ 92025 28.2% 6753 28.0% 6888 39.5%
HHer Living Alone...... 73066 22.4% 6380 26.5% 6750 38.7%
HHer Not Living Alone.. 18959 5.8% 373 1.5% 138 0.8%
Below Poverty.............. 50372 15.4% 3095 12.8% 3927 22.5%
Married Couple Family.... 11011 3.4% 623 2.6% 553 3.2%
Other Family............. 10387 3.2% 513 2.1 264 1.5%
Male Householder....... 1817 0.6% 104 0.4% 53 0.3%
Female Householder..... 8570 2.6% 409 1.7% 211 1.2%
Nonfamily................ 28974 8.9% 1959 8.1% 3110 17.8%
HHer Living Alone...... 19368 5.9% 1848 7.7% 3051 17.5%
HHer Not Living Alone.. 9606 2.9% 111 0.5% 59 0.3%
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
33
<PAGE>
<TABLE>
<CAPTION>
(MSA 640) Austin et al. TX
(Weight: 100.0%)
Senior Life Report (Page 7 of 7)
Civilian Noninstitutionalized Persons Age 16+
Mobility and Disability Total Age 65+ Age 75 +
- ------------------------------- ------------------------ ------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Persons........................ 635562 100.0% 61145 100.0% 23863 100.0%
With Mblty or Care Lmts...... 31583 5.0% 12335 20.2% 7536 31.6%
Mobility Limits Only......... 9366 1.5% 4823 7.9% 3115 13.1%
Self Care Limits Only........ 13490 2.1% 2645 4.3% 1194 5.0%
Both Limits.................. 8727 1.4% 4867 8.0% 3227 13.5%
No Mblty or Care Limits........ 603979 95.0% 48810 79.8% 16327 68.4%
With a Work Disability......... 54077 8.5% 19869 32.5%
In Labor Force............... 18432 2.9 1260 2.1%
Employed................... 15983 2.5% 1150 1.9%
Unemployed................. 2449 0.4% 110 0.2%
Not in Labor Force........... 35645 5.6% 18609 30.4%
Prevented from Working..... 29269 4.6% 15918 26.0%
Not Prevented from Wrk..... 6376 1.0% 2691 4.4%
No Work Disability............. 581485 91.5% 41276 67.5%
In Labor Force............... 440815 69.4% 8107 13.3%
Employed................... 416023 65.5% 7846 12.8%
Unemployed................. 24792 3.9% 261 0.4%
Not in Labor Force........... 140670 22.1% 33169 54.2%
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
34
<PAGE>
(Page 1 of 2)
(MSA 640) Austin et al, TX
(Weight: 100.0%)
1990 Demographic Overview Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Population 846227 Housing Units 370310 Median Age 29.7
Households 326124 Group Quarters 30665 Median HH Inc 27957
Families 205125 Avg. HH Size 2.50 Median Value 74309
Vehicles 543069
</TABLE>
<TABLE>
<CAPTION>
Income in 1989 Household Family Non-Family
- ---------------------- ------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Less than $5,000...... 25623 7.9% 8279 4.0% 18129 15.0%
$5,000 to $9,999...... 28208 8.6% 10944 5.3% 17926 14.8%
$10,000 to $12,499.... 16848 5.2% 7554 3.7% 9613 7.9%
$12,500 to $14,999.... 14359 4.4% 7046 3.4% 7469 6.2%
$15,000 to $17,499.... 16717 5.1% 8340 4.1% 8597 7.1%
$17,500 to $19,999.... 14502 4.4% 7966 3.9% 6700 5.5%
$20,000 to $22,499.... 17031 5.2% 9507 4.6% 7556 6.2%
$22,500 to $24,999.... 13224 4.1 7606 3.7% 5576 4.6%
$25,000 to $27,499.... 14468 4.4% 8776 4.3% 5859 4.8%
$27,500 to $29,999.... 11384 3.5% 7416 3.6% 3737 3.1%
$30,000 to $32,499.... 14661 4.5% 9754 4.8% 4862 4.0%
$32,500 to $34,999.... 10955 3.4% 7713 3.8% 3117 2.6%
$35,000 to $37,499.... 12165 3.7% 8646 4.2% 3380 2.8%
$37,500 to $39,999.... 9282 2.8% 6843 3.3% 2225 1.8%
$40,000 to $42,499.... 10775 3.3% 8148 4.0 2467 2.0%
$42,500 to $44,999.... 8218 2.5% 6294 3.1% 1746 1.4%
$45,000 to $47,499.... 8425 2.6% 6684 3.3% 1557 1.3%
$47,500 to $49,999.... 6976 2.1% 5602 2.7% 1267 1.0%
$50,000 to $54,999.... 13340 4.1% 10706 5.2% 2440 2.0%
$55,000 to $59,999.... 10381 3.2% 8832 4.3% 1379 1.1%
$60,000 to $74,999.... 21266 6.5% 18515 9.0% 2460 2.0%
$75,000 to $99,999.... 15031 4.6% 13326 6.5% 1437 1.2%
$100,000 to $124,999.... 5794 1.8% 4946 2.4% 739 0.6%
$125,000 to $149,999.... 2102 0.6% 1860 0.9% 221 0.2%
$150,000 or More........ 4389 1.3% 3822 1.9% 540 0.4%
Aggregate Income ($Mil) 11793 8941 2735
Median Income 27957 35480 17141
Average Income 36163 43591 22605
</TABLE>
<TABLE>
<CAPTION>
Persons Persons
Educational Attainment 25 Yrs & Over Employment Status 16 Yrs & Over
- -------------------------- ----------------- ------------------------- -------------------
<S> <C> <C> <C> <C> <C>
Less than 9th Grade....... 43630 8.6% In Labor Force.......... 464709 71.4%
9th - 12th Grade,No Dip... 51879 10.2% Civilian.............. 459247 70.5%
High School Graduate...... 110126 21.7% Employed............. 432006 66.3%
Some College, No Degree... 119393 23.5% Male............... 232049 35.6%
Associate Degree.......... 26688 5.3% Female............. 199957 30.7%
Bachelor's Degree......... 103332 20.4% Unemployed........... 27241 4.2%
Graduate/Prof. Degree..... 52328 10.3% Not in Labor Force...... 186475 28.6%
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Source: 1990 Census of the Population and Housing Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
35
<PAGE>
<TABLE>
<CAPTION>
(Page 2 of 2)
(MSA 640) Austin et al, TX
(Weight: 100.0%)
Employed Employed
Industry Persons 16+ Occupation Persons 16+
- ----------------------- ------------------ ------------------------- --------------------
<S> <C> <C> <C> <C> <C>
Agriculture/Forest/Fish 7842 1.8% Managerial/Prof. Spec... 140894 32.6%
Mining ................ 1787 0.4% Exec/Admin/Managerial. 65953 15.3%
Construction........... 24692 5.7% Prof. Specialty....... 74941 17.3%
Manufacture-Nondurable. 12960 3.0% Tech./Sales/Admin. Sup.. 148960 34.5%
Manufacture-Durable.... 43572 10.1% Technician and Related 22078 5.1%
Transportation......... 11964 2.8% Sales................. 49555 11.5%
Communication/Pub. Util 11487 2.7% Administration. Support 77327 17.9%
Wholesales Trade....... 13727 3.2% Service Occupation....... 55517 12.9%
Retail Trade........... 70421 16.3% Private Household...... 2378 0.6%
Finance/Ins/Real Estate 33048 7.6% Protective Service..... 6458 1.5%
Business & Repair Serv. 23188 5.4% Other Service.......... 46681 10.8%
Personal Services...... 14582 3.4% Farming/Forestry/Fish.... 7201 1.7%
Entertain/Recreation... 6569 1.5% Precision/Craft/Repair... 38840 9.0%
Professional & Related. 117177 27.1% Operator/Fab./Laborer.... 40594 9.4%
Health Services....... 27617 6.4% Mach.Op/Assem./Insect.. 17173 4.0%
Educational Services.. 51348 11.9% Trans. & Material Move. 11507 2.7%
Other Professional.... 38212 8.8% Laborers............... 11914 2.8%
Public Administration.. 38990 9.0%
</TABLE>
<TABLE>
<CAPTION>
Transportation to Work Workers 16+ Travel Time to Work Workers 16+
- ------------------------- ------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Drive Alone............. 323020 74.9% Less than 10 Minutes.... 70404 16.3%
Carpooled............... 62666 14.5% 10 to 19 Minutes........ 145893 33.8%
Public Transportation... 13716 3.2% 20 to 29 Minutes........ 94599 21.9%
All Other............... 31943 7.4% 30 Minutes or More...... 120449 27.9%
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Units In Structure Housing Units Year Structure Built Housing Units
- ------------------------ --------------------- ------------------------ ----------------------
<S> <C> <C> <C> <C> <C>
1-Detached............. 182737 56.1% 1989 To March 1990..... 3911 1.2%
1-Attached............. 15796 4.8% 1985 To 1988........... 52823 16.2%
2...................... 15470 4.7% 1980 To 1984........... 79692 24.4%
3 or 4................. 12325 3.8% 1970 To 1979........... 87623 26.9%
5 to 9................. 15071 4.6% 1960 To 1969........... 41210 12.6%
10 To 19............... 23002 7.1% 1950 To 1959........... 27498 8.4%
20 to 49............... 20077 6.2% 1940 To 1949........... 15624 4.8%
50 or More............. 20989 6.4% 1939 or before......... 17614 5.4%
Other.................. 20528 6.3% Median Year Built...... 1977
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Year Hhlder Moved In Housing Units Vehicles Available: Housing Units
- ------------------------ -------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
1989 To March 1990..... 114774 35.2% None................... 23352 7.2%
1985 To 1988........... 100518 30.8% 1...................... 124374 38.2%
1980 To 1984........... 43234 13.3% 2...................... 130764 40.1%
1970 To 1979........... 40740 12.5% 3...................... 36571 11.2%
1960 To 1969........... 14094 4.3% 4...................... 8550 2.6%
1959 or Before......... 12635 3.9% 5 or More.............. 2384 0.7%
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
36
<PAGE>
MARKET AREA AND NEIGHBORHOOD
- -------------------------------------------------------------------------------
37
<PAGE>
[NEIGHBORHOOD MAP]
<PAGE>
[PICTURES OF BUILDINGS]
<PAGE>
[PICTURES OF PARKING LOTS]
<PAGE>
[PICTURES OF HOUSES]
<PAGE>
MARKET AREA AND NEIGHBORHOOD
MARKET AREA
The overall market area served by The Hearthstone of Round Rock covers a wide
geographic range. The proximity of the subject facility to its supporting
population base (i.e., prospective residents and their families) is important
to its successful operation. Prospective residents consider the distance from
their homes and neighborhoods, but also the distance from their families and
established support services (e.g., doctors, therapists). Proximity to the
subject facility may be less important for government subsidized residents,
who often have fewer choices and limited input in the selection process.
Financially independent residents can afford to be selective about their
living accommodations, but are often more concerned about the availability
and quality of services. After considering a wide range of facts pertaining
to the subject market and neighborhood, we believe the subject property's
market area to include the entire Austin area.
NEIGHBORHOOD
Most communities tend toward groupings of consistent land uses, with areas
devoted to the various uses termed "physical neighborhoods." Neighborhood use
in this context can be further defined as: "A portion of a larger community,
or an entire community, in which there is a homogeneous grouping of
inhabitants, buildings, or business enterprises. Inhabitants of a
neighborhood usually have a more than casual community of interests and a
similarity of economic level or cultural background. Neighborhood boundaries
may consist of well defined natural, political or man-made barriers, or they
may be, more or less, defined by distinct changes in land use or in the
character of the inhabitants."
Frank Ramsey of HealthCare Property Appraisers of America, Inc. inspected the
subject property and its neighborhood on March 20, 1997; all comments should
be considered to be relative to the date of inspection.
38
<PAGE>
The subject neighborhood is located approximately three miles west from the
center of the Central Business District of Round Rock. A part of the
neighborhood lies within the municipal limits of Round Rock and the balance
lies in Williamson County. Round Rock is considered to be a bedroom community
of Austin, Texas approximately twelve miles south. We consider the subject
neighborhood to include the area lying south of Falcon Drive, north of Route
620, and west of Bass Road.
The area is primarily single-family residential in nature. The various
property types found in this neighborhood are distributed approximately as
follows:
<TABLE>
<CAPTION>
<S> <C>
Single-Family 40%
Office 10%
Institutional 10%
Parks/Recreation 10%
Undeveloped 30%
----
Total 100%
</TABLE>
Single-family residential structures, which constitute approximately 40% of
the neighborhood, appear to be new to eight years in age. Typical homes range
in size from 1,500 square feet to 3,000+ square feet with home values
generally ranging from $140,000 to $400,000. Homes are well maintained and
exhibit considerable pride of ownership. Typical neighborhood residents are
considered as being in an upper middle income bracket. Owner occupancy in the
neighborhood is considered to be approximately 95%. Single family homes in
the Oakwood and Stone Canyon developments, the two primary residential areas
in the neighborhood range from very good to upscale in quality. Many are
located fenced compounds or gated areas. Overall this is a very high quality
residential area with numerous recreational facilities, particularly in Stone
Canyon.
The nearest retail shopping is along Route 620 closer in toward Round Rock
and its interchange with 1-35. Office buildings represent approximately 10%
of the neighborhood, typically consist of lowrise structures. They are
approximately five years in age, and rated good in maintenance and condition.
Typical office occupants include medical professional offices and clinics
supporting the adjoining Round Rock Hospital, the Oakwood Medical Park, a
four-story structure ad joining the subject on the north side being typical.
39
<PAGE>
Institutional structures comprise approximately 10% of the neighborhood. They
consist of the Round Rock Hospital adjoining the subject on the west side.
This structure is approximately ten years in age and well maintained.
Churches of several denominations are within a five minute drive of subject.
The nearest hospital is the adjoining Round Rock Hospital. Parks and
recreational facilities consist of the Oakland Park.
The subject property is joined by the Oakwood Medical Park building, a
four-story medical office building on its north side; undeveloped property on
its south side; a three-story medical office building and a surgical suite
under construction across the hospital access drive on its west side; and
good quality single family homes typical of the area across Oakwood Boulevard
on its east side. Streets in the neighborhood are primarily paved and with
curbs, gutters, and storm drains. Electricity, gas and telephone services are
provided by local utility companies.
The neighborhood has good access to the area's major traffic arteries, which
include Route 620, an east/west traffic artery providing good access into
Round Rock and also intersecting with 1-35, a north/south interstate into
Austin, Texas.
The subject property is considered to be in general conformity with other
properties in the neighborhood. The appearance and reputation of this area
generally is considered to be good, and the property values in the area
appear to be increasing. We expect that trend to continue over the next few
years as residential development continues.
Neighborhoods generally evolve through a pattern of growth and development.
They evolve from vacant, unimproved land through slow growth, steady to rapid
growth, reach a built-up or stagnant phase, and then begin to decline, with
various plateaus and modernization periods along the way. In that continuum
of growth, development and aging, the subject neighborhood is currently
considered to be in slow upscale residential growth.
A neighborhood's population make-up can dramatically affect the success of a
Nursing Home. As in all real estate, the economics of the immediately
surrounding population affect the ability of The
40
<PAGE>
Hearthstone of Round Rock to market its real estate and services. The subject
neighborhood's population make-up would have an above average appeal to a
self-pay oriented market because of the surrounding upscale single family
development.
In summary, this neighborhood is considered to be primarily a medical area
with a hospital, doctors' offices, support facilities and services with a
surrounding upscale single family residential area.
41
<PAGE>
SITE DATA
- ------------------------------------------------------------------------------
42
<PAGE>
Site Map
[MAP]
<PAGE>
LEGAL DESCRIPTION
FIELD NOTES FOR A TRACT CONTAINING 4.576 ACRES OF LAND OUT OF THE J. M.
MARRELL SURVEY, ABSTRACT NO. 284, SITUATED IN WILLIAMSON COUNTY, TEXAS, BEING
A PORTION OF THAT CERTAIN TRACT CALLED 132,808 ACRES RECORDED IN VOLUME 1004,
PAGE 422 OF THE DEED RECORDS OF WILLIAMSON COUNTY, TEXAS, BEING MORE
PARTICULARLY DESCRIBED BY METES AND BOUNDS AS FOLLOWS:
COMMENCING for reference at an iron pin found in the Northerly right-of-way
line of A.M. 620, for the Southwest corner of a 47.03 tract (called First
Tract) recorded in Volume 717, Page 403 of the Deed Records of Williamson
County, Texas and the Southeast corner of that certain tract called 15.00
Acres recorded in Volume 871, Page 868 of the Deed Records of Williamson
County, Texas.
THENCE, N 67 44'25"E, 425.74 feet along the Northerly right-of-way line of
R.M. 620 to an iron pin found,
THENCE, 49.07 feet along the arc of a 50.00 foot radius curve to the left,
through a central angle of 86 04'25", the chord of which bears N 24 42'13"E,
40.95 feet to an iron pin found;
THENCE, N 10 20'00" W, 264.64 feet to an iron pin found and the POINT OF
BEGINNING, for the herein described tract;
THENCE, S 71 40'00" W. 455.24 feet to a concrete monument found on the
Easterly line of said 15.00 acre tract;
THENCE, N 18 51'15" W, 221.23 feet along said Cantorly line to an iron pin
found;
THENCE, N 18 47'55" W, 193.77 feet continuing along the Easterly line of said
15.00 acre tract to an iron pin set;
THENCE, N 71 12'05" E, 537.19 feet along the Northerly line to an Iron pin
set in the Westerly right-of-way line of Oakwood Boulevard;
THENCE, 356.00 feet along the arc of a 799.34 foot radius curve to the left,
along the Westerly right-of-way line of Oakwood Boulevard through a central
angle of 25 34'49", the chord of which bears S 05 32'35", 350.92 feet to an
iron pin found;
THENCE, S 18 20'00" E, 74.21 feet along said Westerly right-of-way line of
Oakwood Boulevard to the POINT OF BEGINNING, and containing 4.576 Acres.
<PAGE>
SITE DATA
LOCATION: The Hearthstone of Round Rock site is located at 401 Oakwood
Boulevard, approximately three miles west from the Central Business District of
Round Rock, Texas.
PHYSICAL CHARACTERISTICS: The subject is an interior lot with approximately 350
front feet along the west side of Oakwood Boulevard, approximately 350 front
feet along the east side of the hospital complex access road. It is slightly
rectangular in shape and contains approximately 4.58 sf acres of gross area,
based on public records.
ZONING: The subject improvements are located in a District Planned Unit
Development (PUD). Subject improvements are considered to be a legal, conforming
use.
TOPOGRAPHY: The subject site lies at street grade. General area topography is
level. The subject site is basically level and lightly wooded. Drainage appears
adequate.
SOIL ANALYSIS: Mineral deposits, if any, were disregarded by the appraiser. No
soil analysis has been prepared as a part of this report. However, considering
the number and type of existing improvements on surrounding sites, it is assumed
the subject property has sufficient soil-bearing qualities for any type building
or construction that might be contemplated thereon. Soil and subsoil appear to
be the sandy loam typically found in this part of Texas. It is assumed that
soils at the site are generally of medium plasticity, with shrink/swell
potential typical of the area. Soil conditions in this part of Round Rock do not
appear to have limited land development.
EASEMENTS AND ENCROACHMENTS: Our site inspection of The Hearthstone of Round
Rock revealed no adverse easements or encroachments. This property is subject to
typical street and utility easements. It should be noted that we would defer to
competent legal counsel for verification of these and all other legal matters.
43
<PAGE>
SUBJECT
[PHOTO]
[PHOTO]
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SUBJECT
[PHOTO]
[PHOTO]
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SUBJECT
[PHOTO]
[PHOTO]
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FLOOR PLAN
[FLOOR PLAN]
<PAGE>
ACCESS: Access to the site is considered good. It has one access point from
Oakwood Boulevard, a paved two-lane street and one access point from the
hospital complex access road, a two-laned paved street. Access is into ample
paved parking across the front of the subject.
VISIBILITY: The site's visibility is rated average from the hospital access
road and Oakwood Boulevard. Signage on Oakwood Boulevard and the hospital
entrance is good.
DRAINAGE/FLOOD ZONE: According to National Flood Certification Services,
Inc., the subject property is located on a National Flood Insurance Program
Map (NFIP). It is found on Community Panel #48491CO330D, dated 01/03/97, in
an area designated as Zone X. A copy of their certification is located in the
addenda of this report. This Zone generally refers to: "Areas of 500-year
flood; areas of 100-year flood with average depths of less than one foot or
with drainage areas less than one square mile; and areas protected by levees
from 100-year flood".
UTILITIES: The site is served by all municipal utilities and services
including water, sewage, police and fire protection. Gas, telephone and
electricity are provided by public utility firms.
TRAFFIC ARTERIES: The site has good proximity to major traffic arteries. It
is one block from Route 620, a four-laned traffic artery that provides access
into downtown Round Rock and 1-35, two and one-half miles east.
TAXES: Carolyn Paulson in the tax assessor's office reported that the tax
assessor's reported tax value for real estate is $2,608,086 and the assessed
value is the same. The tax rate for the combined city and county plus school
tax is $2.35 per $100 of assessed value. This indicates an annual tax of
$61,289.02 for the subject property, calculated as follows:
<TABLE>
<CAPTION>
Real Estate Tax Assessment X Tax Rate = Annual Taxes
- -------------------------- -------- -----------
<S> <C> <C>
$2,608,086 X $0.0235 = $61,289.02
</TABLE>
44
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HIGHEST AND BEST USE
The Appraisal Standards Board, in Standards Rule 2-2 (a) (ix) calls for a
report to contain the appraiser's opinion of Highest and Best Use unless
considered unnecessary as in certain types of appraisals, e.g., Value in Use
appraisals. This requirement calls for the appraiser to "describe the
appraiser's opinion of the highest and best use of the real estate, WHEN SUCH
AN OPINION IS NECESSARY AND APPROPRIATE. If an opinion is considered
necessary, the reasoning in support of the opinion must also be described in
the depth and detail required by "ITS SIGNIFICANCE TO THE APPRAISAL.""
We believe the subject property is of a type that generates a significant
part of its value from, or is strongly affected by its business component.
Removal of the subject's business component and reduction to real estate only
would dramatically change the subject's utility and marketability.
Consequently, alternative uses are of little interest to potential purchasers
of the subject who are almost exclusively interested in its Value in Use or
Going Concern Value. Accordingly, we believe an opinion of Highest and Best
Use is unnecessary as permitted by USPAP 2-2 (a) (ix).
We realize that some report reviewers may disagree with our opinion as to the
lack of necessity for stating and supporting Highest and Best Use. Therefore,
we offer below out opinion and support in such depth and detail as we believe
is "required by the significance to the appraisal" of this item which is
rarely, if ever, considered by a potential purchaser of this type property.
The Highest and Best Use of land is that use which may be reasonably expected
to produce the greatest net return to the land over a given period of time.
Moreover, it is that legal use which will yield to the land the highest
present value which is economically feasible, legally permissible and
maximally productive. The Highest and Best Use analysis is the basis for the
final conclusions drawn in this report.
45
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Land is valued as though it were unimproved and available for whatever use would
produce the maximum return. Improved property is valued according to the extent
to which the improvements are consistent with the Highest and Best Use of the
site as if unimproved. The Highest and Best Use of the total properties "as
improved" is often determined to be different from the Highest and Best Use of
the land when considered as though "unimproved" and available for development.
In most cases, the existing use will continue until the land value under its
Highest and Best Use exceeds the total value of the property in its existing
use. As long as improvements contribute to the land, they constitute the Highest
and Best Use.
HIGHEST AND BEST USE - UNIMPROVED
Legal uses for the subject land, if unimproved, include only Nursing Homes as
this is PUD zoning.
The site's physical characteristics of this site, i.e., size, shape, terrain,
etc. would permit the following uses: Apartments, Retirement Apartments,
Offices, Commercial Retail, Institutional, Single-family Residential,
Condominiums, and Nursing Homes.
Our market analysis indicates there could be sufficient demand in the general
marketplace and in this specific location for the following uses: Apartments,
Offices, Commercial Retail, Institutional and Nursing Homes.
The following might be economically feasible: Offices and Nursing Homes.
The most probable and reasonable uses for the subject property, if unimproved,
might include development of: Nursing Homes.
When considering the subject site as an unimproved tract of land, and after
considering all alternative uses, it is the appraiser's opinion that Nursing
Home use would be the Highest and
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Best Use: (a) at this time, (b) after a time period sufficient to allow
completion of any necessary improvements and (c) at the time of estimated
stabilized occupancy.
HIGHEST AND BEST USE - AS IMPROVED
There are uses other than the current one that would give an attractive return
to this land. However, there is no alternative use that would yield a large
enough return to justify removal or substantial renovation of the existing
structure. The subject improvements are functional in size, layout and utility
and do not contain any depreciation of sufficient amount; the cost of an
alternative use would not be justified. The subject property has operated for
several years as a Nursing Home and has developed a reputation which, in this
market, assures reasonable occupancy. Staffmg appears adequate and no
unresolvable operational problems were uncovered. It would appear that this
operation is successful and is giving a good return to the underlying land. The
underlying land value does not warrant the demolition of the present subject
building improvements.
The appraiser considered several alternative uses for the land underlying The
Hearthstone of Round Rock. No alternative utilization other than for a Nursing
Home was considered likely to give a higher return in the immediate future.
Therefore, the use contemplated by our study; i.e., Nursing Home use, is
considered to be in conformity with the subject property's Highest and Best Use
As Improved.
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DESCRIPTION OF IMPROVEMENTS
- ---------------------------
<PAGE>
[FLOOR PLAN]
48
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DESCRIPTION OF IMPROVEMENTS
Long-term care facilities must be designed with specific needs in mind. Typical
residents frequently have partially impaired vision, hearing, sense of touch,
mobility, agility, and orientation to time and place. To compensate for a
decrease in ability to distinguish colors, brightness, and depth perception,
developers need to emphasize bright colors against neutral backgrounds and bold
prints. There is also a need for increased interior and exterior lighting,
prevention of glare, and an emphasis on different color carpets to distinguish
stairs from floors. To compensate for decreased overall hearing ability, reduced
capability to discern high pitched sounds, and inability to discriminate normal
conversation from background noises, developers need to emphasize amplifiers on
telephones, PA systems, smoke detectors, installation of alarm systems with
flashing lights, and sound-absorbing materials in areas promoting socialization.
To deal with poor mobility and agility, including the use of wheelchairs, canes
and walkers, developers need to be cognizant of the length of halls, chairs
versus benches, smooth walking surfaces, wide halls and doorways for
wheelchairs, automatic sliding doors, the placement of handrails usable by both
wheelchair and ambulatory residents, and special kitchen and bathroom
arrangements. Decreased sensitivity to touch and circulation requires an
awareness of the increased need for and ease of adjustment in heating/cooling
for the private areas, and attention to the environmental tactile question in
general. Poor orientation to time and place and memory loss can be assisted by
environmental cues such as different colored floors, culturally familiar
designs, activity boards, and large clocks. A well-designed facility for the
disabled will incorporate many or all of these features. The subject property
includes many of these features.
Frank Ramsey of HealthCare Property Appraisers of America, Inc. made an
inspection of the subject property on March 20, 1997. The following description
of improvements describes the buildings as they appeared to our inspector on the
date of inspection.
49
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SUBJECT IMPROVEMENTS
The subject site is improved with a one-story building utilized as The
Hearthstone of Round Rock. The structure's initial completion date is 1988. It
is irregular in shape. The appraiser considers the subject building structure to
contain a functional area of approximately 47,000 sf or 392 sf per bed. The
subject building consists of six connected pods with rooms built around a
central living area. A central administration structure houses offices,
kitchens, laundry and dining and other ancillary areas.
The structure appraised contains all of the functional spaces typically found in
buildings designed for Nursing Home occupancy, including offices, lobby,
activity department, physical therapy, beauty shop, kitchen and dining area,
laundry, personal laundry, nurses' stations, public and employee baths, and
bedrooms. The dining room is capable of seating all residents at once; so that
meals are served at one sitting(s) per meal. The structure has a total possible
utilization of 120 beds and is configured for 120 beds.
The subject's physical structure appears to be of good quality construction and
amenities. The physical plant has good appeal to potential residents and
families with sufficient financial resources to be selective in their choice of
a facility.
No Physical Deterioration-Curable (deferred maintenance) was observed. The
structure contains no Functional Obsolescence and the facility is considered to
be functional and modem. No External Obsolescence is noted.
The Effective Age of the structure is 9 years, and the Remaining Economic Life
is considered to be 41 years. Architecture and layout are considered typical for
a Nursing Home and appears in conformity with the community.
Following is a topical outline of the major improvements:
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SITE PREPARATION: The building site was cleared, graded and prepared for
construction.
FOUNDATION: The foundation was concrete bearing walls.
FRAME: Frame was mill-type wood.
FLOOR STRUCTURE: Floor structure consisted of concrete on ground.
FLOOR COVERING: The floor coverings were carpet on pad, ceramic tile, quarry
tile, marble tile and vinyl composition tile.
CEILING: The ceilings were acoustical, organic fiber in suspended ceiling,
gyupsum board, taped and painted, with insulation.
INTERIOR CONSTRUCTION: Interior construction was framed
PLUMBING: All patient bathrooms are two- or three-fixtured china/porcelain
fixtures including chrome hardware, grab bars and other invalid aids.
Individual bathtubs and showers feature non-slip surfaces, grab bars, shower
hoses and non-ambulatory lifts. The property's plumbing is adequate.
Fifty-four rooms share a full bath with an adjoining room. Twelve rooms have
a full, private bath with a tub or shower.
SPRINKLER: The subject was fully sprinklered.
HEATING, COOLING, VENTILATION: The property is heated with a package heating and
cooling system. Residents' bedrooms are air conditioned with thru-the-wall heat
pump units with electrical resistance heating coils.
ELECTRICAL: Fully wired and lighted with three-phase wiring, adequate to provide
lighting and power for all equipment operation including fluorescent and
incandescent lighting, reading
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lights over each bed, nurse call system, fire alarm system, and intercom system.
There is one diesel generator with a KW rating of 50.
EXTERIOR WALLS: Exterior walls were wood or steel stud with stucco, insulated.
ROOF STRUCTURE: Roof structure was wood joists with composition deck.
ROOF COVER: Roof cover was clay tile.
PARKING: Parking and drives of 2" plant mix asphalt on a crushed stone base.
Marked parking areas.
DOORS & WINDOWS: Interior doors were solid core. Windows were single hund in
aluminum frame.
EQUIPMENT: Specialized equipment necessary for operation as a Nursing Home
facility has been considered in valuing the subject property. Included in this
category are institutional kitchen equipment, stainless steel sinks, food
preparation counters, ovens, stoves, dishwashers, walk-in coolers and freezers,
exhaust fans and grease traps. There are two Century tubs and one Arjo baths.
Laundry equipment includes two Milnor washers and two Huebsch dryers rated
average in condition. Kitchen equipment includes one Hobart dishwasher, one Cold
Storage walk-in freezer, one Cold Storage walk-in cooler, two Traulsen
freestanding coolers, and one range/oven rated average in condition.
ROOM FURNISHINGS: Include a bed, night stand, chair and retractable privacy
curtain.
WALKS & DRIVES: Walks are approximately 41 " wide and constructed of 2 1/2 "
concrete.
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LANDSCAPING: Rated good. The lawn is well established.
53
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COST APPROACH TO VALUE
- -------------------------------------------------------------------------------
<PAGE>
COST APPROACH TO VALUE
The Cost Approach is frequently a reliable indicator of a property's value.
The Principle of Substitution dictates that The Hearthstone of Round Rock
will be worth no more than the cost to reproduce improvements with equal
utility on an equally desirable site. Conversely, in an active building
market, most properties are usually worth at least as much as their cost to
reproduce. Otherwise, developers would not be building comparable buildings.
The initial step in the Cost Approach was the estimation of land value. The
appraiser next estimated the current construction costs to replace subject's
building improvements. The appraiser also considered the possible existence
of the three types of depreciation: Physical Deterioration, Functional
Obsolescence, and External Obsolescence.
To estimate the actual construction cost of the improvements, the appraiser
consulted with various contractors and architects familiar with this type
construction. We also have personal knowledge of comparable structures which
have been built and are familiar with their actual costs. Finally, we checked
with Marshall and Swift Valuation Service to ascertain the current cost
factors for this type construction in Round Rock.
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SITE VALUATION
There are several methods which appraisers may use to estimate vacant land
values. These methods include the direct sales comparison, allocation, land
residual technique, direct capitalization of ground rent, and the land
development method. The direct sales comparison method is based upon the
principle of substitution. This is the best method whenever adequate
quantities of verified comparable sales data is available. We have used both
the direct sales comparison and allocation methods. For Nursing Home sites,
the land residual or land development methods are not a reliable indicator of
value.
DIRECT SALES COMPARISON
The direct sales comparison technique is based on the economic principle of
substitution. This principle states the value of a property tends to be fixed
by the costs of acquiring an equally desirable substitute property with the
same or similar utility and physical characteristics. Comparisons are made
between the property appraised and the sales of similar properties which have
occurred in the marketplace. Typically, units of comparison are derived such
as a sales price per square foot, sales price per front foot, or sales price
per building unit. In the case of an apartment property, the economic
indicator might be cost per apartment, whereas in the case of a nursing home,
the unit of value would be cost per patient bed. The comparables are adjusted
to reflect similarities and dissimilarities of each to the subject for such
characteristics as location, time of sale, existing market conditions, and
the physical characteristics of the property. The adjusted sales prices of
the comparables then become an indication of value for the subject. In the
case of the subject, we have looked to properties with similar zoning and
land use which have sold within the Round Rock area.
The comparable sales utilized in this analysis are summarized in the land
sales summary and the adjustment grid which follow this section. A complete
description of the individual sales used is also included within this section.
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<PAGE>
LAND SALE #1
<TABLE>
<CAPTION>
<S> <C>
LOCATION: NW Corner RM 620 and Great Oaks Drive
LEGAL DESCRIPTION: Lot 1, Block 3, Cat Hollow
BUYER: Scott and White Memorial Hospital
SELLER: Cat Hollow Associates, LP
DATE OF SALE: 11/15/96
SIZE: 11.912 Acres/518,887 s.f.
ZONING: None
IMPROVEMENTS: Vacant
TOPOGRAPHY: Level
SALE PRICE: $1,285,020
COST/UNIT: $2.48 s.f.
COMMENTS: Approximately two acres included in the
Karst Feature Buffer Zone along southwestern boundary. Purchased
for development of Out-Patient Medical Clinic.
</TABLE>
57
<PAGE>
LAND SALE #2
<TABLE>
<CAPTION>
<S> <C>
LOCATION: SE Side proposed Conchos Valley Dr. at
proposed Scott & White Dr.
LEGAL DESCRIPTION: Lot 81, Block D, Cat Hollow
BUYER: Preference Assisted Living, Inc.
SELLER: Cat Hollow Associates, LP
DATE OF SALE: Contract Pending
SIZE: 3.6 Acres/156,816 s.f.
FRONTAGE: 483 FF along Conchos Valley Drive and
358 FF along Scott & White Dr.
ZONING: None
IMPROVEMENTS: Vacant
TOPOGRAPHY: Gently sloping
SALE PRICE: $350,000
COST/UNIT: $2.23 s.f.
COMMENTS: Purchased for construction of assisted living facility.
</TABLE>
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LAND SALE #3
<TABLE>
<CAPTION>
<S> <C>
LOCATION: NE Corner RR 620 and O'Conner Dr
LEGAL DESCRIPTION: John McQueen Survey, Abstract No.
425, and J. M. Harrell Survey, Abstract
No. 284
BUYER: H. E. Butt Grocery Company
SELLER: Cat Hollow Associates, LP
DATE OF SALE: June 20, 1995
SIZE: 10.325 Acres/449,727 s.f.
ZONING: None
IMPROVEMENTS: Vacant
TOPOGRAPHY: Gently Sloping
SALE PRICE: $1,236,832
COST/UNIT: $2,75 s.f.
COMMENTS: Proposed site of HEB Grocery Store
</TABLE>
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LAND SALES SUMMARY & ADJUSTMENT GRID
<TABLE>
<CAPTION>
Comparison # Subject No. 1 No. 2 No. 3
Address 401 NWC RM 620 & SE/S Conchos Val NWC RR 620
Oakwood Blvd Grt Oaks Dr Scott/White Dr & O'Connor Dr
Round Rock, TX Round Rock, TX Round Rock, TX Round Rock, TX
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SITE DATA
Size (SF) 199,505 518,887 156,816 449,757
Size (Acres) 4.58 11.91 3.60 10.33
Frontage/Visability Yes/good Yes/V. Gd Yes/good Yes/V. Gd
Zoning None None None None
Topography Level Level Level Level
Utilities All All All All
SALE DATA
Reported Sale Price ????????? $1,285,020 $350,000 $1,236,832
Sale price/SF $0.00 $2.48 $2.23 $2.75
Sale Price/Acre $0 $107,876 $97,222 $119,790
Transaction Type ---- Pending Pending Closed
Rights Conveyed ---- Fee Simple Fee Simple Fee Simple
Financing Terms ---- Cash Cash Cash
adjustment ---- ---- ---- ----
Condition of Sale ---- Arm's Arm's Arm's
Length Length Length
---- ---- ----
Recorded Sale Date ---- 11/96 3/97 6/95
adjustment ---- ---- ---- ----
Location ---- Similar Similar Similar
adjustment ---- ---- ---- ----
Size ---- Larger Similar Larger
adjustment ---- 15% ---- 15%
Zoning ---- Similar Similar Similar
adjustment ---- ---- ---- ----
Topography ---- Similar Similar Similar
adjustment ---- ---- ---- ----
Frontage/Visability ---- Superior Similar Superior
adjustment ---- -10% ---- -10%
Utilities ---- Similar Similar Similar
adjustment ---- ---- ---- ----
Adjstd Price/Sq Ft $2.56 $2.23 $2.85
Avg Price/Sq Ft $2.55
Adjstd Price/Acre $111,652 $97,222 $123,983
Avg Price/Acre $110,952
</TABLE>
<PAGE>
RECONCILIATION OF COMPARABLE SALES
The comparables have already been adjusted to the subject in respect to
location, size, zoning, topography, corner influence, and utilities. The
unadjusted sales prices range from $2.23 to $2.75 per square foot. After the
adjustments, the comparables form a range of $2.23 to $2.85 per square foot.
The average adjusted price per square foot was $2.55. Typically, the
comparables which have the least adjustments are most representative of the
subject. Accordingly, it is our opinion that the subject 4.58 sf acres site
has a market value of $500,000 or $109,170 per acre.
Considering the land sales data available and prices being paid by developers
of Nursing Homes in similar communities, we estimate the land value of the
site supporting the building and improvements to be $500,000.
This represents the following value per indicator:
<TABLE>
<CAPTION>
<S> <C>
Land Value Per Size Unit $109,170 per acre
Land Value Per Unit (bed/apt) $4,167/bed
Land Value as % of Project Cost 7.38%
SITE VALUE $500,000
--------
--------
</TABLE>
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BUILDING COSTS
This appraisal firm compiles construction cost data on new and proposed
facilities throughout the United States. The hard construction costs vary
considerable depending upon geographical location and quality of
improvements. To estimate the Replacement Cost of The Hearthstone of Round
Rock, the appraiser utilized the Segregated Cost Method of cost estimating.
This method is designed to give separate consideration to all the major
construction components of a building. Many parts of a building, such as
floor, ceiling and lighting, increase in cost directly as the floor area of
the building increases. Other building costs vary with relation to parameters
other than the floor area. However, most costs can be related to floor area,
wall area, roof area, or sometimes an individual count of unit installations.
To facilitate the application of these individualized costs, they are grouped
so that all costs related to floor area can be added together and applied to
the total floor area, all wall area costs can be added together and applied
to the wall area, and all roof costs can be applied to the ground floor or
roof area.
The appraiser utilized the Marshall and Swift Valuation Service, which is the
most widely recognized cost estimating manual in the world. This manual
separates each type of building by occupancy, type of construction, and
quality. It also makes adjustments for current cost factors on a monthly
update basis.
Using the Marshall and Swift Valuation Service, the appraiser selected the
particular construction characteristics of The Hearthstone of Round Rock
building improvements and selected the appropriate quantity cost factors and
adjustments.
Using the computer program, a Replacement Cost New of subject's building
improvements as well as individual estimates of depreciation for each
component item were developed. The computer calculations included all Direct
Costs. The Marshall and Swift Valuation Service includes
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architectural fees, loan interest and some other minor Indirect Costs. It
specifically excludes some of the costs of doing business, or Indirect Costs,
which we have estimated as follows:
<TABLE>
<CAPTION>
<S> <C>
Taxes 0.4%
Marketing 0.4%
Loan Points and Fees 2.0%
Legal 0.5%
Accounting 0.2%
Government Licensure & Permits 4.5%
Working Capital 4.0%
-----
Total Indirect Costs 12.0%
</TABLE>
Our estimate of Indirect Costs and Developer's Profit and Overhead were based
on a percentage of Total Cost-New (depreciated at the same rate as the
building improvements). The Total Cost-New includes not only Direct Cost of
construction, as developed by the Marshall and Swift Valuation Service, but
also the cost of land, furniture, fixtures and equipment.
The Developer's Profit and Overhead was estimated at 15% of the Total
Cost-New. As an alternative to investors, Baa Bonds are currently yielding
seven to eight percent. The developer's profit should be higher than the Baa
Bond rate as it is somewhat riskier.
HealthCare Property Appraisers of America, Inc. compiles cost data on
furniture, fixtures and equipment budgets for facilities like subject. A
summary of some of the more recent transactions follows:
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<PAGE>
NURSING HOME EQUIPMENT COST DATA
<TABLE>
<CAPTION>
PRICE OF COST OF
DATE SOLD CITY STATE #BEDS FF&E FF&E/BED
<S> <C> <C> <C> <C> <C>
05/92 Clearwater FL 120 $210,000 $1,750
02/90 Fluvanna VA 60 $225,000 $3,750
03/90 Goochland VA 72 $250,000 $3,472
04/92 Decaturville TN 60 $210,000 $3,500
02/92 Charlotte NC 120 $420,000 $3,500
05/92 Asheville NC 120 $420,000 $3,500
01/92 Virburnum MO 60 $120,000 $2,000
09/91 Corrigan TX 90 $160,000 $1,778
09/91 Wells TX 96 $168,000 $1,750
09/91 Brownwood TX 130 $230,000 $1,769
10/91 Port Orange FL 120 $600,000 $5,000
07/91 Orange City FL 120 $600,000 $5,000
05/91 Covington TN 196 $350,000 $1,786
02/91 Melbourne FL 120 $315,000 $2,625
04/91 Whites Creek TN 97 $280,000 $2,887
07/92 Casper WY 120 $350,804 $2,923
07/92 Palm City FL 116 $650,000 $5,603
07/92 Ashland TN 90 $260,000 $2,889
02/94 Lychburg VA 100 $380,000 $3,800
06/93 Ashland City TN 90 $260,000 $2,889
05/94 Hilo HI 120 $490,000 $4,083
12/95 Dyer TN 120 $400,000 $3,333
------
Average $3,163
Minimum $1,750
Maximum $5,603
</TABLE>
After considering the geographical location, size, and quality of the subject
property, we believe a cost new of $3,500 per unit to be appropriate. This
indicates a personal property value for the subject as follows:
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<PAGE>
FF&E COST NEW # OF INCOME FF&E COST NEW
(PER UNIT) X GENERATING UNITS X (TOTAL)
------------- ---------------- -------------
$3,500 X 120 Beds X $420,000
Our on-site inspection of The Hearthstone of Round Rock did not reveal any
obvious Physical Deterioration-Curable (deferred maintenance). Overall, the
property appeared to be well maintained and only normal maintenance
situations were observed. Physical Deterioration-Incurable, caused by natural
aging of the building structure in existing buildings, was estimated by the
Marshall & Swift Valuation Service based upon a data bank of sold depreciated
properties.
The depreciation section of the Marshall and Swift Valuation Service is
primarily designed to measure Physical Deterioration-Incurable only. It does
not measure Physical Deterioration-Curable, i.e., Deferred Maintenance, or
any loss in value due to Functional Obsolescence that might be found in the
specific subject property, or External Obsolescence that might exist in the
subject neighborhood. The Marshall and Swift Valuation Service calculations
are based upon analysis of actual sales data from a large number of
properties of subject's type that have been sold within the last year. These
sales prices, after deletion of personal property and land values, are
compared to construction cost figures for new and similar properties. The
resulting depreciation estimate by the Marshall and Swift Valuation Service
will not exactly equal depreciation when calculated on an age-life basis
(which is basically an accounting method that has little or nothing to do
with the market place.) The Marshall and Swift market data method is
considered to be a more refined and accurate method as it is based on actual
data from the market.
The real estate is functional in all respects and considered to be
competitive with Nursing Homes being constructed today. Therefore, no
Functional Obsolescence was deducted.
Our inspection of the neighborhood and the surrounding properties did not
reveal any situations which would detract from subject's value. Therefore, no
deduction was made for External Obsolescence.
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Our physical inspection of the subject indicated that the personal property,
i.e. furniture, fixtures and equipment, is generally in good condition
relative to its age. We have assumed an average useful life of ten years and
an effective age of 1 years, indicating depreciation of 5% (1 years divided
by 10 years).
Depreciation on the personal property is estimated as follows:
FF&E COST NEW X % DEPRECIATED = DEPRECIATION
------------- ------------- ------------
$420,000 X 5% $21,000
Following is a component breakdown of Replacement Costs for the improvements
and depreciation:
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OCCUPANCY: CONVALESCENT HOSPITAL
CLASS: C Masonry COST RANK: 3.5 Above Average/High
EFFECTIVE AGE: 9 Years CONDITION: 6.0 Excellent
NUMBER OF STORIES: 1.0 AVERAGE STORY HEIGHTS: 10.0
FLOOR AREA: 47,000 Sq. Ft. COST AS OF: 3/97
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------REPLACEMENT COST
COMPONENT UNITS COST NEW DEPR
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EXCAVATION & SITE PREPARATION
Site Preparation . . . . . . . . 47,000 0.24 11,280 10,490
FOUNDATION:
Concrete, Bearing walls . . . . 47,000 2.35 110,450 102,719
FRAME:
Wood, Mill Type . . . . . . . . 47,000 4.22 198,340 184,456
FLOOR STRUCTURE:
Concrete on Ground . . . . . . . 47,000 3.17 148,990 138,561
FLOOR COVER:
Carpet and Pad . . . . . . . . . 29,610 4.45 131,764 122,541
Tile, Ceramic . . . . . . . . . 2,350 9.61 22,583 21,022
Tile, Quarry . . . . . . . . . . 2,350 9.61 22,583 21,022
Vinyl Composition Tile . . . . . 11,750 1.71 20,092 18,686
Marble . . . . . . . . . . . . . 940 29.86 28,068 26,103
SUBTOTAL . . . . . . . . . . . . 225,090 209,334
CEILING:
Acoustical, Organic Fiber . . . 4,700 1.47 6,909 6,425
Suspended Ceiling . . . . . . . 4,700 1.33 6,251 5,813
Gypsum Board, Taped & Paint . . 42,300 1.29 54,567 50,747
Ceiling Insulation . . . . . . . 47,000 0.67 31,490 29,286
SUBTOTAL . . . . . . . . . . . . 99,217 92,271
INTERIOR CONSTUCTION:
Interior Construction, Framed . 47,000 18.60 874,200 813,006
PLUMBING:
Plumbing . . . . . . . . . . . . 47,000 10.18 478,460 444,968
FIRE PROTECTION:
Sprinklers . . . . . . . . . . . 47,000 1.77 83,190 77,367
HEATING AND COOLING:
Package Heating & Cooling . . . 32,900 6.52 214,508 199,492
Window Heat Pump . . . . . . . . 66 1,239 81,774 76,050
SUBTOTAL . . . . . . . . . . . . 296,282 275,542
ELECTRICAL:
Electrical . . . . . . . . . . . 47,000 12.20 573,400 533,262
Standby Generator, Diesel . . . 50 452 22,600 21,018
SUBTOTAL . . . . . . . . . . . . 596,000 554,280
EXTERIOR WALL:
Stucco . . . . . . . . . . . . . 32,900 11.75 386,575 359,515
Insulation . . . . . . . . . . . 32,900 0.56 18,424 17,134
SUBTOTAL . . . . . . . . . . . . 404,999 376,649
ROOF STRUCTURE:
Wood Joists, Composition Deck . 47,000 4.80 225,600 209,808
ROOF COVER:
Clay Tile . . . . . . . . . . . 47,000 5.97 280,590 260,949
SUBTOTAL SUPERSTRUCTURE . . . . . 47,000 85.80 4,032,688 3,750,400
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------REPLACEMENT COST
COMPONENT UNITS COST NEW DEPR
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YARD IMPROVEMENTS:
Paving, Asphalt . . . . . . . 47,000 1.95 91,650 85,235
- ----------------------------------------------------------------------------------------
TOTAL . . . . . . . . . . . . . 4,124,338 3,835,635
ARCHITECT'S FEES . . . . . . . 7.4% 304,514 283,198
- ----------------------------------------------------------------------------------------
REPLACEMENT COST NEW . . . . . 47,000 94.23 4,428,752
DEPRECIATION . . . . . . . . . (7.0%) (310,019)
DEPRECIATED COST . . . . . . . 4,118,833
- ----------------------------------------------------------------------------------------
ROUNDED TO NEAREST $100 4,428,900 4,118,800
</TABLE>
Cost data by MARSHALL & SWIFT
68
<PAGE>
SUMMARY OF COST APPROACH
<TABLE>
<CAPTION>
<S> <C> <C>
Bldg. Improvements - Replacement Cost $4,428,900
Indirect Costs 641,868
Developer's Profit & Overhead @15% 802,335
-------
Total Costs: $5,873,103
Less Depreciation:
Physical Deterioration - Curable $0
Physical Deterioration - Incurable -
Replacement Costs 310,000
Physical Deterioration - Incurable
Indirect Costs 44,927
Physical Deterioration - Incurable
Devel. Profit & Overhead 56,159
Functional Obsolescence 0
External Obsolescence
0
--
Total Depreciation 411,087
-------
Depreciated Value $5,462,016
Land Value $500,000
Market Value - Real Estate $5,962,016
Add Furniture, Fixtures, Equipment $420,000
Less Depreciation 21,000
------
Depreciated Value of FF&E $399,000
-------
MARKET VALUE OF REAL & PERSONAL
PROPERTY By Cost Approach $6,361,061
(R) $6,360,000
----------
----------
</TABLE>
69
<PAGE>
INCOME CAPITALIZATION APPROACH TO VALUE
70
<PAGE>
INCOME CAPITALIZATION APPROACH TO VALUE
To estimate The Hearthstone of Round Rock's Market Value through the Income
Capitalization Approach, the appraiser estimated the total gross income the
project will generate by: (a) studying local and regional markets,
(b) considering the economic feasibility of the project itself, and
(c) considering competing projects and the underlying demand for this type
facility.
From the total Gross Income estimate was deducted an estimate for Vacancy and
Credit Loss. Even developments with extremely heavy demand usually experience
some loss of rent due to "down time," when living units are re-decorated
between residents. In addition, there are generally some bad debt losses in
most projects. The appraiser also deducted an estimate of all Expenses the
typical property owner might expect to incur. From this Net Operating Income
estimate, the appraiser processed an estimate of the property's Market Value.
This process is known as Capitalization and is simply a conversion of Net
Operating Income into Market Value.
71
<PAGE>
GROSS INCOME
A Nursing Home's Effective Gross Income is determined by three factors: (a)
various daily charge rates, (b) payor type mix or census and (c) occupancy rate.
Daily charge rates vary significantly from property to property, reflecting the
services offered and the various payor sources. To develop an accurate estimate
of revenue, the appraiser typically interviews the facility's administrator,
financial officers and the reimbursement specialist. Due to the confidential
nature of this assignment, these interviews as well as detailed financial
statements were not available. The appraiser was furnished and has analyzed the
last year's profit and loss statement. Our income for a stabilized year was
projected by inflating the historical data by 5%.
SUBJECT
The Hearthstone of Round Rock is licensed by the state for 120 Skilled Care
(SNF), and Intermediate Care (ICF) beds. The subject property is certified in
accordance with federal regulations pursuant to the Social Security Act as a
provider of Medicaid (Title XIX) Services and is certified for Medicare. It is
currently configured and operated with 120 beds.
OCCUPANCY
The appraiser researched occupancy of this type facility on a national, state
and local basis. National statistics indicate long-term care facilities are
experiencing a nationwide occupancy of 91.0%. Texas's Department of Human
Resources' most recent survey indicated a statewide occupancy of 84%. The twelve
month statement we reviewed indicates the subject had occupancy last year of
approximately 87.8 %.
72
<PAGE>
CENSUS OR PATIENT/RESIDENT MIX
The appraiser researched census-mix (the ratio of various payor types) in the
market area. Patient distribution between government reimbursed programs and
privately funded sources varies from state to state and facility to facility.
Statewide factors contributing to a high self-pay census-mix include the
existence of a Certificate of Need "CON" program, social factors, the state's
restrictiveness on qualifying residents, statewide occupancy, and the adequacy
of the state's reimbursement program. Texas is considered medium in these areas.
Factors contributing to a high, self-pay census-mix in an individual facility in
Texas include reputation, quality of care, facility's age, participation in the
Medicare program, competitiveness of rate structure, and therapeutic programs
offered. The subject rates medium in these areas.
The subject is currently experiencing the following census breakdown by payor:
<TABLE>
<CAPTION>
MEDICAID + MEDICARE + SELF-PAY = TOTAL
-------- -------- -------- -----
<S> <C> <C> <C> <C>
Current
Census 50% + 15% + 35% = 100%
Breakdown
</TABLE>
ANCILLARY/MISCELLANEOUS INCOME
Ancillary income generally refers to revenue generated from profit centers other
than room, board and basic healthcare (i.e., occupational, physical or speech
therapy). These additional services typically will average $ 1.00 to $3.00 per
patient day in an average facility and $5.00 to $15.00 in a facility with a
large high skilled census and substantial therapy programs. The subject's
ancillary charges have historically been between $9.00 and $10.00 per day.
73
<PAGE>
REVENUE SUMMARY
The appraiser reviewed the subject's historical operating statements to compare
the reasonableness of our projections. Management's operating statements
indicated an Effective Gross Revenue of:
<TABLE>
<CAPTION>
<S> <C>
1996 $4,685,073
</TABLE>
After studying actual historical financial statements, the operator's
projections, comparable rates, occupancy and census-mix, the appraiser projected
the subject's Effective Gross Revenue. The appraiser inflated the most recent
income and expenses by 5% and estimated an Effective Gross Revenue of:
<TABLE>
<CAPTION>
<S> <C>
Appraiser's Effective Gross Revenue: $4,919,327
</TABLE>
74
<PAGE>
EXPENSES
To estimate expenses for the subject, the appraiser reviewed the last 12 month
operating statement from the subject.
HEALTHCARE DEPARTMENT expenses include all those services required to provide
nursing and/or personal care and all ancillary and therapy services. Stabilized
staffing includes: directors of nursing (DON), ward clerks, therapists, social
services, in-service coordinator, activities director, activities staff,
registered nurses, licensed practical nurses and certified nursing assistants.
HEALTHCARE EXPENSES
<TABLE>
<CAPTION>
$ %
ANNUAL EGI
------ ---
<S> <C> <C>
1996 Historical $2,257,628 48.2%
Appraiser's Stabilized $2,370,509 48.2%
</TABLE>
ADMINISTRATIVE and general expenses include salaries for administrators,
secretaries, clerks and bookkeepers. Expenses also include payroll benefits,
taxes, insurance, state provider or licensure fees (if applicable), phone,
legal, accounting management, transportation, miscellaneous and supplies.
ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
$ %
ANNUAL EGI
------ ---
<S> <C> <C>
1996 Historical $1,027,481 21.9%
Appraiser's Stabilized $1,078,855 21.9%
</TABLE>
75
<PAGE>
THE DIETARY DEPARTMENT provides food service for patient/residents and staff and
is an important ingredient in the subject's overall marketing package. The
facility provides three meals a day, seven days a week. Stabilized staffing
includes: dietician/food service managers, cooks and server/helpers.
DIETARY-EXPENSES
<TABLE>
<CAPTION>
$ %
ANNUAL EGI
------ ---
<S> <C> <C>
1996 Historical $281,952 6.0%
Appraiser's Stabilized $296,050 6.0%
</TABLE>
HOUSEKEEPING AND LAUNDRY expenses include salaries for: directors of
housekeeping and laundry, housekeepers and laundry workers.
HOUSEKEEPING LAUNDRY EXPENSES
<TABLE>
<CAPTION>
$ %
ANNUAL EGI
------ ---
<S> <C> <C>
1996 Historical $146,694 3.1%
Appraiser's Stabilized $154,029 3.1%
</TABLE>
MAINTENANCE expenses include all those necessary to operate and maintain the
physical plant. Staffing includes: maintenance manager, skilled maintenance
personnel and unskilled personnel. This category covers all day-to-day repairs,
periodic repainting and cosmetic work and lawn and service contracts.
76
<PAGE>
MAINTENANCE EXPENSES
<TABLE>
<CAPTION>
$ %
ANNUAL EGI
------ ---
<S> <C> <C>
1996 Historical $205,062 4.4%
Appraiser's Stabilized $214,315 4.4%
</TABLE>
TOTAL EXPENSES are stabilized at $4,114,757 or 83.6% of effective gross
income.
TOTAL EXPENSES
<TABLE>
<CAPTION>
$ %
ANNUAL EGI
------ ---
<S> <C> <C>
1996 Historical $3,918,817 83.6%
Appraiser's Stabilized $4,114,757 83.6%
</TABLE>
Following is the appraiser's reconstructed pro forma operating statement with
stabilized income and expenses for subject property:
77
<PAGE>
RECAP OF HISTORICAL VS STABILIZED INCOME
<TABLE>
<CAPTION>
12
MOS
1996 APPRAISER'S
BUDGET STABILIZED
------ ----------
<S> <C> <C>
Eff. Gross Income $4,685,073 $4,919,327
Less Expenses *
Healthcare Unit $2,257,628 $2,370,509
Administration $1,027,481 $1,078,855
Dietary $281,952 $296,050
Housekeeping/Laundry $146,694 $154,029
Maintenance $205,062 $215,315
------- -------
Fixed/Operating Exps $3,918,817 $4,114,757
--------- ---------
NET INCOME $766,256 $804,569
------- -------
------- -------
</TABLE>
* Some expenses may have been eliminated as non-recurring or reclassified to
facilitate comparison with the appraiser's estimates and may not match
historical numbers.
78
<PAGE>
CAPITALIZATION
Most investors, in determining what price they would pay for The Hearthstone of
Round Rock, begin with the net income (estimated in the preceding section). This
net income is converted into a value estimate by means of capitalization; the
overall capitalization rate is simply the ratio of net income to value.
The typical investor, when selecting his desired rate of return (or overall
capitalization rate), considers: (a) the term for which he will hold the
property and (b) his initial cash investment. The investor's initial equity is
his actual downpayment at the time of purchase. His return is considered to be
all of the income stream during the holding period and the cash he receives when
he sells the property. The investor's equity may increase due to loan
amortization and is further affected by appreciation or depreciation in property
value.
Most investors consider the actual yield on equity more important than yield on
purchase price. Today's market requires an after tax yield of 10% to 25%,
depending upon the property type and the degree of risk.
The appraiser developed a Capitalization Rate using both a Direct Capitalization
method and a Yield Capitalization method.
80
<PAGE>
DIRECT CAPITALIZATION
LONG TERM CARE FACILITY SALES
Capitalization rates on typical investment type real estate currently range from
8% to 10%. Historically, properties like subject, with some Going Concern Value
or Special Use characteristics, have commanded an increase in capitalization
rate of 1% to 3% over typical investment type property.
SUMMARY NURSING HOME FACILITY SALES
<TABLE>
<CAPTION>
OCCU- PRVT SF/ SP/ SP/ CAPT
UNITS AGE PANCY PAY UNIT SF UNIT EGIM RATE
----- --- ----- --- ---- ---- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Averages 166 16 86% 42% 283 $103 $30150 1.33 14.1%
Total Facilities 30
</TABLE>
The data suggests a current rate of 13.5% to 14.5% (adjusted for today's
market).
YIELD CAPITALIZATION
MORTGAGE EQUITY ANALYSIS
The appraiser prepared a Mortgage Equity Analysis and developed a Weighted
Average Capitalization Rate sufficient to service the mortgage debt and equity
position. The Appraisal Foundation publishes a monthly of mortgage interest
rates derived from a survey of major institutional investors in the U.S.
Although interest rates for Nursing Homes are not included in the survey,
lenders advise that a premium of 1% to 3% should be added to the general
apartment rate to reflect the increased risk for any property containing some
Going Concern Value.
81
<PAGE>
To develop an Overall Capitalization Rate by Band of Investment, Mortgage -
Equity, we assumed a first mortgage of 75% loan to value and 10.25% interest
rate, amortized over 25 years. Nursing Home lenders confirm this criteria would
be currently acceptable. The Equity Yield Rate was estimated at 25%. The
appraiser consulted with two major purchasers of this type property, who
reported that this return is sufficient to attract equity capital.
The weighted average does not reflect equity buildup from mortgage amortization
during the holding period. Mortgage amortization would accrue to the equity
position and satisfy part of the owner's yield requirements. To reflect this,
the appraiser deducted an appropriate rate from the weighted average. The
mortgage amortization rate is calculated by multiplying the loan to value ratio,
times the portion of the loan that will be paid off at the end of the holding
period; this product is multiplied by the Sinking Fund Factor at the equity
yield rate.
The weighted average rate does not incorporate the value appreciation or
depreciation that can be anticipated for this type property in this location
over the investment period. Studies show that well located real estate will
appreciate in value at a rate at least equal to the inflation rate. We have
assumed no appreciation or depreciation.
82
<PAGE>
NATIONAL MARKET INDICATORS
--------------------------
<TABLE>
<CAPTION>
REGIONAL MALL CBD OFFICE INDUSTRIAL APARTMENT
------------- ---------- ---------- ---------
3rd Qtr Prior Qtr 3rd Qtr Prior Qtr 3rd Qtr Prior Qtr 3rd Qtr Prior Qtr
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Discount Rate (IRR)(a)
Range 10.00%-14.00% 10.00%-14.00% 10.00%-15.00% 10.00%-15.00% 8.50%-14.00% 9.00%-14.00% 10.00%-12.50% 10.00%-12.50%
Average 11.56% 11.50% 11.93% 11.99% 11.19% 11.22% 11.30% 11.35%
Change (b.p.) -- +6 -- -6 -- -3 -- -5
Overall Cap Rate
(OAR)(a)
Range 6.25%-11.00% 6.25%-11.00% 7.00%-12.00% 8.00%-12.00% 7.25%-13.00% 7.25%-13.00% 8.00%-10.50% 7.50%-10.50%
Average 8.33% 8.17% 9.47% 9.53% 9.23% 9.23% 9.03% 8.98%
Change (b.p.) -- +16 -- -6 -- 0 -- +5
Residual cap rate
Range 7.50%-11.00% 7.00%-11.00% 8.25%-12.00% 8.25%-12.00% 8.00%-11.00% 8.00%-11.00% 8.50%-10.50% 8.00%-10.50%
Average 8.71% 8.56% 9.67% 9.67% 9.55% 9.51% 9.32% 9.39%
Change (b.p.) -- +15 -- 0 -- +4 -- +3
(a.) Rate on unleveraged, all-cash transactions.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Definitions:
B.P.: Basis Points
DISCOUNT RATE (IRR): Internal rate of return on equity in an all-cash
transaction, based on annual year-end compounding; formerly termed the Free and
Clear Equity RR in the Korpacz Survey.
OVERALL CAPITALIZATION RATE (OAR): Initial cash-on-sale rate of return on the
equity investment in an all-cash transaction; formerly termed the Free and Clear
Equity Cap Rate in the Korpacz Survey.
RESIDUAL CAP RATE: Overall capitalization rate used in calculation of residual
price at conclusion of forecast period.
Source: Korpacz Real Estate Investor Survey. Personal survey of a cross
section of major institutional equity real estate market participants conducted
in October 1995 by Peter F. Korpacz & Associates, Inc. Published Fall 1996 in
Valuation Insights & Perspectives.
83
<PAGE>
<TABLE>
<CAPTION>
AS % X REQUIRED ANNUAL = CAPT
OF TOTAL RETURN RATE
<S> <C> <C> <C> <C> <C>
First Mortgage 75.00% X 11.12% = 8.34%
Equity 25.00% X 25.00% = 6.25%
Weighted Average 14.59%
</TABLE>
LESS CREDIT FOR EQUITY BUILDUP:
<TABLE>
<CAPTION>
X PART X SINKING =
LOAN RATIO LOAN FUND FACTOR
PAID OFF
<S> <C> <C> <C> <C> <C> <C>
75.00% X 5.63% X 0.12180 = 0.51%
</TABLE>
ADJUSTMENT FOR DEPRECIATION/APPRECIATION:
<TABLE>
<CAPTION>
PLUS DEPRECIATION (OR X SINKING FUND =
MINUS APPRECIATION) FACTOR
<S> <C> <C> <C> <C>
0.0% X 0.12180 = 0.00%
</TABLE>
OVERALL CAPITALIZATION RATE:
<TABLE>
<CAPTION>
<S> <C>
TOTAL 14.08%
</TABLE>
84
<PAGE>
CAPITALIZATION RATE SUMMARY
The various techniques examined indicated capitalization rates of:
<TABLE>
<CAPTION>
<S> <C>
Direct Capitalization (Sales Data) 13.5 to 14.5%
Mortgage Equity 14.1%
</TABLE>
An overall capitalization rate of 14.00% was selected for our analysis,
indicating a value by the Income Capitalization Approach of:
<TABLE>
<CAPTION>
NET INCOME + CAPT.RATE = VALUE
<S> <C> <C>
$804,569 + 14.00% = $5,746,923
</TABLE>
MARKET VALUE OF REAL PROPERTY, PERSONAL (R)$5,750,000
PROPERTY & BUSINESS VALUE
85
<PAGE>
SALES COMPARISON APPROACH TO VALUE
86
<PAGE>
SALES COMPARISON APPROACH TO VALUE
The sales comparison approach is defined as "a set of procedures in which an
appraiser derives a value indication by comparing the property being
appraised to similar properties that have been sold recently, applying
appropriate units of comparison, and making adjustments, based on the
elements of comparison, to the sales prices of the comparables." (This
information taken from THE DICTIONARY OF REAL ESTATE APPRAISAL, American
Institute of Real Estate Appraisers, second edition.)
In this approach, the market value of the subject is estimated by comparing
it to similar properties that have sold recently. This approach is predicated
on the direct relationship between subject property's market value and the
sale prices of comparable properties. In the case of a Nursing Home, such as
the subject, these properties are sold and purchased by investors on a
regional and national basis. For selection of comparable properties, we
sought recent sales first within Texas and then in the United States.
The accurate application of this approach is based, in part, on the choice of
an appropriate unit of comparison, as shown on the summary grid. We extracted
from each comparable two physical indicators and one economic indicator. The
physical indicators included sales price per revenue-generating unit (beds or
apartments) and sales price per square foot. The economic indicator used was
an effective gross income multiplier (EGIM). The following section presents
information on the sales analysis of comparables for an indicated value of
the subject property.
This appraiser interviewed Ms. Fern Chenault, Contract Coordinator in the
Department of Human Services Long Term Care Division concerning whether the
property owner could operate the subject facility and participate in the
state nursing home reimbursement program, in the event the current lessee
does not extend the lease. It was the opinion of Ms. Chenault that there are
no legal or regulatory requirements that would prohibit the property owner
from obtaining a new tenant or management company to operate the
87
<PAGE>
nursing home facility. The reader is cautioned that the appraiser is not an
expert on nursing home or medicaid matters and this critical assumption
should be confirmed by legal counsel. If this assumption is not accurate it
could have a dramatic impact on the property's value.
88
<PAGE>
Facilities Within State
<TABLE>
<CAPTION>
COMP OCCU- PRIV. SF/ SP/ SP/ CAPT
# STATE DATE BEDS AGE PANCY PAY BED SF BED GIM RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1340 TX Feb 93 302 15 .80 .90 407 112 45364 1.31 .139
1469 TX Apr 93 270 10 .94 .35 245 112 27500 1.20 .129
1470 TX Jan 93 195 31 .85 282 66 18500 1.23 .134
1493 TX Dec 93 101 .96 .27 182 110 20000 1.08 .259
1498 TX Apr 93 120 4 .80 .43 236 100 23500 1.40 .032
1555 TX Dec 94 120 7 .98 .37 291 175 50833 2.45 .139
1557 TX Dec 94 224 18 .90 .96 338 201 68969 2.54 .103
1600 TX Oct 94 342 .75 .15 220 94 20760 0.91 .105
1635 TX Jul 95 178 7 .98 .62 345 155 53371 1.72 .087
1636 TX Jan 95 120 7 1.00 .30 351 98 34333
1637 TX Jul 95 120 7 .90 .32 271 92 25000 1.03 .178
1638 TX Jan 94 192 6 .87 1.00 347 101 35000 1.76 .161
1639 TX Jul 94 120 8 .92 .49 309 113 35000 1.23 .090
1640 TX Jun 94 100 1 .95 287 81 23250
1641 TX Sep 94 240 8 .90 50000
1642 TX Apr 94 160 22 .98 .25 259 74 19063 0.91 .194
1644 TX May 94 140 8 .90 .22 262 109 28571 1.18 .188
1645 TX Dec 93 120 10 .84 249 104 25908 1.58 .164
1646 TX Dec 93 206 9 .80 277 136 37600
1647 TX Oct 93 107 25 .94 .30 207 124 25701 1.11 .161
1730 TX May 94 157 9 .76 387 50 19325
1731 TX Oct 95 60 12 .76 .95 349 103 35833 1.49 .189
1732 TX Dec 95 102 21 .75 196 90 17647
1733 TX Dec 95 169 25 .92 .26 237 117 27751 1.10 .127
1734 TX Jul 95 181 20 .91 .28 298 87 26000 1.35 .104
1735 TX Apr 96 178 20 .87 .15 365 73 26764 1.19 .077
1736 TX Jan 95 166 11 .95 246 123 30120
1737 TX Jan 95 280 66 .71 .02 314 57 17857
1779 TX Aug 96 112 31 .54 220 82 18000 0.94 .125
1780 TX Aug 96 111 35 .84 247 73 18000 0.74 .221
Average: 166 16 .86 .42 283 1.3 30150 1.33 .141
Total Facilities: 30
</TABLE>
89
<PAGE>
COMPARABLE #1779
<TABLE>
<CAPTION>
<S> <C>
Property: Oaks Health and Rehabilitation Center
Location: 510 North 3rd Street
Orange, TX
Seller: Continue, Inc.
Buyer: Orange, L.L.C.
Level of Care: NH
Date of Sale: AUG 96
Sale Price: $2016000
Terms: Cash to seller.
Building Notes: Wood and hadite block w/brick veneer and flat
built-up tar and gravel roof in average condition
Building Date: 1965
No. of Units: 112
Occupancy: 0.54
Building SF: 24654 SF
SF/Unit: 220 SF
Effective Gross Income: $2151192
Expenses: $1899502
Net Income: $251690
Price/SF: $82/SF
Price/Unit: $18000/Unit
EGIM: 0.94
Capt. Rate: 0.1250
</TABLE>
Comments: 2.5 acre site; Grantee entered into a triple net lease agreement
w/ Sunrise Healthcare: 10 yrs with 2-5 yr options; beginning
lease rate of $346,320/annum or $260/mo.
91
<PAGE>
COMPARABLE #1780
<TABLE>
<CAPTION>
<S> <C>
Property: Jones Health and Rehabilitation Center
Location: 3000 Cardinal Drive Orange, TX
Seller: Continue, Inc.
Buyer: Orange, L.L.C.
Level of Care: NH
Date of Sale: AUG 96
Sale Price: $1998000
Terms: Cash to seller.
Building Notes: Wood and hadite block w/brick veneer and flat
built-up tar and gravel roof in average condition.
Building Date: 1962
Year Renovated: 63
No. of Units: 111
Occupancy: 0.84
Building SF: 27385 SF
SF/Unit: 247 SF
Effective Gross Income: $2687722
Expenses: $2246935
Net Income: $440787
Price/SF: $73/SF
Price/Unit: $18000/Unit
EGIM: 0.74
Capt. Rate: 0.2210
</TABLE>
Comments: 3.1 acre site; Grantee entered into a triple net lease agree-
ment w/ Sunrise Healthcare: 10 yrs with 2-5 yr options; beginning
lease rate of $346,320/annum or $260/mo.
92
<PAGE>
COMPARABLE #1731
<TABLE>
<CAPTION>
<S> <C>
Property: Walden Oaks Health Care Center
Location: 5100 Newcome Drive
San Antonio, TX Seller: Retirement Services of America
Buyer: Liberty Place Associates
Level of Care: NH
Date of Sale: OCT 95
Sale Price: $2150000
Terms: Cash
Building Notes: Wood frame with stucco finish and slightly
pitched composition roof; well maintained.
Building Date: 1983
No. of Units: 60
Occupancy: 0.76
Building SF: 20950 SF
SF/Unit: 349 SF
Non-Medicaid Ratio: 0.95
Effective Gross Income: $1439506
Expenses: $1034256
Net Income: $405250
Price/SF: $103/SF
Price/Unit: $358331 Unit
EGIM: 1.49
Capt. Rate: 0.1890
</TABLE>
Comments Buyer purchased adjacent retirement center
from same seller in 1993.
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<PAGE>
COMPARABLE #1733
<TABLE>
<CAPTION>
<S> <C>
Property: Afton Oaks Nursing Center
Location: 7514 Kingsley Street
Houston, TX Seller: Williams Nursing Homes, Inc.
Buyer: Divisicare Leasing Corp.
Level of Care: NH
Date of Sale: DEC 95
Sale Price: $4690000
Terms: Cash
Building Notes: Good condition
Building Date: 1971
Year Renovated: 1986
No. of Units: 169
Occupancy: 0.92
Building SF: 40019 SF
SF/Unit: 237 SF
Non-Medicaid Ratio: 0.26
Effective Gross Income: $4251089
Expenses: $3653652
Net Income: $597437
Price/SF: $117/SF
Price/Unit: $27751/Unit
EGIM: 1.10
Capt. Rate: 0.1270
</TABLE>
Comments: Expenses include approx. 5% management fee.
94
<PAGE>
COMPARABLE #1635
<TABLE>
<CAPTION>
<S> <C>
Property: Huguley Nursing Center
Location: 301 Huguley Boulevard
Forth Worth, TX
Seller: SW Adventist Health Services
Buyer: Sunbelt Health Care Prop., Inc
Level of Care: SNF
Date of Sale: Jul 95
Sale Price: $9500000
Terms: 90% Cash; approximately 10% owner financed
terms unknown
Building Notes: Wood frame, brick veneer and stucco w/ flat
built-up roof good condition; no deferred
maintenance noted at time of sale.
Building Date: 1988
No. of Units: 178
Occupancy: 0.98
Building SF: 61390 SF
SF/Unit: 345 SF
Non-Medicaid Ratio: 0.62
Effective Gross Income: $5535000
Expenses: $4705000
Net Income: $830000
Price/SF: $155/SF
Price/Unit: $53371/Unit
EGIM: 1.72
Capt. Rate: 0.0870
</TABLE>
Comments: Located between the Huguley hospital and a retirement center;
patients drawn from both facilities; interior and exterior appeal
above average based on other TX facilities; Patient mix: PvtPay
50%, Medicare 12%, Medicaid 38%; 1994 Avg PvtPay approximately
$69ppd semi-pvt & $77ppd full private; 9.52 acres
95
<PAGE>
COMPARABLE #1734
<TABLE>
<CAPTION>
<S> <C>
Property: Granbury Care Center
Location: 301 Park Street, Granbury, TX
Seller: Granbury Nursing Home, Inc.
Buyer: Lynnhaven 1 - LLC
Level of Care: NH
Date of Sale: JUL 95
Sale Price: $4706000
Terms: Cash
Building Notes: Wood frame, brick veneer with slightly
pitched comp. roof; well maintained.
Building Date: 1976
Year Renovated: 1995
No. of Units: 181
Occupancy: 0.91
Building SF: 53887 SF
SF/Unit: 298 SF
Non-Medicaid Ratio: 0.28
Effective Gross Income: $3474852
Expenses: $2984941
Net Income: $489911
Price/SF: $87/SF
Price/Unit: $26000/Unit
EGIM: 1.35
Capt. Rate: 0.1040
</TABLE>
Comments: Expenses include 5% management fee; Originally 101 beds; 20 added
in 1983 and 60 in 1988.
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<PAGE>
SALES COMPARISON SUMMARY GRID
<TABLE>
<CAPTION>
COMP# Subject # 1779 #1780 1731 # 1733 # 1635 # 1734
NAME Hearthstone of Oaks Jones Walden Afton Huguley Granbury
Round Rock Health Health Oaks Oaks Nursing Care
City Round Rock Orange Orange San Anton. Houston Ft Wprtj Granbury
State TX TX TX TX TX TX TX
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY DATA
Year Built 1988 1965 1962,63 1983 1971 1988 1976
#Beds 120 112 111 60 169 178 181
GBA (sf) 47,000 24654 27385 20950 40019 61390 53887
SF Per Bed/Apt 392 220 247 349 237 345 298
NOI $804,500 $251,689 $440,795 $405,250 $597,437 $830,000 $489,911
Expense % 83.60% 88% 83% 72% 86% 85% 86%
SALE DATA
Date of Sale --- Aug '96 Aug '96 Oct '95 Dec '95 Jul '95 Jul '95
Sale Price --- $2,016,000 $1,998,000 $2,150,000 $4,690,000 $9,500,000 $4,706,000
Price Per Bed/Apt --- $18,000 $18,000 $35,833 $27,751 $53,371 $26,000
Price / SF --- $81.77 $72.96 $102.63 $117.19 $154.75 $87.33
EGIM --- 0.94 0.74 1.49 1.10 1.72 1.35
OAR --- 12.48% 22.06% 18.85% 12.74% 8.74% 10.41%
ADJUSTMENTS
NOI Per Bed/Apt $6,704 $2,247 $3,971 $6,754 $3,535 $4,663 $2,707
Adjustment --- 2.98 1.69 0.99 1.90 1.44 2.48
Adjusted $ / Unit --- $53,700 $30,388 $35,568 $52,629 $76,734 $64,399
Average - Mean $52,236
NOI / SF $17.12 $10.21 $16.10 $19.34 $14.93 $13.52 $9.09
Adjustment --- 1.68 1.06 0.88 1.15 1.27 1.88
Adjusted $ / Unit --- $137.11 $77.59 $90.81 $134.37 $195.92 $164.42
Average - Mean $133
EGIM --- 0.94 0.74 1.49 1.10 1.72 1.35
Adjustment --- 0.27 -0.05 -0.71 0.15 0.09 0.15
Adjusted $ / Unit --- 1.21 0.69 0.78 1.25 1.81 1.50
Average - Mean 1.20
</TABLE>
<PAGE>
ADJUSTMENTS TO COMPARABLE SALES
Since investment grade properties are bought for their income producing
capabilities, investors will pay more for a property with a higher income. To
adjust for this economic difference in the sales comparables, we used a net
income differential multiplier, which recognizes any percentage change
between the comparables' and the subject's net income on a per bed or per
square foot basis. For example, the subject's net income on a per bed basis
was 298% of Comparable Number # 1779's net operating income. Accordingly, an
economic multiplier of 2.98 was applied to that comparable's sales indicator.
This analysis was used for all of the comparables, on both a per square foot
basis and per revenue generating unit (bed or apartment) basis. Since the
economics of a property are a direct reflection of the physical features,
amenities, and location, no further adjustments for these items was
considered necessary.
SALES PRICE PER BED
HealthCare Property Appraisers maintains a nationwide data bank on long term
health care facilities, which currently includes sales of over 1,800
facilities. Facilities which are of good quality but predominantly medicaid
funded are selling on a nationwide basis for approximately $25,000 to $50,000
per bed. Higher quality homes, which offer better services, amenities, and
therapy areas, or homes with unusual profit potential, generally sell for
$45,000 to $75,000 per bed.
The comparables selected for close analysis have an unadjusted sales price
per bed ranging from $18,000 to $53,371, with an average of $29,826. Factors
which affect the sales price per bed include unit mix, number of residents
per room, project amenities, and average area per bed. A property which has a
larger average area per bed will typically sell at a higher unit price.
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After adjusting the comparables to the subject using the net income
differential multiplier, the sales price per bed formed a range of $30,388 to
$76,734, with an average of $52,236. Giving further consideration to
subject's average bed area and other physical characteristics, the value
range on a per bed basis is estimated at $51,000 to $53,000. Applying this
range to the subject's 120 units indicates a value range of $6,120,000 to
$6,360,000.
<TABLE>
<CAPTION>
#BEDS X SALE PRICE PER BED = INDICATED VALUE
- ----- ------------------ ---------------
<S> <C> <C> <C> <C>
120 units X $51,000to $53,000 = $6,120,000 to $6,360,000
</TABLE>
SALES PRICE PER SQUARE FOOT
The unadjusted comparables formed a sales price range from $73 to $155 per
square foot, with an average of $103. An inverse relationship usually exists
between the sales price per square foot and the average area per bed,
assuming all amenities and services are similar (i.e., a smaller unit usually
generates more income on a per square foot basis than a larger unit). This
relationship is reflective of staffing costs because per resident day costs
are typically not directly influenced by unit size. It is also reflective of
the fixed costs of furniture, fixtures, and equipment, which are spread over
the total square footage. After economic adjustments, the comparables formed
a sales price per square foot range of $78 to $196, with an average of $133.
Considering the subject's functional utility, area per resident, quality and
condition, we believe a value range of $130 to $135 per square foot to be
indicated. Applying the unit values to the subject's 47,000 Sq Ft of gross
building area indicates a value range of $6,110,000 to $6,345,000.
<TABLE>
<CAPTION>
BUILDING SIZE X SALE PRICE PER SF = INDICATED VALUE
- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
47,000 Sq Ft X $130 to $135 = $6,110,000 to $6,345,000
</TABLE>
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<PAGE>
EFFECTIVE GROSS INCOME MULTIPLIER
The most common method of developing an Income Multiplier is derivation from
sales data. In the case of a Special Use property with highly variable
income and expense characteristics, however, this can be misleading. It is
also possible to develop an Income Multiplier by mathematical calculation
using expense and capitalization rate data: the Profit Ratio (Net Income as a
percentage of Effective Gross Income) divided by the Capitalization Rate
equals the Income Multiplier.
1-EXPENSERATIO
-------------- = INCOMEMULTIPLIER
CAPT.RATE
In the Income Approach, we estimated that the subject property could
reasonably be expected to experience an expense ratio of 83.6% in a
stabilized year. In our Capitalization Analysis, we estimated the appropriate
capitalization rate in today's market to be 14%. These figures produce an
Income Multiplier as follows:
100% -83.6%
----------- = 1. 17X
14%
The effective gross income multiplier (EGIM) is an extracted indication of
value based upon the property's effective gross income. Key items affecting
the EGIM include the expense ratio percentage, census mix, occupancy and rate
schedule. Typically, the expense ratio percentage and EGIM have an inverse
relationship (i.e., a higher expense ratio percentage generates a lower EGIM).
The appraiser carefully evaluated the comparables and eliminated those on the
extreme end of the range from consideration. The unadjusted comparables form
a wide range of EGIMs, between 0.74 to 1.72, with an average of 1.22. The
subject's expense ratio percentage is 83.6%, which falls near the middle of
the range of the comparables. Accordingly, the
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<PAGE>
indicated EGIM for the subject property is near the middle of the range. To
help quantify the EGIM mathematically, we calculated the percentage change
between the highest and lowest EGIM divided by the high and low ends of the
expense percentage. Using this methodology, a percentage change of 0.0610
is calculated for each change of 1% between the comparables and the
subject's expense percentage, as shown below.
DELTAY = 1.72-0.74 = 0.98 = 6.10 + 100 = 0.0610
------ --------- ---- ---- ------
DELTAX .880-.720 .16 100% 1%
After adjustments, the EGIMs formed a tighter range of 0. 69 to 1.81, with
an average of 1.20. After considering the EGIMs indicated by: (a) the
comparable data and (b) the subject's own expense ratio and capitalization
rate analysis, we believe the indicated EGIM range for the subject property
is 1.18 to 1.22. Applying these multipliers to the subject's effective
gross income of $4,919,000 yields a value range of $5,804,420 to $6,001,180.
EFFECTIVE GROSS INCOME = INDICATED
INCOME X MULTIPLIER = VALUE
-------------- ---------- --------
$4,919,000 X 1.18 to 1.22 = $5,804,420 to $6,001,180
RECONCILIATION OF SALES COMPARISON INDICATORS
The value ranges developed by the indicators are summarized below:
<TABLE>
<CAPTION>
INDICATORS OF VALUE VALUE RANGE
<S> <C>
SALES PRICE PER BED $6,120,000 to $6,360,000
SALES PRICE PER SQUARE FOOT $6,110,000 to $6,345,000
EFFECTIVE GROSS INCOME MULTIPLIER $5,804,420 to $6,001,180
</TABLE>
The effective gross income multiplier is usually a more reliable indicator of
the subject's market value because it automatically adjusts for any
differences between the comparables caused by rate fluctuations or occupancy
and self pay ratio differences. The sales price per
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<PAGE>
bed tends to be a good indicator if the comparables have similar rates, per
patient day occupancy, and self pay ratios. The sales price per square foot
can be a good indicator, if all the comparables happen to be similar to size.
The flaws or deficiencies of the physical indicators have been tempered with
economic adjustment. Accordingly, we believe all indicators provided a
meaningful, but limited, indication of value. Giving consideration to current
market conditions and the subject's physical and economic characteristics,
the sales comparison approach is best represented by a narrower range of
$5,800,000to $6,250,000.
The usefulness of the Sales Comparison Approach in providing a value range is
limited by differences in location, services and many other variables. A
precise comparison between the comparable sales and the subject property is
extremely difficult. We made economic adjustments to lessen these differences
somewhat. Moreover, there is no accurate way to determine whether the sales
prices actually paid represent fair market values, due to the unknown
variables of buyers' and sellers' exact motivations or any special conditions
that may have influenced the sales. We believe the sales comparison approach
has limited application for indicating an exact value estimate. Accordingly,
the reconciled range is intended primarily to test the reasonableness of the
Cost and Income Capitalization Approaches.
INDICATED MARKET VALUE $5,800,000to $6,250,000
105
<PAGE>
STABILIZED INCOME AND EXPENSES
(Appraiser's Estimate)
[GRAPH]
<PAGE>
SALES COMPARABLES
[MAP]
<PAGE>
ADJUSTED SALES COMPARISONS
SALE PRICE PER BED
[GRAPH]
<PAGE>
ADJUSTED SALES COMPARISONS
SALE PRICE PER SQUARE FOOT
[GRAPH]
<PAGE>
ADJUSTED SALES COMPARISONS
GROSS INCOME MULTIPLIER
[GRAPH]
<PAGE>
RECONCILIATION AND FINAL VALUE ESTIMATE
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------
INDICATED VALUE BY
COST APPROACH $6,360,000
INDICATED VALUE BY
INCOME APPROACH $5,750,000
INDICATED VALUE BY
SALES COMPARISON APPROACH $5,800,000
TO $6,250,000
</TABLE>
To estimate the final Market Value for The Hearthstone of Round
Rock, it is necessary to reconsider all three approaches, correlate the data,
and determine what emphasis to give each approach.
The COST APPROACH was based upon a component cost breakdown prepared by a
computer utilizing the Marshall and Swift Valuation Service Cost Data Bank.
This nationally recognized building costs service prepared a very accurate
estimate of replacement costs for subject's improvements. From replacement
costs (direct and indirect) was deducted depreciation based upon observation
and age of the improvements and sales data as well as consideration of
Functional and External Obsolescence. Subject's 4.58 sf acres of land were
valued at $109,170 per acre or $500,000. This approach indicated a market
value for the real estate and the Furniture, Fixtures, and Equipment in The
Hearthstone of Round Rock of $6,360,000, which includes an estimated $399,000
for FF&E.
The Principle of Substitution does not recognize the fact that it is very
difficult to take a long-term care project from the initial construction
stages through all of the regulatory agencies, obtain a Certificate of Need
(CON) from the state, operate the facility successfully, and generate the
reputation for excellence necessary to attract a strong private pay census.
The application and approval of the Certificate of Need necessary to operate
will quite often take as long as two years and is by no means a guarantee of
success. Once a CON has been
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<PAGE>
obtained, it is sometimes sold prior to construction. Sales prices of $50,000
to $500,000 for an approved CON have been reported. The business expertise
necessary to deal with the Medicaid and Medicare authorities as well as the
multitude of governmental agencies regulating and supervising a nursing home
also requires considerable specialized knowledge. None of this expertise was
reflected by the Cost Approach to Value. Therefore, the least emphasis was
placed upon the Cost Approach to Value in this analysis.
Under the INCOME APPROACH to value, the appraiser analyzed the subject
property from the standpoint of a potential investor who would be most
interested in its income stream. After reviewing the owner's operating
statements for the subject property as well as other comparable properties,
the appraiser believes the subject's estimated income stream is a reasonable
expectation. Our stabilized income stream was based upon an anticipated Gross
Income of $6,192,683,805, Occupancy of 95. 0 %,a non-government funded ratio
of 6660 %, and Expenses of $4,114,757 (or 83.6 % of Effective Gross Income).
The projected Net Income to Real Estate of $804,569 was capitalized at
14.00%. Based upon a consideration of current financing, available
alternatives, and equity demands, the Market Value of The Hearthstone of
Round Rock was indicated by the Income Approach to be $5,750,000, which
includes $399,000 for Furniture, Fixtures and Equipment.
Under the SALES COMPARISON APPROACH, the appraiser reviewed a considerable
number of sales of Nursing Homes. Analysis of this data after adjustments for
property differences indicated a Market Value for The Hearthstone of Round
Rock of $5,800,000to $6,250,000, based on a Gross Income Multiplier of 1. 18
to 1.22 and $51,000 to $53,000 per unit. The $5,800,000 to $6,250,000 value
includes Furniture, Fixtures and Equipment estimated at $399,000.
We believe equal emphasis can be placed on the Sales Comparison and Income
Capitalization Appraoches to Value. Based on the enclosed data and analyses,
I believe the
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<PAGE>
Subject Property described herein has the following estimated Final Market
Value as of March 20, 1997 at Stabilized Census, Occupancy and Rates:
FINAL MARKET VALUE OF SUBJECT PROPERTY: $5,900,000
MARKETING PERIOD
Due to the fairly strong market and demand for Nursing Homes, The Hearthstone
of Round Rock should be readily saleable. Although the market is not as
strong today as it was a few years ago, there are a number of buyers seeking
for this type property. In fact, the market for this type property is strong
enough that they generally are not listed with real estate brokers, but are
usually sold "off the market." The appraiser is familiar with the sale of a
number of Nursing Homes that have taken place over the past year. The average
sales time for those properties was approximately six months. If the subject
property were fairly priced and adequately marketed, we believe it could be
sold at our appraised value within approximately twelve months.
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<PAGE>
ALLOCATION OF VALUE BETWEEN REAL PROPERTY, PERSONAL PROPERTY
AND BUSINESS ENTERPRISE
The total value of a real estate property frequently consists of only land
and improvements. However, in the case of a "Going Concern" property in which
a business is operated, such as a Nursing Home, the total value may also
contain personal property and/or intangible assets (i.e., "Business Value")
consisting of business enterprise, goodwill, and going-concern value). Income
generated from the property is derived from tangible real and personal
property and intangible assets.
Both the real estate and the business enterprise are required to generate
income. To estimate the value of the real estate, the appraiser must divide
the net operating income between the two components of real estate and
business enterprise. In the case of a Nursing Home, the intangible assets
(i.e., in-place management, staff, operations, stabilized occupancy, good
will, percentage of nonsubsidized residents and general reputation of the
property) are difficult to relocate. Consequently, the value attributable to
them is considered to be tied to the real estate.
The operation of a Nursing Home is a highly specialized business enterprise,
requiring extensive knowledge of national and state health care systems, over
and above a knowledge of health care and the business acumen required to
operate any business. This is evidenced by the fact that the State Department
of Public Health requires very specific licensing of the professionals and
real estate that provide these services.
Management of this specialized business can be contracted out to a
professional management firm for a specified fee arrangement (typically 3% to
6% of effective gross income). The management firm will provide the business
acumen to operate the business enterprise. However, the management company,
while operating this business on behalf of an owner, will not assume the
ownership risk of that business. Any liability risk, entrepreneurship risk,
and/or losses to be covered are the responsibility of the owner of the
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<PAGE>
business enterprise. Accordingly, the real estate interest and the operating
business enterprise interest are two separate components that are frequently
bought, sold, and leased independently from each other.
To study the value of the real estate separate from the value of the business
enterprise, the appraiser first examined leases of various facilities. Our
study of Nursing Home leases did not develop a consistent pattern of rental
rates per bed or any other common denominator that could be applied to the
subject appraisal assignment. The lease rate paid on a Nursing Home is
affected by a large number of variables (e.g., the funding program for
government subsidized residents, accounting methods used, occupancy and
census ratio) in addition to the usual array of variables found in any real
estate. These factors vary to such an extent that analysis of other leases in
comparison to the subject property did not develop any meaningful or helpful
data.
Analysis of leases on a specific subject property may also be less than
helpful in estimating the value of the fee simple estate. An old lease may
have a contract rental different from the market rental rate, developing some
leasehold estate value. The leased fee value and the leasehold value can be
ascertained by studying the fair market rental or economic rental of the
subject property. However, it is not necessary to consider an old lease to
develop a value for the fee simple estate.
The appraiser considered several methods for studying the Business Value by
investigating the relationship between: (a) the COST OF TANGIBLE ASSETS
versus the total VALUE OF ALL ASSETS (b) capitalization rates of typical
investment properties versus Going Concern properties and (c) the debt
coverage ratio required for Going Concern type real property.
COST ANALYSIS
Under the Cost Approach to Value, we estimated the replacement cost of all
tangible components, such as land and direct and indirect construction costs.
The difference between
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<PAGE>
the reproduction costs of the tangible assets and the Final Market Value of
the total subject property was considered to be an indication of Business
Value.
Final Market Value $5,900,000
Less Cost Approach $6,360,000
----------
Indicated Business Value ($ 460,000)
CAPITALIZATION RATE ANALYSIS
Properties which include intangibles like Going Concern Value, normally have
a higher Overall Capitalization Rate than properties without any Business
Value. The higher Overall Capitalization Rate recognizes, in part, the
greater risk of owning a business versus owning real estate or other tangible
assets. Comparison of the subject's Capitalization Rate to the Capitalization
Rate for properties not having any Business Value (but having similar age,
construction, location and value) indicates the portion of the total value
attributable to the business enterprise. The higher Capitalization Rate of
Nursing Homes includes the return necessary on the real estate, the business
portion, and furniture, fixtures and equipment. In our subject study we
developed an Overall Capitalization Rate of 14.00% for the subject property.
A fair market Capitalization Rate for a comparable property without any
Business Value is considered to be 9.00%. Dividing the real estate
Capitalization Rate of 9.00% by subject's Capitalization Rate of 14.00%
indicates the portion of subject's value representing tangible real property
and business value to be:
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<PAGE>
REAL PROPERTY SUBJECT % TANGIBLE
CAPT. RATE DIVIDED BY CAPT.RATE = REAL ESTATE
--------- --------- -----------
9.00% DIVIDED BY 14.00% = 64.0% (R)
FINAL % TANGIBLE VALUE OF
MARKET VALUE X REAL ESTATE = REAL PROPERTY
------------ ----------- -------------
$5,900,000 X 64.0% (R) = $3,776,000
Final Market Value (Total Property) $5,900,000
Less Value Of Real Property $3,776,000
----------
Business Value and Furniture, Fixtures And Equipment $2,124,000
Less Furniture, Fixtures And Equipment $ 399,000
----------
Indicated Business Value $1,725,000
DEBT COVERAGE RATIO ANALYSIS
An indication of the subject property's Business Value can be developed by
separating net income into real estate and business components. (Personal
property is handled in our income model with a replacement reserve.)
Investors in Nursing Home real estate and Nursing Home business enterprises
have specific income rate of return and "debt coverage" requirements. The
relationship between the "debt coverage" requirements of a real estate
investor and the requirements of a business enterprise investor can be
ascertained mathematically.
112
<PAGE>
REAL ESTATE INVESTOR
There are several investors for real estate entities that do not contain the
business enterprise component. Many investors want to be passive real estate
investors, without the management problems or risk associated with operating
a Nursing Home. The typical investor is a health-care oriented, real estate
investment trust (REIT) who purchases 100% of a Nursing Home's real estate.
The appraiser surveyed acquisition officers of several REITs to ascertain
their rate of return and "debt coverage" (i.e., rent coverage) requirements:
- Omega Healthcare is currently seeking 11.8% on a variable return and
underwrites debt coverage with a minimum of 1.25X.
- Healthcare REIT's current yield requirement is based on 500 points
over the 10 year T bill rate. Today, this is a total return of 11.84%.
Their minimum debt coverage ratio is 1.25X.
- Health Equity Properties' current return requirement . is 12 % to 12.5
%. Their minimum debt coverage ratio is 1.25X to 1.4X, depending on
the credit.
From the above data, it appears that the real estate in a Nursing Home like
the subject property can be sold and leased back, giving a return to the
passive real estate investor of approximately 11. 8 % to 12.5 %, or an
average (mode) of 12 %. The most common " debt coverage" factor is 1.20X to
1.50X, or an average of 1.35X.
BUSINESS ENTERPRISE INVESTORS
Many Nursing Home operators and individual investors will purchase the
business enterprise operating within a Nursing Home property. Consequently,
the real estate in a Nursing Home is frequently sold to a real estate
investor, such as a REIT. The new real estate owner will then lease it to a
management company who will own and operate the business enterprise.
Management companies and individual investors try to group their property
operations within a specific state for obvious reasons; however, they will
usually consider an individual acquisition within any state that has a viable
government assistance program. We surveyed
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<PAGE>
companies and individuals who invest in Nursing Home businesses to determine
their requirements for investing in a Nursing Home business enterprise. The
results of this survey include:
- Health Prime, Inc., an active purchaser of Nursing Home going concerns
and business enterprises, reported they would acquire a health care
business (without the underlying real estate) if the investment would
provide a return of 15 % to 17 %. This assumes they had no other
facilities within the area, were not attempting to fill out their
management team, and had no other ulterior motives.
- Life Care Affiliates reported that their investors require a 15 %
return on cash invested, assuming the real estate is owned by another
entity and the investors are strictly buying the business operation
with no interest in the underlying real or personal property assets.
- Regency Health Care reported that they would be willing to consider
purchasing a leasehold estate or the business interest in a going
concern property, assuming a cash-on-cash return of 15 % to 18 %.
There are many potential purchasers actively seeking the acquisition of
Nursing Homes either as "going concerns" (i.e., containing both real estate
and the business enterprise) or as the operating business enterprise only. As
evident from the above, the business enterprise operating within the subject
real estate can probably be sold to an investor who would require a 15 %
cash-on-cash return after satisfy all requirements of real estate, personal
property and management.
DISTRIBUTION OF INCOME BETWEEN REAL ESTATE AND BUSINESS ENTERPRISE
The subject property's Economic Rental is the amount of net operating income
available to satisfy a potential purchaser of the real estate and his
requirements for rate of return and "debt coverage. " Conversely, the income
available to an investor in the business enterprise is the income available
after satisfying the priority claim on income by ownership of the real and
personal property. The division of income (and value) between the various
components of the total going concern entity (i.e., real property, personal
property and business enterprise) can be developed by studying their
mathematical relationship.
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<PAGE>
Debt coverage ratios for this type property range from 1.1OX to 3.OOX,
depending on the quality of the property and dependability of its income
stream. We believe the subject ranks average in credit risk and estimate a
debt coverage ratio of 1.35X to be appropriate.
When a potential purchaser of real estate requires a "debt coverage" factor
of 1.35, he is requiring that a minimum of 26% of the net operating income be
available to compensate the business enterprise owner. Without that minimum
return, no one will provide the requirements of business enterprise ownership
for this facility. This is demonstrated mathematically as follows:
DEBT MAXIMUM INCOME
FACILITY'S NET COVERAGE AVAILABLE TO
OPERATING INCOME RATIO REAL
----------------- DIVIDED BY -------- = ESTATE OWNER
------------
100% DIVIDED BY 1.35X = 74%
INCOME
ALLOWABLE
TO REAL INCOME REQUIRED
FACILITY'S ESTATE FOR BUSINESS
OPERATING INCOME - OWNER = OWNER
---------------- -------- ------------
100% - 74% = 26%
This analysis of the capital requirements of purchasers of Nursing Home real
estate demonstrates that a minimum of 26% of the net operating income must be
allocated to the business enterprise component. Conversely, a maximum of 74%
of the property's net operating income is available for economic rental to
the owner of the underlying real estate. Accordingly, the appraiser allocated
26% of net operating income to provide the necessary compensation for the
required business enterprise ownership.
115
<PAGE>
DISTRIBUTION OF VALUE BETWEEN REAL, PERSONAL AND BUSINESS PROPERTY
The personal property component has already been estimated and its respective
capital requirement previously deducted. The remaining net income can be
distributed between real property and business enterprise as shown above. By
studying the capital return requirements of real property versus a business
enterprise, a mathematical relationship between the value of those two
components can be established.
Ownership of the real estate component requires a 10% return, according to
the typical REIT investors in real estate. Ownership of the business
enterprise component requires a 15% return on investment, according to
typical purchasers of business property. A distribution of income and related
values for the two property components is shown below. Assuming a $100,000
net operating income, and the required rate of return and debt coverage
factors previously discussed, the "Going Concern" value of a Nursing Home
would be distributed between real estate and business enterprise as follows:
<TABLE>
<CAPTION>
Distribution of Income
Between Real Estate Distribution of Percentage Distribution
Ownership & Business Required Rate Value Between of Value Between Real
Enterprise Ownership + of Return = Components Estate & Business
(Assumes 1.35X Debt
Coverage & $100K NOI)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real Estate = + 10% = $740,000 81%
$74,000( 74%)
Business Enterprise = + 15% = $173,333 19%
$ 26,000( 26%)
Total Property =
$100,000 (100%) $913,333 100%
</TABLE>
Indicated Business Value: $5,900,OOO X 19% = $1,121,000
116
<PAGE>
SUMMARY
The two methods of estimating Business Value have indicated values as follows:
Cost Analysis ($460,000)
Capitalization Rate Analysis $1,725,000
Debt Coverage Ratio Analysis $1,121,000
After considering all methods, it was our opinion that the subject property's
final Market Value of $5,900,000 included a Business Value of:
BUSINESS VALUE $1,000,000
117
<PAGE>
SUMMARY OF VALUES
It was our opinion that the Subject Property described herein had the
following Market Value, as of March 20, 1997, at current occupancy and in its
present physical condition, subject to the Underlying Assumptions and
Limiting Conditions contained in this report:
Land $ 500,000
Building Improvements $4,001,000
----------
Total Real Estate $4,501,000
Personal Property $ 399,000
Business Value $1,000,000
----------
Total Property $5,900,000
SPECIAL CONDITION
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have
a dramatic impact on the property's value.
118
<PAGE>
UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS
1. The Appraiser assumes no responsibility for legal matters nor renders an
opinion of title. Good title to The Hearthstone of Round Rock is assumed.
2. The commissioning and/or possession of this report does not carry with it
the right of publication, nor does it oblige the appraiser to appear in
court, commission, or in any other capacity without prior arrangements and
additional compensation.
This appraisal report has been prepared for the exclusive benefit of its
intended user, Capitol Senior Living, Inc.. It may not be used or relied
upon by any other party. Any party who uses or relies upon any information
in this report without the preparer's written consent is an unintended
user, and does so at his own risk.
3. The separate values for land, equipment, business value and/or buildings
must not be used in reference to any other appraisal and are invalid if so
used. The distribution of total value applies only to existing utilization.
4. The factual information in this report--furnished by others or taken from
public records--is believed to be reliable, but no responsibility is
assumed for its accuracy. We do not guarantee the correctness of estimates,
opinions, sketches and other exhibits.
5. One (or more) of the signatories of this appraisal report is a Member of
the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each appraisal
report signed by such Member. Therefore, except as hereinafter provided,
the party for whom this appraisal report was prepared may distribute copies
of this appraisal report, in its entirety, to such third parties as may be
selected by the party for whom this appraisal report was prepared. However,
selected portions of this appraisal report shall not be given to third
parties without prior written consent of the signatories of this appraisal
report. Further, neither all nor any part of this appraisal report shall be
disseminated to the general public by use of advertising, public relations,
news, sales, or other media for public communication without the prior
written consent of the signatories of this appraisal report.
6. The soil and subsoil, unless otherwise detailed, appear firm and solid. No
engineering study has been made and the appraiser is not responsible for
any adverse condition that may be found in these matters.
7. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters (including but
not limited to termites, dry rot, wet rot, and other wood-destroying
organisms) are not present or have been detected and properly corrected.
119
<PAGE>
8. Any description of improvements is intended to be general, for descriptive
purposes only, and based primarily upon observation. All foundations and
mechanical, plumbing, electrical, heating, ventilation, air conditioning,
and roof systems are assumed to be adequate, in good working order and
capable of performing the function for which they were designed. The
appraiser has no expertise in this area and cannot certify the condition or
functional adequacy of these items. A qualified inspector should be
utilized for that purpose. The appraiser assumes no responsibility for any
hidden or unapparent conditions of the property, soil, subsoil, or
structures that would affect its value.
9. Any site or building improvement, whether existing or proposed, is assumed
by the appraiser to comply with all applicable building codes, zoning and
environmental regulations for this jurisdiction and is assumed to be a
legal structure. The appraiser has not verified the accuracy of this
assumption. We recommend an attorney be retained for verification purposes.
10. The existence (if any) of potentially hazardous material (such as, but not
limited to, formaldehyde foam insulation, radon, asbestos or toxic waste)
was not considered. The appraiser is not qualified to detect such
substances and we urge the client to retain an expert in this field.
11. The appraiser has not researched the subject property for liens nor
reviewed any mortgage documents. Our analysis is based upon the assumption
that any mortgages encumbering subject are of such amount, rates, and terms
as to be considered typical in the market place and would neither
contribute to nor detract from the property's market value. The property is
therefore appraised as though it were free and clear of any debt
encumbrances or subject to financing which is generally acceptable in the
market.
12. The value estimate and estimated income and expenses assume responsible
ownership and typical, competent management.
13. Gross area of land and improvements is estimated by methods and from
sources considered reliable and the data is believed to be accurate.
However, no responsibility is assumed for its accuracy and it is
recommended that a licensed surveyor be employed for that purpose. The
appraiser's Final Market Value estimate is primarily predicated upon the
economic viability of the project itself and its projected income stream.
Any minor difference in the subject's actual land or improvement size would
have little or no effect on its true market value. Any statement by the
appraiser contained herein as to the size of land or building improvements
is for descriptive purposes and is a statement of the appraiser's opinion
as to the property's functional utility and not a statement of fact as to
its physical size.
120
<PAGE>
14. The subject property is subject to licensing and certification by several
regulatory agencies. Our value estimate is predicated upon the subject
property maintaining its Certificate Of Need and/or License and
Certification to Operate as a Nursing Home. The loss of either one of those
items could affect the value of the subject property.
15. In the event that any residents are funded by public or third party payors,
we have assumed that all payments will be made promptly.
16. The Market Value estimate is predicated upon an assumption of stabilized
occupancy, rates and census.
17. The appraiser's projections of income and expenses are not predictions of
the future. They are our best estimates of current market thinking about
what future income and expenses might be. We make no warranty or
representations that these projections will materialize.
18. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale. There may have
been transactions of this type, but the relevant details were not
available. While any present or past listing, option or sales data on the
subject available to the appraiser have been considered in this analysis,
the Final Market Value was estimated as though subject were available for
sale on the open market.
19. To the best of the Appraiser's knowledge, this report conforms to the
current requirements prescribed by the Uniform Standards of Professional
Appraisal Practice of the Appraisal Standards Board of the Appraisal
Foundation as required by the Financial Institutions Reform, Recovery and
Enforcement Act (FIRREA) and the Appraisal Institute.
20. The Americans with Disabilities Act "ADA" became effective January 26,
1992. We have 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 we have no direct evidence
relating to this issue, I (we) did not consider possible noncompliance with
the requirements of ADA in estimating the value of the property. Based on
our personal inspection, we are not aware of any irregular or apparent
non-compliant handicap items.
121
<PAGE>
21. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract or
lease and that the property would be available for negotiation of a new
lease or management contract at this time.
SPECIAL CONDITION
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home, even if the current leassee does not extend their lease. The
reader is cautioned that the appraiser is not an expert on nursing home or
medicaid legal matters and this critical assumption should be confirmed by legal
counsel. If this assumption is not accurate it could have a dramatic impact on
the property's value.
122
<PAGE>
APRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- The statements of fact contained in this appraisal report are true and
correct.
- The reported appraisal 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 personal interest or bias with respect to the
parties involved.
- My compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the amount
of the value estimate, the attainment of a stipulated result, or the
occurrence of a subsequent event.
- My analyses, opinions and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Standards Board of the Appraisal
Foundation as required by the Financial Institutions Reform, Recovery and
Enforcement Act (FIRREA) and the Code of Professional Ethics and Standards
of Professional Appraisal Practice of the Appraisal Institute.
- As of the date of this report, J. Michael Burroughs, MAI, SRA has completed
the requirements of the continuing education program 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.
- The subject property was inspected by Franklin M. Ramsey and was not
inspected by J. Michael Burroughs.
- Eve L. Burroughs and Bonny J. Sinclair provided valuable assistance in
compiling data for this report. No one else provided significant
professional assistance to the undersigned. The appraiser gratefully
acknowledges the contribution of data from several sources.
- The appraiser has complied with the USPAP competency provision.
- The USPAP departure provision does not apply.
123
<PAGE>
- This appraisal assignment was not based on a requested minimum or maximum
valuation, a specific valuation, or the approval of a loan.
I do not authorize the out-of-context quoting from or partial reprinting of
this appraisal report. Further, neither all nor any part of this appraisal
report shall be disseminated to the general public by the use of media for
public communication without the prior written consent of the appraiser(s)
signing this appraisal report.
/s/ J. MICHAEL BURROUGHS
- -------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
124
<PAGE>
REFERENCES
The appraiser would like to acknowledge the following resources:
1. Laventhol & Horwath, Retirement Housing Industry 1989 (Laventhol &
Horwath, Philadelphia, PA 1990).
2. Laventhol & Horwath, Nursing Home Industry 1988 (Laventhol & Horwath,
Philadelphia, PA 1989).
3. Marshall and Swift Computerized Services, Los Angeles, CA.
4. National Planning Data Corporation, Ithaca, NY.
5. SMG Marketing Group, Inc. -COPYRIGHT-1993.
6. Ernst & Young and American Association of Homes for the Aging Study.
Continuing Care Retirement Communities: An Industry in Action, Analysis and
Developing Trends, 1989.
7. THE DICTIONARY OF REAL ESTATE APPRAISAL, American Institute of Real Estate
Appraisers, second edition.
8. THE APPRAISAL OF REAL ESTATE, ninth edition.
9. THE GUIDE TO THE NURSING HOME INDUSTRY, 1993. A joint publication of Health
Care Investment Analysts, Inc. and Arthur Andersen & Co.
10. U. S. Bureau of Census.
11. MARION MERRELL DOW MANAGED CARE DIGEST LONG TERM CARE EDITION 1993. Marion
Merrell Dow, Inc.
12. AN OVERVIEW OF THE ASSISTED LIVING INDUSTRY, October 1993, Coopers &
Lybrand and The Assisted Living Facilities Association of America.
125
<PAGE>
QUALIFICATIONS OF APPRAISER
J. MICHAEL BURROUGHS, MAI & SRA
POST OFFICE BOX 2227
HWY 64 EAST, LAUREL TERRACE, 2ND FLOOR
CASHIERS, NORTH CAROLINA 28717
BUSINESS EXPERIENCE
J. Michael Burroughs has been engaged in the preparation of appraisals,
feasibility studies, economic analyses, and general consulting on all types
of properties for various clients. In the mid-1970s, Mr. Burroughs began
specializing in the appraisal of long-term health care facilities and housing
for the elderly. Since 1985, Mr. Burroughs has worked exclusively with
long-term health care and housing for the elderly in the areas of appraising,
brokerage, and finance.
Assignments have been in more than 44 of the 50 United States. Current
assignments include all types of healthcare and senior housing real estate:
Nursing Homes
Continuing Care Retirement Communities (Both Rental and Endowment)
Assisted Living Facilities
Acute Care Hospitals
Psychiatric Hospitals
Congregate Living Facilities
Properties appraised total approximately 3,000 in number and exceed $7
Billion in appraised value. Mr. Burroughs has also been active as a general
partner in five successful apartment to condominium conversion projects and
is actively engaged in the buying and selling of investment real estate for
his own account and for clients. He is a nationally recognized convention
speaker and published author on healthcare appraising and financing.
EMPLOYMENT
HealthCare Property Appraisers of America, Inc. - President
June, 1973 to Present
Atlantic Mortgage and Investment Company - First Vice President
January, 1972 to July, 1973, Winston-Salem, NC
Wachovia Mortgage Company -- Asst. VP and Manager of the Charlotte Income
Property Loan Department May, 1970 to January,
1972, Charlotte, NC
Prudential Insurance Company Real Estate and Mortgage Loan Department Regional
Appraiser December, 1964 to April, 1969, Montgomery, Alabama
May 1969 to May, 1970, Charlotte, N. C.
126
<PAGE>
GENERAL EDUCATION
Mars Hill College-Associate of Arts--1962
University of North Carolina at Chapel Hill-B.S. in Business Administration
(Major: Banking and Finance) 1964
REAL ESTATE EDUCATION
American Institute of Real Estate Appraisers-Real Estate Valuation-Course
I-University of Mississippi, 1966.
American Institute of Real Estate Appraisers-Real Estate Valuation-Course
II-Tulane University, 1967.
Various Seminars in Tax Deferred Exchanging and Computer Applications for
Real Estate Analysis.
PROFESSIONAL CONTRIBUTIONS.
Mr. Burroughs has authored articles for national industry periodicals and is a
nationally recognized speaker on the valuation of healthcare and senior living
properties.
MEMBERSHIPS AND PROFESSIONAL DESIGNATIONS
The Appraisal Institute-MAI, SRA
Licensed Real Estate Broker
The Academy of Real Estate Exchangers
State Certified General Appraiser
AREA OF SPECIALTY-LONG-TERM HEALTH CARE
HEALTHCARE AND NURSING HOME FACILITIES
Facilities Appraised: 2500
Location: Located in 44 States
Type: Skilled, ICF, Personal Care, Head Trauma, Long-Term
Pediatric Care, Substance Abuse, Mentally Retarded
(MR), Rehabilitation, Alzheimer's, Acute, Sub-Acute,
Rehab, and Psychiatric Hospitals
RETIREMENT HOUSING
Facilities Appraised: 60+
Location: Located in over 14 States
Type: Lease Rental, Condo Ownership, Retirement Apartments
with or without Nursing Home, Assisted Living, and
Luxurious Hotel-type for the well elderly. Housing for
the elderly requiring some personal care and services.
127
<PAGE>
TYPICAL NURSING HOME CLIENTS (PARTIAL LIST)
MORTGAGE/BOND LENDERS
Bank One, Indianapolis, IN
Bear Sterns Investment Bankers, New York, NY
Dominion Bank, Richmond, VA
First American National Bank, Nashville, TN
First National of Maryland, Baltimore, MD
Grove Capital, Atlanta, GA
Healthcare REIT, Toledo, OH
Hibernia National Bank, New Orleans, LA
J. C. Bradford, Nashville TN and Pensacola, FL
Maryland National Bank, Baltimore, MD
Society Bank, Dayton, Ohio
Southtrust Bank, N.A., Birmingham, AL
Van Kampen Merritt, Philadelphia, PA
Wachovia Bank & Trust, Raleigh, NC
Wright One Financial, Dayton, OH
HEALTHCARE MANAGEMENT COMPANIES
American Retirement Corporation, Nashville, TN
The Angell Group, Winston-Salem, NC
Asheville Psychiatric Hospital, Asheville, NC
Beverly Enterprises, Ft. Smith, AR
Brian Management Group, Hickory, NC
The Brunner Companies, Dayton, OH
Charlotte Memorial Hospital, Charlotte, NC
Convalescent Services, Atlanta, GA
Cumberland Health Systems, Nashville, TN
Denver Health Group, Denver, CO
Diversicare Corporation of America, Franklin, TN
Elmhurst Psychiatric Hospital, Portland, CT
Genesis Health, West Point, PA
Health Care Capital, Atlanta, GA
Health Care Concepts, Atlanta, GA
Health Prime, Atlanta, GA
Meridian Healthcare, Towson, MD
Multicare Management, Inc., Hackensack, NJ
National Health Corporation, Murfreesboro, TN
Nomura, New York, NY
Quest Rescue, Atlanta, GA
Quorum Health Services, Inc., Wellesley, MA
Regency Health Care, Ormond Beach, FL
Resource Housing of America, Atlanta, GA
Royal Care, Inc., Cleveland, TN
Southern Care Enterprises, Atlanta, GA
TheraTx, Baltimore, MD
Total Care Systems, Inc., West Point, PA
WellCare, Inc., Atlanta, GA
128
<PAGE>
ADDENDA
- ----------------------------------------------------------------------------
<PAGE>
[DATA TO COME]
<PAGE>
[DATA TO COME]
<PAGE>
[DATA TO COME]
<PAGE>
[DATA TO COME]
<PAGE>
[DATA TO COME]
<PAGE>
FEDERAL EMERGENCY MANAGEMENT AGENCY See the Attached O.M.B. No. 3067 0264
STANDARD FLOOD HAZARD DETERMINATION Instructions Expires April 30, 1998
- --------------------------------------------------------------------------------
SECTION I - LOAN INFORMATION
- --------------------------------------------------------------------------------
1. LENDER NAME AND ADDRESS 2. COLLATERAL (Building/Mobile Home/Personal
Property) PROPERTY ADDRESS
(LEGAL DESCRIPTION MAY BE ATTACHED.)
HEALTHCARE PROPERTY APPRAISERS
HWY 64 EAST BOX 2227 401 OAKWOOD BLVD
CASHIERS, NC 28717 ROUND ROCK, TX 78681-4067
- --------------------------------------------------------------------------------
3. LENDER ID. NO. 4. LOAN IDENTIFIER 5. AMOUNT OF FLOOD INSURANCE REQUIRED
7 $ 0
- --------------------------------------------------------------------------------
SECTION II
- --------------------------------------------------------------------------------
A. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) COMMUNITY JURISDICTION
- --------------------------------------------------------------------------------
NFIP COMMUNITY COUNTY(IES) STATE NFIP COMMUNITY
NAME NUMBER
- --------------------------------------------------------------------------------
ROUND ROCK, CITY OF WILLIAMSON TX 481048
- --------------------------------------------------------------------------------
B. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) DATA AFFECTING BUILDING/MOBILE HOME
- --------------------------------------------------------------------------------
NFIP MAP NUMBER OR
COMMUNITY-PANEL NUMBER NFIP MAP PANEL
(COMMUNITY NAME, IF NOT EFFECTIVE/REVISED NO. NFIP
THE SAME AS "A") DATE LOMA/LOMR FLOOD ZONE MAP
48491C0330D 01/03/97 X
---- -----
Yes Date
- --------------------------------------------------------------------------------
C. FEDERAL FLOOD INSURANCE AVAILABILITY (CHECK ALL THAT APPLY)
- --------------------------------------------------------------------------------
/X/ Federal Flood Insurance is available (community participates in NFIP).
/X/ Regular Program / / Emergency Program of NFIP
/ / Federal Flood Insurance is not available because community is not
participating in the NFIP
/ / Building/Mobile Home is in a Coastal Barrier Resources Area (CBRA),
Federal Flood Insurance may not be available.
CBRA designation dates:
----------------------------
- --------------------------------------------------------------------------------
D. DETERMINATION
- --------------------------------------------------------------------------------
IS BUILDING/MOBILE HOME IN SPECIAL FLOOD HAZARD AREA
(ZONES BEGINNING WITH LETTERS "A" OR "V")? / / YES /X/ NO
If yes, flood insurance is required by the Flood Disaster Protection Act of
1973.
If no, flood insurance is not required by the Flood Disaster Protection Act of
1973.
- --------------------------------------------------------------------------------
E. COMMENTS (OPTIONAL):
Name: Cert No.: 1405446-0
Type: REGULAR Client ID: 7425
Priority: REGULAR
BFE: UNSHADED
Requested By: EVE OR BONNY Fax: 1-(704) 743-1730
- --------------------------------------------------------------------------------
This determination is based on examining the NFIP map, any Federal Emergency
Management Agency revisions to it, and any other information needed to locate
the building/mobile home on the NFIP map.
- --------------------------------------------------------------------------------
F. PREPARER'S INFORMATION
- --------------------------------------------------------------------------------
NAME, ADDRESS, TELEPHONE NUYMBER (IF OTHER THAN LENDER) DATE OF DETERMINATION
BANKERS HAZARD DETERMINATION SERVICES-BHDS 3/24/97
PO BOX 33001
ST. PETERSBURG, FL 33733
PHONE: 1-800-723-6327
- --------------------------------------------------------------------------------
FEMA FORM 81-93, JUN 95
<PAGE>
The McCurdy Residential Center
101 Southeast First Street
Evansville, Indiana
<PAGE>
APPRAISAL REPORT
ON
THE MCCURDY
RESIDENTIAL CENTER
101 SOUTHEAST FIRST STREET
EVANSVILLE, INDIANA
PREPARED BY:
HealthCare Property Appraisers of America, Inc.
Hwy 64 East, Laurel Terrace, 2nd Floor
Post Office Box 2227
Cashiers, North Carolina 28717
Copyright 1997, HealthCare Property Appraisers of America, Inc.
<PAGE>
[Letterhead]
April 10, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
14160 Dallas Parkway
Dallas, Texas 75240
Re: The McCurdy Residential Center
Evansville, Indiana
Dear Mr. Brickman:
HealthCare Property Appraisers of America, Inc. has inspected The McCurdy
Residential Center for the purpose of estimating the Market Value of its fee
simple estate as a Going Concern. All factors which might influence the value
of this property were investigated and fully considered to the best of our
ability. We have performed a Complete Appraisal and report our findings here
in the form of a Self-Contained Appraisal Report, which describes the
appraisal method and contains the information necessary for forming realistic
conclusions. The supporting data analyses and conclusions are an integral
part of this report. The maps, sketches, and statistics are included to aid
the reader in visualizing the property. Your attention is directed to the
section entitled: "Underlying Assumptions and Limiting Conditions Section"
which provides the basis for all conclusions and the Final Value Estimate.
Based on the enclosed data and analyses, we believe the Subject Property
described herein had a Market Value, as of April 5, 1997, at current
occupancy and in its present physical condition of:
$11,250,000
This value estimate included all real and personal property, as well as the
business value as a Going Concern. Furniture, fixtures and equipment were
estimated to have a contributory value of approximately $518,000 and
intangible business assets were estimated to contribute $2,000,000 to the
total value. The real estate alone was estimated to contribute $8,732,000.
These estimated contributory values are allocations of the Going Concern and
may not represent the amount that would be realized if components were sold
separately.
The value conclusions in this report assume that this property is not subject
to any existing leases or management contracts. We have assumed that any new
owner would be free to negotiate a new lease or management contract if they
so desired.
<PAGE>
SUBJECT
[PHOTO]
2
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
After studying the sales history of similar properties, the Appraiser
estimates a reasonable marketing period for the subject property to be twelve
months.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by the Uniform Standards of
Professional Appraisal Practice (USPAP).
SPECIAL CONDITION
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have
a dramatic impact on the property's value.
I appreciate the opportunity to provide these appraisal services to you. If
you have any questions on this report or any other matters, please do not
hesitate to call.
Respectfully submitted,
HealthCare Property Appraisers of America; Inc.
/s/ J. Michael Burroughs
J. MICHAEL BURROUGHS, MAI, SRA
State Certified General Appraiser; #A218
President
JMB:ela
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 3
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
SUMMARY OF IMPORTANT CONCLUSIONS
SELF-CONTAINED REPORT OF A COMPLETE APPRAISAL
<TABLE>
<CAPTION>
<S> <C>
Subject Property: The McCurdy
Residential Center
Property Location: 101 Southeast First Street
Evansville, Indiana
Effective Date: April 5, 1997
Report Date: April 10, 1997
Purpose of Appraisal: Market Value
Area of Site: 31,363 sf (approx.)
Highest and Best Use: For Retirement Home Use
Improvements:
Number of Units: 296 Beds
Building Size: 135,350 sf (approx.)
Building Date: 1916,1970,1988
Economics:
Effective Gross Income: $8,958,472
Expenses: (7,208,462)
----------
Net Income: $1,750,010
Indicated Values:
Cost Approach: $11,270,000
Income Capitalization Approach: $11,620,000
Sales Comparison Approach: $10,950,000 to $11,250,000
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 4
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
FINAL ESTIMATED MARKET VALUE:
Land $ 285,000
Building Improvements $ 8,447,000
-----------
Total Real Estate $ 8,732,000
Personal Property $ 518,000
Business Value $ 2,000,000
-----------
Total Property $11,250,000
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 5
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<S> <C>
TRANSMITTAL LETTER ............................................2
SUMMARY OF IMPORTANT CONCLUSIONS ..............................4
TABLE OF CONTENTS .............................................6
GENERAL IDENTIFICATION OF PROPERTY ............................7
PROPERTY RIGHTS APPRAISED .....................................7
SCOPE OF APPRAISAL ............................................7
HISTORY OF PROPERTY ...........................................8
THE PURPOSE OF THE APPRAISAL ..................................9
METHOD OF APPRAISAL ..........................................13
REGIONAL ANALYSIS ............................................15
MARKET AREA AND NEIGHBORHOOD .................................38
SITE DATA ....................................................42
DESCRIPTION OF IMPROVEMENTS ..................................47
COST APPROACH TO VALUE .......................................53
INCOME CAPITALIZATIONAPPROACH TO VALUE .......................72
SALES COMPARISON APPROACH TO VALUE ...........................93
RECONCILIATION AND FINAL VALUE ESTIMATE .....................108
ALLOCATIONOF VALUE BETWEEN REAL PROPERTY, PERSONAL PROPERTY
AND BUSINESS ENTERPRISE .....................................111
SUMMARY OF VALUES ...........................................120
UNDERLYING ASSUMPTIONS AND LE%MING CONDITIONS ...............121
APPRAISER'S CERTIFICATION ...................................125
QUALIFICATIONS OF APPRAISER .................................128
</TABLE>
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The McCurdy Residential Center, Evansville, Indiana
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GENERAL IDENTIFICATION OF PROPERTY
The subject property, known as The McCurdy Residential Center, is located at
101 Southeast First Street, Evansville, Indiana. The subject site and
improvements are described further in subsequent sections of this report. The
subject of this analysis includes all real, personal and business property
necessary to operate as a Retirement Home.
PROPERTY RIGHTS APPRAISED
The appraiser, in completing this appraisal assignment, considered the
subject property to include all of those rights that may be lawfully owned
and are legally referred to as being held in "fee simple".
DEFINITION OF FEE SIMPLE ESTATE
Absolute ownership unencumbered by any other interest or
estate; subject only to the limitations of eminent domain,
escheat, police power, and taxation. (THE DICTIONARY OF
REAL ESTATE APPRAISAL American Institute of Real Estate
Appraisers, Third Printing, October, 1987)
SCOPE OF APPRAISAL
In conducting this appraisal, our staff
- Inspected the subject property.
- Developed and analyzed significant data from primary and
secondary sources, confirming that data where possible.
- Analyzed sales, income and expense data and projected a
reasonable cash flow for the subject.
- Completed Income Capitalization, Cost and Sales Comparison
Approaches To Value and reached a Final Market Value
conclusion as reported herein.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by USPAP.
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The McCurdy Residential Center, Evansville, Indiana
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HISTORY OF PROPERTY
To the best of the appraiser's knowledge, the complete subject property (land,
building, equipment and business) has not been sold, listed or placed under
contract within the past three years.
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The McCurdy Residential Center, Evansville, Indiana
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THE PURPOSE OF THE APPRAISAL
The purpose of the Complete Appraisal contained in this Self-Contained Appraisal
Report is to estimate the Market Value of The McCurdy Residential Center. This
report is intended for the internal use of the property owner.
DEFINITION OF MARKET VALUE
The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the buyer
and seller each acting prudently and knowledgeably, and assuming the
price is not affected by undue stimulus. Implicit in this definition is
the consummation of a sale as of a specified date and the passing of
title from seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated.
(2) Both parties are well informed or well advised, and acting in what
they consider their own best interests.
(3) A reasonable time is allowed for exposure in the open market.
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto.
(5) The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale. *
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The McCurdy Residential Center, Evansville, Indiana
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DEFINITION OF GOING CONCERN VALUE
As most properties of subject's type are usually owned, operated, and
sold as one entity including the real estate, personal property, and
business, in this report Market Value is considered to be synonymous with
the Going Concern Value, which includes any intangible enhancement
attributable to the operation of the property. The physical real estate
assets are such integral parts of the business that the market values for
the land and building or the business aspects are difficult, if not
impossible, to segregate from the total value of the property.
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The McCurdy Residential Center, Evansville, Indiana
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COMPETENCY
The Office of the Comptroller of the Currency has issued the following Final
Rule, which requires lenders to evaluate appraiser competency for each specific
appraisal assignment:
"Not all appraisers are competent to perform every type of appraisal that
will be needed in connection with federally related transactions. For
instance, an appraiser who is experienced in appraising shopping centers may
not possess sufficient expertise to appraise a golf course. A financial
institution should look beyond an individual's title to determine if he or
she has the experience and training needed to perform the appraisal. This
provision is not intended to prohibit, in every circumstance, an individual
from appraising a type of property with which he or she is not familiar.
However in such instances, an appraiser may perform the appraisal only in
accordance with the Competency Provision in the USPAP."
HealthCare Property Appraisers of America, Inc. is a national appraisal firm
limiting its appraisal practice to Health Care and Senior Housing properties.
HealthCare Property Appraisers of America, Inc. has prepared over 3,000
appraisal reports in 42 states on a wide variety of health care-oriented
facilities and housing for the elderly. Property types encompass the complete
continuum of health care facilities including:
- General and Acute Care Hospitals
- Psychiatric Hospitals
- Substance Abuse Facilities
- Skilled Nursing Homes
- Assisted Living Homes
- Rest Homes, Personal Care and Homes for the Aged
- Facilities for the Developmentally Disabled
- Independent Living Apartments for Retirees
- Continuing Care Retirement Communities
Our office maintains a constant dialogue with public health departments,
medicaid reimbursement officials and healthcare licensing agencies in all 50
states. We constantly update our data bank in accordance with changes within the
various state health care programs.
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HealthCare Property Appraisers of America, Inc. maintains an in-house database
which currently contains in excess of 1,300 sales of health care-related and
senior housing properties.
SOURCE OF DEFINITIONS
- TITLE XI. FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT
ACT OF 1989 (FIRREA), [Pub. L. No. 101-73,103 Stat. 183 (1989)], 12
U.S.C. 3310,3331-3351, and section 5(b) of the Bank Holding Company
Act, 12 U.S. C. 1844(b); Part 225, Subpart G: Appraisals Paragraph
225.62(f).
- UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE, Page 1-7.
- FEDERAL RESERVE SYSTEM 12 CFR Parts 208 and 225, Sec. 225.62.
- OFFICE OF THE COMPTROLLER OF THE CURRENCY 12 CFR part 34, Sec. 34.42.
- FDIC, 12 CFR Part 323, Sec. 323.2.
- OFFICE OF THRIFT SUPERVISION, 12 CFR Part 564, Sec. 564.2.
- NCUA, 12 CFR Part 722, Sec. 722.2.
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METHOD OF APPRAISAL
The Appraisal Profession generally recognizes three approaches to value:
1. COST APPROACH TO VALUE: The appraiser: (a) estimates the land value as
though the site were vacant and available for development and (b) estimates
the cost to replace subject's improvements (at their same stage of
depreciation). The depreciated Replacement Cost is usually based upon
consultation with local contractors and construction cost data services.
2. INCOME CAPITALIZATION APPROACH TO VALUE: The Appraiser compiles and analyzes
market data to estimate subject property's economic rental and expenses. The
net income thus derived is capitalized into a value estimate. This indicates
the property's value to an investor receiving this income stream and
develops the present value of perceived future benefits and property
reversion.
3. SALES COMPARISON APPROACH TO VALUE (also known as the Comparative Approach
or Market Data Method): The Appraiser researches sales of Retirement Homes
in this market area and develops units of comparison which are adjusted and
applied to the subject property.
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HealthCare Property Appraisers of America, Inc. 13
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REGIONAL ANALYSIS
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HealthCare Property Appraisers of America, Inc. 14
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The McCurdy Residential Center, Evansville, Indiana
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REGIONAL ANALYSIS
OVERVIEW
The subject property is located in the city of Evansville, Vanderburgh County,
Indiana. Located in the Southwestern region of the state, the site is
approximately 176 miles southwest of Indianapolis, Indiana; 156 miles north of
Nashville, Tennessee; 126 miles west of Louisville, Kentucky and 174 miles east
of St. Louis, Missouri.
Vanderburgh County rests in the northern section of the Evansville-Henderson,
IN-KY Metropolitan Statistical Area (hereafter referred to as the Evansville
MSA), which is composed of the following counties: Posey, Vanderburgh and
Warrick counties in Indiana and Henderson County in Kentucky.
TERRAIN AND CLIMATE
The Vanderburgh County area, bordered on the south by the Ohio River, is
primarily level to slightly rolling, typical of southwestern Indiana. A moderate
climate, the prevailing winds are from the south, sometimes producing hot humid
summers, but the area is also affected by colder northwesterly winds following
high pressure cells. Snowfall varies a great deal from year to year averaging 13
inches annually. The average annual rainfall is 42 inches and the growing season
is 199 days. Averaging a low temperature of 32 degrees in January and a high of
78 degrees in July has encouraged growth in the Vanderburgh County area.
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POPULATION AND DEMOGRAPHICS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CHANGE PROJECTED CHANGE
1990-1996 1996-2001
---------------------------------------------
<S> <C> <C>
UNITED STATES 6.5% 4.9%
STATE 5.2% 3.9%
MSA 3.8% 2.8%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The area enjoys a broadly diversified economic base, including education,
home appliance and automobile production, medical services, plastics and
pharmaceutical industries, which contribute to the growth of the area.
According to Claritas, Inc., a demographics survey firm, the estimated 1996
population of the United States has increased 6.5% since 1990, and an
additional 4.9% increase can be expected by 2001.
According to the 1990 Census, Indiana's population totaled 5,544,159
residents. Claritas estimates the current population at
5,834,129,representing an increase of 5.2%. By 2001, the population is
projected to reach 6,062,622 residents, an increase of 3.9%.
The 1990 Census indicates Evansville MSA's population totaled 278,990
residents. Claritas estimates the current population at 289,587, representing
an increase of 3.8%. By 2001, the population is projected to reach 297,718
residents, an increase of 2.8%.
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DEMOGRAPHICS OF THE ELDERLY POPULATION
PERCENTAGE OF CHANGE - ELDERLY POPULATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1990-1996 1996-2001
----------- -----------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
U.S. 14.4% 21.0% 32.9% 11.3% 12.4% 19.0%
STATE 14.0% 21.9% 31.8% 11.5% 11.4% 16.3%
MSA 8.7% 20.0% 28.6% 9.7% 6.5% 17.2%
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</TABLE>
The market segments of primary interest in this demographics study are the
age groups: (a) 75 to 79, (b) 80 to 84, and (c) 85 and over. Between 1990 and
1996, the estimated increase nationally in the 75 to 79 year old age bracket
was 14.4%. In the 80 to 84 age group the change was 21.0% and the change in
the 85 and over age group was 32.9%. By 2001, the 75 to 79 age group is
projected to increase by an additional 11.3 %, the 80 to 84 group by 12.4 %
and the age group 85 and over by 19.0%.
In the state of Indiana, the 75 to 79 age group is currently estimated at
152,940 which is an increase of 14.0 % since the last census. The age group 80
to 84 has shown an increase of 21.9% in that same time period and the 85 and
over age group has shown an increase of 31.8%. It is estimated that by 200 1,
there will be 170,534, 118,909 and 115,865 residents in these age groups or a
change of 11.5 %, 11.4 %, and 16.3 % respectively.
In the Evansville MSA, the 75 to 79 age group is currently estimated at 8,427
which is an increase of 8.7 % since the last census. The age group 80 to 84
has shown an increase of 20.0 % in the time period between 1990 and 1996 and
the 85 and over age group has shown an increase of 28.6%. It is estimated
that by 2001, there will be 12.9, 9.0 and 9.1 residents in these age groups
or a change of 9.7%, 6.5 %, and 17.2 % respectively.
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The McCurdy Residential Center, Evansville, Indiana
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MEDIAN HOUSEHOLD INCOME - AGES 75+
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1990-1996 1996-2001
----------- -----------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
------- ------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
U.S. +$3,462 +$3,355 +$3,233 +$3,344 +$3,359 +$3,357
STATE +$3,633 +$3,564 +$3,509 +$3,604 +$3,647 +$3,520
MSA +$2,961 +$3,105 +$2,649 +$3,891 +$3,684 +$3,540
- -------------------------------------------------------------------------------
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</TABLE>
Nationally, the 75 to 79 age group median household income increased $3,462
between 1990 and 1996 and is projected to increase an additional $3,344 by
2001. The 80 to 84 age group showed an increase nationally in median
household income of $3,355 between 1990 and 1996 and is projected to increase
an additional $3,359 by 2001. The age group 85 and over showed an increase
between 1990 and 1996 of $3,233 and is projected increase an additional
$3,357 by 2001.
In the state of Indiana, the median household income for the 75-79 age group
increased $3,633 between 1990 and 1996, and is projected to reach $21,241 or
increase an additional $3,604 by 2001. The median household income for the 80
to 84 age group during the time period 1990 to 1996 increased $3,564 and is
expected to reach $21,010 or increase an additional $3,647 by 2001. The age
group 85 and over showed an increase of $3,509 between 1990 and current
estimates and is projected to reach $20,694 or increase an additional $3,520
by 2001.
In the Evansville MSA, median household income for the 75-79 age group
increased $2,961 between 1990 and 1996, and is projected to reach $19,881 or
increase an additional $3,891 by 2001. The median household income for the 80
to 84 age group during the 1990-1996 time period increased $3,105 and is
expected to reach $19,645 or increase an additional $3,684 by 2001. The age
group 85 and over showed an increase of $2,649 between 1990 and current
estimates and is projected to reach $18,447 or an additional increase of
$3,540 by 2001.
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ELDERLY HOUSEHOLDS WITH INCOME $35,000+
(AS A % OF TOTAL HOUSEHOLD INCOME FOR 55+ POPULATION)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1996 2001
1990 ESTIMATED PROJECTED
--------------------------------------------------
<S> <C> <C> <C>
UNITED STATES 42.4% 52.0% 58.3%
STATE 39.7% 51.4% 59.3%
MSA 37.7% 49.3% 56.5%
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</TABLE>
One of the best indicators of the ability of the subject's residents to be self
supporting (rather than government funded) is their level of affluence. The
appraiser compared the subject's potential local market with that of Indiana and
the USA as a whole. The comparison was based upon the percentage of population
aged 55 + with an annual household income exceeding $35,000.
GOVERNMENT AND SERVICES
The Evansville MSA area consists of the city of Evansville and four other
communities in Vanderburgh County. The subject property falls within the
jurisdiction of Evansville which has a mayor-council form of government. Police
protection is provided by the Evansville City Police Department and the
Vanderburgh County Sheriff's Department. Fire protection is provided by the
Evansville City Fire Department.
UTILITIES
Water and sewer service are provided by the Evansville Water Department.
Electricity is supplied by Southern Indiana Gas & Electric, gas service is
provided by the same, and telephone service by Ameritech.
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EDUCATION
The Evansville-Vanderburgh School Corporation has 20 elementary, 12 middle and 6
high schools. There are also more than eight private and/or parochial schools.
Vocational Technical institutions in the area include ITT Technical Institute,
Ivy Tech State College and Indiana Business College. Among the area's facilities
for higher education are University of Evansville, University of Southern
Indiana and Oakland City University.
TRANSPORTATION
The area's principal highways include Interstate 64 (E-W), U.S. Highways 41
(N-S) and State Highways 62 and 66 (both E-W). Currently, there are no ongoing
highway improvement projects. Proposed projects include the addition of left
turn lanes on US 41 anticipated to be completed in one construction season and a
bridge reconstruction across Pigeon Creek on State Road 62, being completed in
one to two years.
Airports are located throughout the area with the major commercial airport being
Evansville Regional Airport, with 40 daily flights. Airlines serving that
airport include USAir, American Eagle, Atlantic Southeast, Northwest and
Transworld Express.
Freight rail service is provided by CSX Corporation, Conrail and Norfolk
Southern Corporation, and bus service by The Metropolitan Evansville Transit
System. Trucking companies serving the area include several major firms.
HEALTH CARE
There are three hospitals, Welborn Baptist Memorial, St. Mary's and Deaconess
hospitals, with a total of more than 1,500 beds serving the Evansville MSA.
Medical assistance is provided by 300 physicians and 100 dentists. Vanderburgh
county alone has more than 25 nursing homes with a total of more than 2,500
beds. Evansville nursing homes include Bethel Manor (66
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beds), Brentwood Nursing and Rehabilitation Center (122), Good Samaritan Home
(166), Parkview Convalescent Center (101), St John's Home for the Aged (52),
Woodbridge Health Care (92) and Washington Manor (199).
ECONOMY
Financial institutions in the area include Old National Bank, Mid-West Federal,
United Fidelity, Citizens, First Federal and First Indiana Bank along with many
credit unions. The city's financial district has experienced a revitalization
with the passage of riverboat gambling and the development of a downtown casino,
passenger pavilion and riverfront hotel.
According to the 1995 SURVEY OF BUYING POWER, by Sales & Marketing Management,
the per household retail sales for the Evansville MSA, ranking 190th in the
nation, was $23,488 (compared to the national average of $23,209). The median
household effective buying income, ranking 177th in the nation, was $34,058
($37,070). Household expenditures for health care ranked in the top 200 in the
nation with $2 billion. Figures for Evansville alone were $34,203 and $29,392
respectively.
According to the PLACES RATED ALMANAC , the Evansville MSA ranks 229th of the
nation's 343 MSAs in the area of employment opportunity. The area is projected
to show a growth rate of 3.56% in new jobs, with an increase of 4,449 white
collar and 1,321 blue collar positions expected. Distribution by sector and
percentage of employees is as follows:
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<TABLE>
<CAPTION>
SECTOR PERCENTAGE
- ------ ----------
<S> <C>
Services 30.2%
Manufacturing 23.0%
Wholesale/Retail Trade 23.7%
Construction 5.7%
Transportation/Communications/Utilities 6.7%
Finance/Insurance/Real Estate 5.3%
Government 2.3%
Agriculture/Forestry/Fishing 1.5%
Mining 1.5%
</TABLE>
The area's major employers are:
<TABLE>
<CAPTION>
Company Name # Employees Product/Service
- ------------- ------------ ---------------
<S> <C> <C>
Evansville/Vanderburgh Schools 3,064 Educational Services
Whirlpool Corporation 2,800 Refrigerators
Mead Johnson Nutritionals 2,430 Nutritional/Pharmaceutical
St. Mary's Medical Center 2,420 Medical Services
ALCOA Warrick Operations 2,400 Aluminum Sheet & Ingot
T.J. Maxx 1,600 Retail Distribution
General Electric 1,600 Plastics
American General Finance 1,221 Financial Services
City of Evansville 1,200 Governmental Services
Casino Aztar 1,000 Gaming/Hotel
</TABLE>
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UNITED STATES/STATE/MSA HOUSEHOLD INCOME
(GENERAL POPULATION)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
% OF CHANGE
---------------------------------------------------
1990-1996 1996-2001
---------------------------------------------------
<S> <C> <C>
UNITED STATES 21.7% 15.4%
STATE 25.2% 18.4%
MSA 26.4% 19.1%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
An important indicator of economic health is growth in Median Household Income.
The national increase in Median Household Income between 1990 and 1996 was
21.7%. Claritas projects the National Median Household Income will reach $42,259
(i.e. increase by 15.4%)by 2001.
Median Household Income for Indiana in 1996 is estimated at $36,125, or an
increase of 25.2% since 1989. It is projected that by 2001 the Median Household
Income will reach $42,770, or increase by 18.4%.
Median Household Income for the Evansville MSA in 1996 has increased to $34,419,
or 26.4%, since 1989. It is projected that by 2001 the Median Household Income
will reach $41,005, or increase 19.1%.
NUMBER OF HOUSING UNITS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
% OF CHANGE
-----------------------------------------------------
1990-1996 1996-2001
-----------------------------------------------------
<S> <C> <C>
UNITED STATES 7.6% 5.5%
STATE 7.3% 4.7%
MSA 5.4% 3.5%
- --------------------------------------------------------------------------------
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</TABLE>
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Growth in the number of housing units in a specified area is another good
indication of economic health. Housing units increased 7.6% nationally between
1990 and 1996. By 2001, it is projected that total housing units nationally will
have increased by an additional 5.5%.
The number of housing units in Indiana is currently estimated at 2,410,192,
which is an increase of 7.3% since the 1990 Census. It is estimated that by
2001; this figure will reach 2,524,561, or increase by 4.7%.
The number of housing units in the Evansville MSA is currently estimated at
124,274, which is an increase of 5.4% since the 1990 Census. It is estimated
that by 2001, this figure will reach 128,623, or increase by 3.5%.
METROPOLITAN STATISTICAL AREA (MSA) DATA
The economy of Evansville and Vanderburgh County are strongly effected by the
Evansville-Henderson, IN-KY Metropolitan Statistical Area.
The appraiser considered the cost of living in Evansville, as this factor
affects The McCurdy Residential Center in two ways: (a) the likelihood of
retirees remaining in the area or being attracted to it and (b) payroll costs.
The PLACES RATED ALMANAC Cost of Living Index ranks the subject MSA 55th of the
343 MSAs nationwide (with the first place MSA having the lowest cost of living).
Ranked against the national average of 100, the Evansville MSA indexes are:
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<TABLE>
Housing:
<S> <C> <C>
Median Price: 66
Utilities: 107
Property Taxes: 79
Miscellaneous Living Cost Indexes:
College Tuition: 93
Food: 95
Health Care: 85
Transportation: 95
The PLACES RATED ALMANAC rates and ranks 343 metropolitan areas on ten factors
that greatly influence the quality of an area: costs of living, job outlook,
housing, transportation, education, health care, crime, the arts, recreation,
and climate. The Evansville MSA is ranked as follows:
Costs of Living 55
Job Outlook 229
Housing 82
Transportation 248
Education 221
Health Care 110
Crime 146
The Arts 165
Recreation 192
Climate 155
</TABLE>
Based on these factors, the Evansville MSA had an overall rank of 135th of the
343 Metropolitan Statistical Areas.
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TRENDS, FUTURE OUTLOOK, CONCLUSIONS
Evansville is a thriving hub of the Tri-State's financial, medical, educational
and cultural art centers. It also has a very stable economy, drawing strength
from the automobile and steel production, secondary education and medical
service industries and the recently approved riverboat gambling ordinance.
General population trends for the area indicate that the area has a slower
growth rate than the rest of the nation. The housing increase supports the
prediction that the growth rate will be slightly slower than the nation during
the coming 5-year period. The elderly population will increase at a greater pace
than the overall population with the largest increase in the 85 + age group. Due
to the varied and strong economy, incomes for both the general and elderly
populations will enjoy a faster growth rate than the national averages.
From the economic and demographic indications for the Evansville area, the
economy should remain in its stable to slow growth posture. With the increases
in the elderly population and the indication of their continuing growth in
incomes and the growing and stable economy in the Evansville area, the appraiser
anticipates a positive climate for the senior service industries.
*All population and household income figures were taken from the most recent
U.S. Census (if actual numbers) or were provided to the appraiser by Claritas,
Inc. (if projected numbers) or by the local Chamber of Commerce.
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(MSA 2440) Evansville et al, IN-KY TABLE
<TABLE>
<CAPTION>
(Weight: 100.0%)
Household Trend Report
1980 1990 % Chg 1996 % Chg 2001 % Chg
Universe Census Census 80-90 (Est.) 90-96 (Proj.) 96-01
-------------------------- --------- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Population ............... 276253 278990 1.0 289587 3.8 297718 2.8
Households ............... 101528 108663 7.0 114301 5.2 118320 3.5
Families ................. 75223 76611 1.8 79746 4.1 81815 2.6
Housing Units ............ 107715 117896 9.5 124274 5.4 128623 3.5
Grp Qr . Pop ............. 5317 5925 11.4 6204 4.7 6235 0.5
Household Size ........... 2.67 2.51 -5.8 2.48 -1.3 2.46 -0.6
<CAPTION>
1979 1989 % Chg 1996 % Chg 2001 % Chg
Income (Census) (Census) 79-89 (Est.) 89-96 (Proj.) 96-01
-------------------------- --------- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate($MM) 2030 3689 81.7 5087 37.9 6529 28.3
Per Capita 7350 13226 79.9 17569 32.8 21932 24.8
Avg. Household 19856 33667 69.6 44115 31.0 54603 23.8
Median Hhold 16964 27235 60.5 34419 26.4 41005 19.1
Avg. Family HH 22946 40036 74.5 52410 30.9 63928 22.0
Med: Family HH 20306 34229 68.6 43200 26.2 51677 19.6
Avg. HH Wealth 129378 151271 16.9
Med. HH Wealth 68118 79721 17.0
----------------------------------- Households ---------------------------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
--------------------------------------- ------------------------- -------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Total ................................. 108663 114301 118320
Less than $5,000 ................. 7244 6.7% 5163 4.5% 4037 3.4%
$5,000 to $9,999 ................... 11324 10.4% 9539 8.3% 8358 7.1%
$10,000 to $14,999 ................... 10347 9.5% 9095 8.0% 8128 6.9%
$15,000 to $19,999 ................... 11221 10.3% 8343 7.3% 7382 6.2%
$20,000 to $24,999 ................... 9413 8.7% 9850 8.6% 7439 6.3%
$25,000 to $29,999 ................... 9728 9.0% 8062 7.1% 8576 7.2%
$30,000 to $34,999 ................... 8452 7.8% 7966 7.0% 7520 6.4%
$35,000 to $39,999 ................... 7791 7.2% 7062 6.2% 6277 5.3%
$40,000 to $44,999 ................... 6957 6.4% 7108 6.2% 6497 5.5%
$45,000 to $49,999 ................... 5630 5.2% 6407 5.6% 5966 5.0%
$50,000 to $59,999 ................... 8429 7.8% 11454 10.0% 11984 10.1%
$60,000 to $74,999 ................... 5881 5.4% 11361 9.9% 13949 11.8%
$75,000 to $99,999 ................... 3439 3.2% 7753 6.8% 12537 10.6%
$100,000 to $124,999 .................. 1248 1.1% 2508 2.2% 5751 4.9%
$125,000 to $149,999 .................. 483 0.4% 1112 1.0% 1703 1.4%
$150,000 to $249,999 .................. 673 0.6% 931 0.8% 1449 1.2%
$250,000 to $499,999 .................. 328 0.3% 419 0.4% 523 0.4%
$500,000 or More ...................... 75 0.1% 168 0.1% 244 0.2%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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HealthCare Property Appraisers of America Inc. 27
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
(MSA 2440) Evansville et al, IN-KY (Weight: 100.0%)
Senior Life Report (Page 1 of 7)
<TABLE>
<CAPTION>
---------------------------- Population Age 55 Years and Over ---------------------------
Population by Age and Sex 1990 1996 Estimate 2001 Proj.
--------------------------------- ------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Population Age 55+............... 64245 100.0% 67785 100.0% 71560 100.0%
55 to 59.................... 12128 18.9% 13002 19.2% 14782 20.7%
60 to 64.................... 12889 20.1% 11814 17.4% 12633 17.7%
65 to 69.................... 12396 19.3% 12043 17.8% 11246 15.7%
70 to 74.................... 9690 15.1% 10862 16.0% 10668 14.9%
75 to 79.................... 7756 12.1% 8427 12.4% 9241 12.9%
80 to 84.................... 5043 7.8% 6051 8.9% 6446 9.0%
85 + ....................... 4343 6.8% 5586 8.2% 6544 9.1%
Males Age 55+.................... 26573 41.4% 28022 41.3% 29824 41.7%
55 to 59.................... 5674 8.8% 6109 9.0% 7097 9.9%
60 to 64.................... 5907 9.2% 5353 7.9% 5746 8.0%
65 to 69.................... 5357 8.3% 5321 7.8% 4894 6.8%
70 to 74.................... 3912 6.1% 4555 6.7% 4562 6.4%
75 to 79.................... 2907 4.5% 3180 4.7% 3610 5.0%
80 to 84.................... 1642 2.6% 2046 3.0% 2198 3.1%
85 + ...................... 1174 1.8% 1458 2.2% 1717 2.4%
Female Age 55+................... 37672 58.6% 39763 58.7% 41736 58.3%
55 to 59.................... 6454 10.0% 6893 10.2% 7685 10.7%
60 to 64.................... 6982 10.9% 6461 9.5% 6887 9.6%
65 to 69.................... 7039 11.0% 6722 9.9% 6352 8.9%
70 to 74.................... 5778 9.0% 6307 9.3% 6106 8.5%
75 to 79.................... 4849 7.5% 5247 7.7% 5631 7.9%
80 to 84.................... 3401 5.3% 4005 5.9% 4248 5.9%
85 + ...................... 3169 4.9% 4128 6.1% 4827 6.7%
<CAPTION>
-------------------- Population --------------------
Population by Age & Race 1990 1996 Estimate 2001 Proj.
--------------------------------- ------------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Population................. 278990 100.0% 289587 100.0% 297718 100.0%
White Population............ 261115 93.6% 269924 93.2% 276809 93.0%
Age 65 and Over........... 37306 13.4% 41072 14.2% 42249 14.2%
Black Population............ 16148 5.8% 17539 6.1% 18435 6.2%
Age 65 and Over........... 1840 0.7% 1817 0.6% 1821 0.6%
Asian Population............ 1248 0.4% 1635 0.6% 1976 0.7%
Age 65 and Over........... 32 0.0% 37 0.0% 32 0.0%
Am. Indian Population....... 479 0.2% 489 0.2% 498 0.2%
Age 65 and Over........... 50 0.0% 43 0.0% 43 0.0%
Hispanic Population......... 1321 0.5% 1682 0.6% 2015 0.7%
Age 65 and Over........... 90 0.0% 78 0.0% 87 0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 Projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America Inc. 28
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
(MSA 2440) Evansville et al, IN-KY (Weight: 100.0%)
Senior Life Report (Page 2 of 7)
<TABLE>
<CAPTION>
Household Income by ---------------------- Households with Householder Age 55 and Over -----------------
Age of Householder 1990 1996 Estimate 2001 Proj.
---------------------------------------- ------------------------ ------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 55 to 64................ 14785 100.0% 14363 100.0% 16015 100.0%
Under $5,000.............. 959 6.5% 615 4.3% 504 3.1%
$5,000 - $9,999.............. 1308 8.8% 976 6.8% 924 5.8%
$10,000 - $14,999............. 1282 8.7% 965 6.7% 927 5.8%
$15,000 - $24,999............. 2667 18.0% 2132 14.8% 1844 11.5%
$25,000 - $34,999............. 2229 15.1% 1817 12.7% 2034 12.7%
$35,000 - $49,999............. 2979 20.1% 2656 18.5% 2498 15.6%
$50,000 - $74,999............. 2244 15.2% 3209 22.3% 3790 23.7%
$75,000 - $99,999............. 542 3.7% 1124 7.8% 1893 11.8%
$100,000 - $149,999............ 316 2.1% 563 3.9% 1181 7.4%
$150,000 - $249,999............ 158 1.1% 178 1.2% 251 1.6%
$250,000 - $499,999............ 92 0.6% 99 0.7% 115 0.7%
$500,000 or More.................. 9 0.1% 29 0.2% 54 0.3%
Median Income........................... 30278 38820 45655
Householder Age 65 to 69................ 7762 100.0% 7724 100.0% 7174 100.0%
Under $5,000.............. 593 7.6% 407 5.3% 289 4.0%
$5,000 - $9,999.............. 1336 17.2% 1034 13.4% 791 11.0%
$10,000 - $14,999............. 1235 15.9% 1044 13.5% 820 11.4%
$15,000 - $24,999............. 1870 24.1% 1738 22.5% 1363 19.0%
$25,000 - $34,999............. 1113 14.3% 1125 14.6% 1182 16.5%
$35,000 - $49,999............. 873 11.2% 1024 13.3% 988 13.8%
$50,000 - $74,999............. 477 6.1% 847 11.0% 995 13.9%
$75,000 - $99,999............. 155 2.0% 290 3.8% 414 5.8%
$100,000 - $149,999............ 70 0.9% 153 2.0% 254 3.5%
$150,000 - $249,999............ 25 0.3% 39 0.5% 54 0.8%
$250,000 - $499,999............ 13 0.2% 15 0.2% 16 0.2%
$500,000 or More.................. 2 0.0% 8 0.1% 8 0.1%
Median Income........................... 18834 22923 27741
Householder Age 70 to 74................ 6716 100.0% 6908 100.0% 6705 100.0%
Under $5,000.............. 555 8.3% 392 5.7% 287 4.3%
$5,000 - $9,999.............. 1222 18.2% 989 14.3% 788 11.8%
$10,000 - $14,999............. 1077 16.0% 957 13.9% 800 11.9%
$15,000 - $24,999............. 1602 23.9% 1545 22.4% 1283 19.1%
$25,000 - $34,999............. 906 13.5% 984 14.2% 1089 16.2%
$35,000 - $49,999............. 730 10.9% 873 12.6% 883 13.2%
$50,000 - $74,999............. 394 5.9% 734 10.6% 890 13.3%
$75,000 - $99,999............. 118 1.8% 228 3.3% 376 5.6%
$100,000 - $149,999............ 75 1.1% 147 2.1% 227 3.4%
$150,000 - $249,999............ 24 0.4% 41 0.6% 57 0.9%
$250,000 - $499,999............ 12 0.2% 14 0.2% 19 0.3%
$500,000 or More.................. 1 0.0% 4 0.1% 6 0.1%
Median Income........................... 18146 22223 26786
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 Projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America Inc. 29
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
(MSA 2440) Evansville et al, IN-KY (Weight: 100.0%)
Senior Life Report (Page 3 of 7)
<TABLE>
<CAPTION>
Household Income by ------------------------- Households with Householder Age 55 and Over --------------
Age of Householder 1990 1996 Estimate 2001 Proj.
----------------------------------------- ------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 75 to 79................. 5267 100.0% 6121 100.0% 6686 100.0%
Under $5,000.............. 578 11.0% 485 7.9% 396 5.9%
$5,000 - $9,999.............. 1517 28.8% 1421 23.2% 1281 19.2%
$10,000 - $14,999.............. 889 16.9% 1035 16.9% 1072 16.0%
$15,000 - $24,999.............. 1020 19.4% 1207 19.7% 1217 18.2%
$25,000 - $34,999.............. 551 10.5% 697 11.4% 933 14.0%
$35,000 - $49,999.............. 358 6.8% 546 8.9% 685 10.2%
$50,000 - $74,999.............. 217 4.1% 444 7.3% 623 9.3%
$75,000 - $99,999.............. 63 1.2% 154 2.5% 258 3.9%
$100,000 - $149,999............. 42 0.8% 83 1.4% 162 2.4%
$150,000 - $249,999............. 18 0.3% 26 0.4% 36 0.5%
$250,000 - $499,999............. 10 0.2% 14 0.2% 14 0.2%
$500,000 or More.................... 4 0.1% 9 0.1% 9 0.1%
Median Income............................ 13029 15990 19881
Householder Age 80 to 84................. 3404 100.0% 4157 100.0% 4482 100.0%
Under $5,000.............. 378 11.1% 325 7.8% 267 6.0%
$5,000 - $9,999.............. 1003 29.5% 978 23.5% 869 19.4%
$10,000 - $14,999.............. 562 16.5% 696 16.7% 719 16.0%
$15,000 - $24,999.............. 675 19.8% 827 19.9% 831 18.5%
$25,000 - $34,999.............. 340 10.0% 482 11.6% 615 13.7%
$35,000 - $49,999.............. 224 6.6% 359 8.6% 447 10.0%
$50,000 - $74,999.............. 141 4.1% 305 7.3% 411 9.2%
$75,000 - $99,999.............. 36 1.1% 103 2.5% 176 3.9%
$100,000 - $149,999............. 22 0.6% 52 1.3% 113 2.5%
$150,000 - $249,999............. 13 0.4% 13 0.3% 20 0.4%
$250,000 - $499,999............. 9 0.3% 13 0.3% 10 0.2%
$500,000 or More.................... 1 0.0% 4 0.1% 4 0.1%
Median Income............................ 12856 15961 19645
Householder Age 85+...................... 2322 100.0% 2867 100.0% 3300 100.0%
Under $5,000.............. 266 11.5% 229 8.0% 204 6.2%
$5,000 - $9,999.............. 718 30.9% 704 24.6% 666 20.2%
$10,000 - $14,999.............. 392 16.9% 510 17.8% 568 17.2%
$15,000 - $24,999.............. 447 19.3% 569 19.8% 615 18.6%
$25,000 - $34,999.............. 211 9.1% 307 10.7% 436 13.2%
$35,000 - $49,999.............. 146 6.3% 230 8.0% 320 9.7%
$50,000 - $74,999.............. 92 4.0% 204 7.1% 289 8.8%
$75,000 - $99,999.............. 22 0.9% 60 2.1% 123 3.7%
$100,000 - $149,999............. 16 0.7% 33 1.2% 61 1.8%
$150,000 - $249,999............. 6 0.3% 9 0.3% 11 0.3%
$250,000 - $499,999............. 4 0.2% 6 0.2% 3 0.1%
$500,000 or More.................... 2 0.1% 6 0.2% 4 0.1%
Median Income............................ 12258 14907 18447
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 Projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America Inc. 30
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
(MSA 2440) Evansville et al, IN-KY (Weight: 100.0%)
Senior Life Report (Page 4 of 7)
<TABLE>
<CAPTION>
------------------------------------ Total Households -------------------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
---------------------------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Total.................... 108663 100.0% 114301 100.0% 118320 100.0%
Under $5,0000........... 7244 6.7% 5163 4.5% 4037 3.4%
$5,000 to $9,999...... 11324 10.4% 9539 8.3% 8358 7.1%
$10,000 to $14,999..... 10347 9.5% 9095 8.0% 8128 6.9%
$15,000 to $24,999..... 20634 19.0% 18193 15.9% 14821 12.5%
$25,000 to $34,999..... 18180 16.7% 16028 14.0% 16096 13.6%
$35,000 to $49,999..... 20378 18.8% 20577 18.0% 18740 15.8%
$50,000 to $74,999..... 14310 13.2% 22815 20.0% 25933 21.9%
$75,000 to $99,999..... 3439 3.2% 7753 6.8% 12537 10.6%
$100,000 to $124,999..... 1248 1.1% 2508 2.2% 5751 4.9%
$125,000 to $149,999..... 483 0.4% 1112 1.0% 1703 1.4%
$150,000 to $249,999..... 673 0.6% 931 0.8% 1449 1.2%
$250,000 to $499,999..... 328 0.3% 419 0.4% 523 0.4%
$500,000 or More......... 75 0.1% 168 0.1% 244 0.2%
Median Household Income.. 27235 34419 41005
<CAPTION>
---------------- Total Specified Owner-Occupied Housing Units ----------------------
Housing Value 1990 Census 1996 Estimate 2001 Proj.
------------------------------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Units................... 61051 64118 66306
Less than $15,000........... 1833 3.0% 1570 2.4% 1386 2.1%
$15,000 to $19,999.......... 1596 2.6% 827 1.3% 603 0.9%
$20,000 to $24,999.......... 2247 3.7% 1472 2.3% 922 1.4%
$25,000 to $29,999.......... 2967 4.9% 1957 3.1% 1356 2.0%
$30,000 to $34,999.......... 3991 6.5% 2509 3.9% 1754 2.6%
$35,000 to $39,999.......... 4578 7.5% 3132 4.9% 2154 3.2%
$40,000 to $44,999.......... 4987 8.2% 3617 5.6% 2582 3.9%
$45,000 to $49,999.......... 4559 7.5% 4021 6.3% 2914 4.4%
$50,000 to $59,999.......... 8334 13.7% 8099 12.6% 6641 10.0%
$60,000 to $74,999.......... 10090 16.5% 10545 16.4% 9991 15.1%
$75,000 to $99,999.......... 9152 15.0% 12464 19.4% 13129 19.8%
$100,000 to $124,999.......... 3097 5.1% 7009 10.9% 9716 14.7%
$125,000 to $149,999.......... 1496 2.5% 2758 4.3% 5697 8.6%
$150,000 to $174,999.......... 805 1.3% 1517 2.4% 2641 4.0%
$175,000 to $199,999.......... 471 0.8% 902 1.4% 1552 2.3%
$200,000 to $249,999.......... 428 0.7% 866 1.4% 1610 2.4%
$250,000 to $299,999.......... 194 0.3% 382 0.6% 739 1.1%
$300,000 to $399,999.......... 127 0.2% 273 0.4% 520 0.8%
$400,000 to $499,999.......... 54 0.1% 103 0.2% 212 0.3%
$500,000 and over............. 45 0.1% 95 0.1% 187 0.3%
Median Housing Value.......... 54521 66906 80427
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 Projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America Inc. 31
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
(MSA 2440) Evansville et al, IN-KY
(Weight: 100.0%)
Senior Life Report (Page 5 of 7)
<TABLE>
<CAPTION>
Household Household
Type and Relationship Population 65+ Type and Relationship Population 65+
--------------------------------- ------------------- ------------------------------ -------------------
<S> <C> <C> <C> <C> <C>
Total......................... 39132 100.0%
In Family Households........ 23017 58.8% In Nonfamily Hhlds............ 13104 33.5%
Householder............... 12761 32.6% Male Householder............. 2408 6.2%
Spouse.................... 8528 21.8% Living Alone............... 2263 5.8%
0ther Relative............ 1639 4.2% Not Living Alone........... 145 0.4%
Nonrelative................. 89 0.2% Female Householder........... 10520 26.9%
Living Alone............ 10363 26.5%
In Group Quarters........... 3011 7.7% Not Living Alone........ 157 0.4%
Institutionalized......... 2975 7.6% Nonrelative................... 176 0.4%
Other..................... 36 0.1%
<CAPTION>
-------------- Spec. Owner-Occ Units ---------------
Monthly Owner Costs by Age of Householder
as a Percent of 1989 HH Inc. Total Units 65 Yrs +
------------------------------------------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Total.............................................. 62082 100.0% 16243 100.0%
Less than 20%.................................... 40785 65.7% 11191 68.9%
20 - 24%......................................... 8513 13.7% 1369 8.4%
25 - 29%......................................... 4579 7.4% 975 6.0%
30 - 34%......................................... 2435 3.9% 632 3.9%
35% or More...................................... 5440 8.8% 1955 12.0%
Not computed..................................... 330 0.5% 121 0.7%
<CAPTION>
-------------- Spec. Renter-Occ Units --------------
Gross Rent as Percent by Age of Householder
of 1989 HH Income Total Units 65 Yrs +
--------------------------------------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Total................................................ 33012 100.0% 6179 100.0%
Less than 20%...................................... 11015 33.4% 999 16.2%
20 - 24%........................................... 4611 14.0% 852 13.8%
25 - 29%........................................... 3506 10.6% 912 14.8%
30 - 34%........................................... 2390 7.2% 723 11.7%
35% or More........................................ 9531 28.9% 2162 35.0%
Not computed....................................... 1959 5.9% 531 8.6%
<CAPTION>
---------------- Occupied Housing Units ----------
Attribute Total Hhldr 65 +
------------------------------------------------------ ----------------- ----------------
Owner Occupied Units.................................. 74911 68.9% 19691 75.9%
Rnter Occupied Units.................................. 33752 31.1% 6240 24.1%
Compete Plumbing Facil................................ 108272 99.6% 25723 99.2%
Lacking Plumbing Facil................................ 391 0.4% 208 0.8%
With Telephone........................................ 102318 94.2% 25428 98.1%
No Telephone.......................................... 6345 5.8% 503 1.9%
One or More Vehicles.................................. 97973 90.2% 20098 77.5%
No Vehicles Available................................. 10690 9.8% 5833 22.5%
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America Inc. 32
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
(MSA 2440) Evansville et al, IN-KY
(Weight: 100.0%)
Senior Life Report (Page 6 of 7)
<TABLE>
<CAPTION>
Poverty Status by ----------------1990 Households by Age of Householder-------------------------------
Household Type Total Age 65-74 Age 75 +
----------------------------------------- ---------------------- ------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C>
Total.................................... 108685 100.0% 14858 100.0% 10831 100.0%
Married Couple Family................. 63317 58.3% 7553 50.8% 3326 30.7%
Other Family.......................... 13917 12.8% 1034 7.0% 848 7.8%
Male Householder.................... 2854 2.6% 161 1.1% 1471 0.4%
Female Householder.................. 11063 10.2% 873 5.9% 701 6.5%
Nonfamily............................. 31451 28.9% 6271 42.2% 6657 61.5%
HHer Living Alone................... 27855 25.6% 6070 40.9% 6556 60.5%
HHer Not Living Alone............... 3596 3.3% 201 1.4% 101 0.9%
Above Poverty............................ 95226 87.6% 12977 87.3% 8812 81.4%
Married Couple Family................. 60566 55.7% 7259 48.9% 3121 28.8%
Other Family.......................... 10007 9.2% 902 6.1% 769 7.1%
Male Householder.................... 2539 2.3% 157 1.1% 140 1.3%
Female Householder.................. 7468 6.9% 745 5.0% 629 5.8%
Nonfamily............................. 24653 22.7% 4816 32.4% 4922 45.4%
HHer Living Alone................... 21930 20.2% 4660 31.4% 4838 44.7%
HHer Not Living Alone............... 2723 2.5% 156 1.0% 84 0.8%
Below Poverty............................ 13459 12.4% 1881 12.7% 2019 18.6%
Married Couple Family................. 2751 2.5% 294 2.0% 205 1.9%
Other Family.......................... 3910 3.6% 132 0.9% 79 0.7%
Male Householder.................... 315 0.3% 4 0.0% 7 0.1%
Female Householder.................. 3595 3.3% 128 0.9% 72 0.7%
Nonfamily............................. 6798 6.3% 1455 9.8% 1735 16.0%
HHer Living Alone................... 5925 5.5% 1410 9.5% 1718 15.9%
HHer Not Living Alone............... 873 0.8% 45 0.3% 17 0.2%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 Projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America Inc. 33
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
(MSA 2440) Evansville et al, IN-KY
(Weight: 100.0%)
Senior Life Report (Page 7 of 7)
<TABLE>
<CAPTION>
Civilian Noninstitutionalized Persons Age 16+
Mobility and Disability Total Age 65+ Age 75+
----------------------------------------- ----------------------- ------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Persons................................ 211109 100.0% 36157 100.0% 14179 100.0%
With Mblty or Care Lmts.............. 14688 7.0% 7582 21.0% 4592 32.4%
Mobility Limits Only............... 5659 2.7% 3589 9.9% 2389 16.8%
Self Care Limits Only.............. 5197 2.5% 1649 4.6% 670 4.7%
Both Limits........................ 3832 1.8% 2344 6.5% 1533 10.8%
No Mblty or Care Limits.............. 196421 93.0% 28575 79.0% 9587 67.6%
With a Work Disability................ 26332 12.5% 12324 34.1%
In Labor Force...................... 5663 2.7% 517 1.4%
Employed.......................... 5009 2.4% 487 1.3%
Unemployed........................ 654 0.3% 30 0.1%
Not in Labor Force.................... 20669 9.8% 11807 32.7%
Prevented from Working.............. 18153 8.6% 10419 28.8%
Not Prevented from Wrk.............. 2516 1.2% 1388 3.8%
No Work Disability.................... 184777 87.5% 23833 65.9%
In Labor Force...................... 135291 64.1% 3381 9.4%
Employed.......................... 127398 60.3% 3299 9.1%
Unemployed........................ 7893 3.7% 82 0.2%
Not in Labor Force.................... 49486 23.4% 20452 56.6%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 Projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
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The McCurdy Residential Center, Evansville, Indiana
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(MSA 2440) Evansville et al, IN-KY
(Page 1 of 2)
1990 Demographic Overview Report (Weight: 100.0%)
Population 278990 Housing Units 117896 Median Age 34.1
Households 108685 Group Quarters 5904 Median HH Inc 27229
Families 77234 Avg. HH Size 2.51 Median Value 53935
Vehicles 187239
<TABLE>
<CAPTION>
Income in 1989 Household Family Non-Family
----------------------------------- ------------------------ --------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Less than $5,000............. 7241 6.7% 3067 4.0% 4351 13.8%
$5,000 to $9,999............. 11308 10.4% 3906 5.1% 7529 23.9%
$10,000 to $12,499............. 5665 5.2% 2868 3.7% 2867 9.1%
$12,500 to $14,999............. 4696 4.3% 2609 3.4% 2114 6.7%
$15,000 to $17,499............. 5977 5.5% 3564 4.6% 2502 8.0%
$17,500 to $19,999............. 5288 4.9% 3632 4.7% 1660 5.3%
$20,000 to $22,499............. 5029 4.6% 3417 4.4% 1719 5.5%
$22,500 to $24,999............. 4372 4.0% 3115 4.0% 1225 3.9%
$25,000 to $27,499............. 5347 4.9% 3981 5.2% 1429 4.5%
$27,500 to $29,999............. 4384 4.0% 3333 4.3% 991 3.2%
$30,000 to $32,499............. 4879 4.5% 3899 5.0% 987 3.1%
$32,500 to $34,999............. 3587 3.3% 2995 3.9% 562 1.8%
$35,000 to $37,499............. 4243 3.9% 3640 4.7% 611 1.9%
$37,500 to $39,999............. 3529 3.2% 3112 4.0% 349 1.1%
$40,000 to $42,499............. 4015 3.7% 3567 4.6% 409 1.3%
$42,500 to $44,999............. 2947 2.7% 2594 3.4% 310 1.0%
$45,000 to $47,499............. 3104 2.9% 2830 3.7% 240 0.8%
$47,500 to $49,999............. 2505 2.3% 2252 2.9% 175 0.6%
$50,000 to $54,999............. 4990 4.6% 4530 5.9% 371 1.2%
$55,000 to $59,999............. 3420 3.1% 3049 3.9% 314 1.0%
$60,000 to $74,999............. 5876 5.4% 5458 7.1% 329 1.0%
$75,000 to $99,999............. 3458 3.2% 3249 4.2% 208 0.7%
$100,000 to $124,999............. 1252 1.2% 1128 1.5% 106 0.3%
$125,000 to $149,999............. 490 0.5% 478 0.6% 6 0.0%
$150,000 or More................. 1083 1.0% 961 1.2% 87 0.3%
Aggregate Income ($Mil)............. 3663 3052 581
Median Income....................... 27229 33523 13657
Average Income..................... 33709 39519 18495
<CAPTION>
Persons Persons
Educational Attainment 25 Yrs & Over Employment Status 16 Yrs & Over
---------------------------------------- ------------------- ------------------------------ ----------------------
<S> <C> <C> <C> <C>
Less than 9th Grade..................... 18674 10.3% In Labor Force.................. 141159 65.5%
9th - 12th Grade, No Dip................ 26659 14.7% Civilian...................... 140954 65.4%
High School Graduate.................... 67132 36.9% Employed.................... 132407 61.4%
Some College, No Degree................. 31334 17.2% Male...................... 70595 32.7%
Associate Degree........................ 10977 6.0% Female.................... 61812 28.7%
Bachelor's Degree....................... 16133 8.9% Unemployed.................. 8547 4.0%
Graduate/Prof. Degree................... 10832 6.0% Not in Labor Force.............. 74428 34.5%
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Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
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The McCurdy Residential Center, Evansville, Indiana
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(MSA 2440) Evansville et al, IN-KY (Page 2 of 2)
(Weight: 100.0%)
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Employed Employed
Industry Persons 16+ Occupation Persons 16+
-------------------------------------- --------------------- -------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Agriculture/Forest/Fish............... 2031 1.5% Managerial/Prof. Spec................. 29430 22.2%
Mining................................ 2027 1.5% Exec/Admin/Managerial............... 13554 10.2%
Construction.......................... 7563 5.7% Prof. Speciality.................... 15876 12.0%
Manufacture-Nondurable................ 15037 11.4% Tech./Sales/Admin. Sup................ 41240 31.1%
Manufacture-Durable................... 15303 11.6% Technician and Related................ 5296 4.0%
Transportation........................ 5331 4.0% Sales............................... 16018 12.1%
Communication/Pub. Util............... 3597 2.7% Administration Support.............. 19926 15.0%
Wholesales Trade...................... 6211 4.7% Service Occupation.................... 18134 13.7%
Retail Trade.......................... 25198 19.0% Private Household................... 245 0.2%
Finance/Ins/Real Estate............... 7053 5.3% Protective Service.................. 1664 1.3%
Business & Repair Serv................ 5619 4.2% Other Service....................... 16225 12.3%
Personal Services..................... 3569 2.7% Farming/Forestry/Fish................. 2099 1.6%
Entertain/Recreation.................. 1466 1.1% Precision/Craft/Repair................ 16743 12.6%
Professional & Related................ 29379 22.2% Operator/Fab./Laborer................. 24761 18.7%
Health Services..................... 13563 10.2% Mach.Op/Assem./Inspect.............. 12200 9.2%
Educational Services................ 8744 6.6% Trans. & Material Move.............. 6416 4.8%
Other Professional.................. 7072 5.3% Laborers............................ 6145 4.6%
Public Administration................. 3023 2.3%
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<CAPTION>
Transportation to Work Workers 16+ Travel Time to Work Workers 16+
-------------------------------------- --------------------- -------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Drive Alone........................... 106935 82.3% Less than 10 Minutes.................. 25006 19.3%
Carpooled............................. 14702 11.3% 10 to 19 Minutes...................... 54957 42.3%
Public Transportation................. 1175 0.9% 20 to 29 Minutes...................... 27528 21.2%
All Other............................. 7061 5.4% 30 Minutes or More.................... 22382 17.2%
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Units in Structure Housing Units Year Structure Built Housing Units
-------------------------------------- --------------------- -------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
1-Detached............................ 77717 71.5% 1989 To March 1990.................... 1165 1.1%
1-Attached............................ 1409 1.3% 1985 To 1988.......................... 7550 6.9%
2..................................... 4295 4.0% 1980 To 1984.......................... 9284 8.5%
3 or 4................................ 4479 4.1% 1970 To 1979.......................... 22192 20.4%
5 to 9................................ 5225 4.8% 1960 To 1969.......................... 13918 12.8%
10 To 19.............................. 4309 4.0% 1950 To 1959.......................... 17973 16.5%
20 to 49.............................. 2349 2.2% 1940 To 1949.......................... 13839 12.7%
50 or More............................ 1986 1.8% 1939 or before........................ 22742 20.9%
Other................................. 6894 6.3% Median Year Built..................... 1960
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Year Hhlder Moved In Housing Units Vehicles Available: Housing Units
-------------------------------------- --------------------- -------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
1989 To March 1990.................... 20954 19.3% None.................................. 10690 9.8%
1985 To 1988.......................... 29748 27.4% 1..................................... 35173 32.4%
1980 To 1984.......................... 14898 13.7% 2..................................... 43388 39.9%
1970 To 1979.......................... 20351 18.7% 3..................................... 14052 12.9%
1960 To 1969.......................... 10374 9.5% 4..................................... 4172 3.8%
1959 or Before........................ 12338 11.4% 5 or More............................. 1188 1.1%
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</TABLE>
Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
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HealthCare Property Appraisers of America Inc. 36
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The McCurdy Residential Center, Evansville, Indiana
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MARKET AREA AND NEIGHBORHOOD
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NEIGHBORHOOD
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NEIGHBORHOOD
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NEIGHBORHOOD
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The McCurdy Residential Center, Evansville, Indiana
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MARKET AREA AND NEIGHBORHOOD
MARKET AREA
The overall market area served by The McCurdy Residential Center covers a
wide geographic range. The proximity of the subject facility to its
supporting population base (i.e., prospective residents and their families)
is important to its successful operation. Prospective residents consider the
distance from their homes and neighborhoods, but also the distance from their
families and established support services (e.g., doctors, therapists).
Proximity to the subject facility may be less important for government
subsidized residents, who often have fewer choices and limited input in the
selection process. Financially independent residents can afford to be
selective about their living accommodations, but are often more concerned
about the availability and quality of services. After considering a wide
range of facts pertaining to the subject market and neighborhood, we believe
the subject property's market area to include the metropolitan area of
Evansville.
NEIGHBORHOOD
Most communities tend toward groupings of consistent land uses, with areas
devoted to the various uses termed "physical neighborhoods." Neighborhood use
in this context can be further defined as: "A portion of a larger community,
or an entire community, in which there is a homogeneous grouping of
inhabitants, buildings, or business enterprises. Inhabitants of a
neighborhood usually have a more than casual community of interests and a
similarity of economic level or cultural background. Neighborhood boundaries
may consist of well defined natural, political or man-made barriers, or they
may be, more or less, defined by distinct changes in land use or in the
character of the inhabitants.'
Frank Ramsey of HealthCare Property Appraisers of America, Inc. inspected the
subject property and its neighborhood on April 5, 1997; all comments should
be considered to be relative to the date of inspection.
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The McCurdy Residential Center, Evansville, Indiana
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The subject neighborhood is the central business district of Evansville,
Indiana. We consider the subject neighborhood to include the area lying south
of Lloyd Expressway (Hwy. 62), north of Mulberry Street, east of the Ohio
River and west of Ninth Street.
The area is primarily commercial/retail and offices in nature. The various
property types found in this neighborhood are distributed approximately as
follows:
<TABLE>
<S> <C>
Multifamily 5%
Commercial/Retail 20%
Office 65%
Institutional 5%
Recreation/Parks 5%
---
Total 100%
</TABLE>
Multifamily properties, which make up approximately 5% of this neighborhood,
are approximately 50 years in age and fairly well maintained. They serve a
part of the multifamily market best described as transient tenants.
Multifamily housing in the neighborhood is primarily in the form of some
small resident hotels near the waterfront.
Retail structures constitute approximately 20% of the neighborhood and
consist of freestanding retail. They are well maintained and occupancy
appears to be full. Typical properties/tenants include small local
businesses, hotels and restaurants mostly supporting the Aztar Casino and
Hotel, the primary attraction in the downtown area. Most other large
retailers have moved to outlying malls and shopping centers.
Office buildings represent approximately 65% of the neighborhood, and
typically consist of walk-up, lowrise and midrise structures. They are
approximately 25+ years in age,, and rated good in maintenance and condition.
Typical office occupants include 1st Citizens, Old National and other local
bank offices, an IBM Branch office and a television studio office.
Institutional structures comprise approximately 5% of the neighborhood. They
consist of Willard Library, Vanderburgh Convention Center, the old
courthouse, Evansville Arts & Science Museum and the Soldiers and Sailors
Memorial Coliseum. These structures are well maintained. Houses of
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The McCurdy Residential Center, Evansville, Indiana
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worship of several denominations are within a five minute drive of subject.
Parks and recreational facilities, representing approximately 5% of the
neighborhood, consist of small open parks along the riverfront. The nearest
hospital is the Welborn Baptist Memorial Hospital, which is approximately
three blocks from the subject.
The subject property is joined by a city owned park and parking lot on its
north side; the Riverside Hotel and Hadi Shrine Temple on its south side; the
Ohio River across Riverside Drive on its west side; and a parking lot across
1st Street on its east side. Streets in the neighborhood are primarily paved
with curbs, gutters and storm drains. The neighborhood has good access to the
area's major traffic arteries, which include the Lloyd Expressway (Hwy 62),
Highways 41, 66 and 164, all easily accessed within one mile from the
subject. The area receives water and sewer service from Evansville.
Electricity, gas and telephone services are provided by local utility
companies.
The subject property is considered to be in general conformity with other
properties in the neighborhood. The appearance and reputation of this area
generally is considered to be good, and the property values in the area
appear to be stable. We expect that trend to continue over the next few years.
Neighborhoods generally evolve through a pattern of growth and development.
They evolve from vacant, unimproved land through slow growth, steady to rapid
growth, reach a built-up or stagnant phase, and then begin to decline, with
various plateaus and modernization periods along the way. In that continuum
of growth, development and aging, the subject neighborhood is currently
considered to be stable with some office construction in progress and
renovation of some other older structures observed.
In summary, this neighborhood is considered to be primarily a downtown
office, entertainment and hotel complex along the Ohio Riverfront. The new
casino has given the downtown area a boost and we suggest this area will
continue to improve.
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SITE DATA
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The McCurdy Residential Center, Evansville, Indiana
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SITE DATA
LOCATION: The McCurdy Residential Center site is located at 101 Southeast
First Street, in the central downtown district.
PHYSICAL CHARACTERISTICS: The subject is a corner lot with approximately 400
front feet along the west side of 1st Street, approximately 400 front feet
along the east side of Riverside Drive and 400 front feet on the south side
of Locust Street. It is square in shape and contains approximately 31,363 sf
of gross area, based upon a site inspection. The site is directly across
Riverside Drive, a divided four-lane scenic traffic artery, from the Ohio
River.
ZONING: According to Brenda Hill with the City of Evansville Town Hall, the
subject property is zoned C-3, which is a downtown commercial business
district use. The subject improvements are considered to be a legal
conforming use.
TOPOGRAPHY: , The subject site lies at street grade. General area topography
is level. The subject site is basically level. This tract is cleared and
drainage appears adequate.
SOIL ANALYSIS: Mineral deposits, if any, were disregarded by the appraiser.
No soil analysis has been prepared as a part of this report. However,
considering the number and type of existing improvements on surrounding
sites, it is assumed the subject property has sufficient soilbearing
qualities for any type building or construction that might be contemplated
thereon. Soil and subsoil appear to be the sandy loam typically found in this
part of Indiana. It is assumed that soils at the site are generally of medium
plasticity, with shrink/swell potential typical of the area. Soil conditions
in this part of Evansville do not appear to have limited land development.
EASEMENTS AND ENCROACHMENTS: Our site inspection of The McCurdy Residential
Center revealed no adverse easements or encroachments. This property is
subject to typical street and utility easements. It should be noted that we
would defer to competent legal counsel for verification of these and all
other legal matters.
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The McCurdy Residential Center, Evansville, Indiana
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ACCESS: Access to the site is considered good. It has one access point from
Locust Street, a paved, two-lane street and one access point from 1st Street,
a paved two-lane street. Access is into somewhat limited on site parking and
access to service entrances. There is ample off street public parking nearby.
VISIBILITY: The site's visibility is rated good from the entire surrounding
area as the subject is a prominent landmark.
DRAINAGE/FLOOD ZONE: According to National Flood Certification Services,
Inc., the subject property is located on a National Flood Insurance Program
Map (NFIP). It is found on Community Panel # 1802570007B, dated 10/15/81, in
an area designated as Zone C. A copy of their certification is located in the
addenda of this report. This Zone generally refers to: "Areas of minimal
flooding". The site is approximately 30 feet above the river.
UTILITIES: The site is served by all municipal utilities and services
including water, sewage, police and fire protection. Gas, telephone and
electricity are provided by public utility firms.
TRAFFIC ARTERIES: The site has good proximity to major traffic arteries. It
is one mile from Highways 41, 62, 66 and 164, all major highways through the
Evansville area.
TAXES: Claudette Robinson in the tax assessor's office reported that the
assessor's reported tax value for real estate is $360,470 and the assessed
value is the same. The tax rate for the county is $10. 11 per $100 of
assessed value. This indicates an annual tax of $36,443.51 for the subject
property, calculated as follows:
Real Estate Tax Assessment X Tax Rate = Annual Taxes
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$360,470 X $0.1011 = $36,443.51
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The McCurdy Residential Center, Evansville, Indiana
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HIGHEST AND BEST USE
The Highest and Best Use of land is that use which may be reasonably expected
to produce the greatest net return to the land over a given period of time.
Moreover, it is that legal use which will yield to the land the highest
present value which is economically feasible, legally permissible and
maximally productive. The Highest and Best Use analysis is the basis for the
final conclusions drawn in this report.
Land is valued as though it were unimproved and available for whatever use
would produce the maximum return. Improved property is valued according to
the extent to which the improvements are consistent with the Highest and Best
Use of the site as if unimproved. The Highest and Best Use of the total
properties "as improved" is often determined to be different from the Highest
and Best Use of the land when considered as though "unimproved" and available
for development. In most cases, the existing use will continue until the land
value under its Highest and Best Use exceeds the total value of the property
in its existing use. As long as improvements contribute to the land, they
constitute the Highest and Best Use.
HIGHEST AND BEST USE - UNIMPROVED
Legal uses for the subject land, if unimproved, include: Apartments,
Retirement Apartments, Offices, Commercial Retail, Motels, Condominiums and
Retirement Homes.
The site's physical characteristics of this site, i.e., size, shape, terrain,
etc. would permit the following uses: Apartments, Retirement Apartments,
Offices, Commercial Retail, Motels, Condominiums and Retirement Homes.
Our market analysis indicates there could be sufficient demand in the general
marketplace and in this specific location for the following uses: Apartments,
Retirement Apartments, Offices, Commercial Retail, Motels, Condominiums and
Retirement Homes.
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The following might be economically feasible: Apartments, Retirement
Apartments, Offices, Commercial Retail, Motels and Retirement Homes.
The most probable and reasonable uses for the subject property, if
unimproved, might include development of: Retirement Apartments, Offices,
Commercial Retail, Motels, Condominiums and Retirement Homes.
When considering the subject site as an unimproved tract of land, and after
considering all alternative uses, it is the appraiser's opinion that
Retirement Home use would be the Highest and Best Use: (a) at this time, (b)
after a time period sufficient to allow completion of any necessary
improvements and (c) at the time of estimated stabilized occupancy.
HIGHEST AND BEST USE - AS IMPROVED
There are uses other than the current one that would give an attractive
return to this land. However, there is no alternative use that would yield a
large enough return to justify removal or substantial renovation of the
existing structure. The subject improvements are functional in size, layout
and utility and do not contain any depreciation of sufficient amount; the
cost of an alternative use would not be justified. The subject property has
operated for several years as a Retirement Home and has developed a
reputation which, in this market, assures reasonable occupancy. Staffing
appears adequate and no unresolvable operational problems were uncovered. It
would appear that this operation is successful and is giving a good return to
the underlying land. The underlying land value does not warrant the
demolition of the present subject building improvements.
The appraiser considered several alternative uses for the land underlying The
McCurdy Residential Center. No alternative utilization other than for a
Retirement Home was considered likely to give a higher return in the
immediate future. Therefore, the use contemplated by our study; i.e.,
Retirement Home use, is considered to be in conformity with the subject
property's Highest and Best Use As Improved.
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DESCRIPTION OF IMPROVEMENTS
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The McCurdy Residential Center, Evansville, Indiana
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DESCRIPTION OF IMPROVEMENTS
Long-term care facilities must be designed with specific needs in mind.
Typical residents frequently have partially impaired vision, hearing, sense
of touch, mobility, agility, and orientation to time and place. To compensate
for a decrease in ability to distinguish colors, brightness, and depth
perception, developers need to emphasize bright colors against neutral
backgrounds and bold prints. There is also a need for increased interior and
exterior lighting, prevention of glare, and an emphasis on different color
carpets to distinguish stairs from floors. To compensate for decreased
overall hearing ability, reduced capability to discern high pitched sounds,
and inability to discriminate normal conversation from background noises,
developers need to emphasize amplifiers on telephones, PA systems, smoke
detectors, installation of alarm systems with flashing lights, and sound
absorbing materials in areas promoting socialization. To deal with poor
mobility and agility, including the use of wheelchairs, canes and walkers,
developers need to be cognizant of the length of halls, chairs versus
benches, smooth walking surfaces, wide halls and doorways for wheelchairs,
automatic sliding doors, the placement of handrails usable by both wheelchair
and ambulatory residents, and special kitchen and bathroom arrangements.
Decreased sensitivity to touch and circulation requires an awareness of the
increased need for and ease of adjustment in heating/cooling for the private
areas, and attention to the environmental tactile question in general. Poor
orientation to time and place and memory loss can be assisted by
environmental cues such as different colored floors, culturally familiar
designs, activity boards, and large clocks. A well designed facility for the
disabled will incorporate many or all of these features. The subject property
includes a number of these features.
Frank M. Ramsey of HealthCare Property Appraisers of America, Inc. made an
inspection of the subject property on April 5, 1997. The following
description of improvements describes building as it appeared to our
inspector on the date of inspection.
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The McCurdy Residential Center, Evansville, Indiana
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The subject site was is improved with an eight-story building utilized as The
McCurdy Residential Center. The structure's initial completion date was 1916.
The subject was used for many years as a hotel. It is irregular in shape. The
appraiser considered the subject building structure to contain a functional
area of approximately 135,350 sf or 457 sf per bed. The building was
converted to health care in 1970 and has gone through several renovations,
the last in 1988. It has offices, lounges, lobby and physical therapy space
on the ground floor, kitchen and primary dining and resident rooms on the 8th
floor, and resident rooms on the 2nd through 7th floors. Rooms are either
suites with sitting room, bedroom and bathroom or a single bedroom with
bathroom. Each resident floor has a large sitting room overlooking the river
and a nursing station/office. The two-story main lobby is quite grand with
marble floor, large columns and chandeliers and reflects the elegance of the
original hotel. This building is on the National Register of Historic
Buildings.
The structure appraised contains all of the functional spaces typically found
in buildings designed for Retirement Home occupancy including offices, lobby,
activity department, physical therapy, beauty shop, kitchen and dining area,
laundry, chapel, nurses' stations, public and employee baths, and bedrooms.
The dining room is capable of seating all residents at once so that meals are
served at one sitting per meal. The structure has a total possible
utilization of 296 beds and is configured for 296 beds.
The subject's physical structure appears to be of good quality construction
and amenities. The physical plant has good appeal to potential residents and
their families with sufficient financial resources to be selective in their
choice of a facility.
No Physical Deterioration-Curable (deferred maintenance) was noted. The
structure contains no Functional Obsolescence and the facility is considered
to be functional. No External or Economic Obsolescence is noted.
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The Effective Age of the structure is 30 years, and the Remaining Economic
Life is considered to be 20 years. Architecture and layout are considered
typical for a Retirement Home and in conformity with the community.
Following is a topical outline of the major improvements:
SITE PREPARATION: The building site was cleared, graded and
prepared for construction.
FOUNDATION: Concrete bearing walls.
FRAME: Reinforced concrete.
FLOOR STRUCTURE: Concrete on ground.
FLOOR COVERING: Carpet on pad, quarry tile, vinyl composition
tile, sheet vinyl and marble.
CEILING: Acoustical, organic fiber and gypsum board, taped and
painted with finish only on exposed roof structure.
INTERIOR CONSTRUCTION: Framed and masonry.
PLUMBING: All patient rooms' baths are two- or three-fixtured china/porcelain
fixtures including chrome hardware, grab bars, and other invalid aids.
Patient tubs and showers are institutional type with non-slip surfaces, grab
bars, shower hoses, and non-ambulatory lifts. The property has adequate
plumbing of good quality for its intended use. 243 rooms have a full, private
bath with a tub or shower.
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SPRINKLER: None.
HEATING, COOLING, VENTILATION: The property is heated with a gas steam
radiator with a heat pump which also provides air conditioning and air
conditioned with refrigerated cooling and air conditioned with window units.
ELECTRICAL: Fully wired and lighted with three-phase wiring, adequate to
provide lighting and power for all equipment operation including fluorescent
and incandescent lighting, reading lights over each bed, nurse call system,
fire alarm system, and intercom system. The diesel generator has a 175 KW
rating.
EXTERIOR WALLS: Face brick.
INTERIOR STAIRS: There are 24 flights of concrete and steel stairs.
STORE FRONT: 500 square feet of plate glass.
ELEVATORS: The property contains three traction (cable) elevators, two
passenger and one freight, serving 8 floors:
SHAFTS STOPS QUALITY (1-4)
3 8 3
ROOF STRUCTURE: Concrete joists and slab.
ROOF COVER: Hypalon-neoprene with gravel ballast.
BASEMENT: Concrete reinforced walls with partially finished interior and
finished electrical and lighting.
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<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
PARKING: Parking and drives of 2" plant mix asphalt on a crushed stone base.
Marked parking areas.
DOORS & WINDOWS: Solid core interior doors and double-hung windows in
aluminum frame.
EQUIPMENT: Specialized equipment pertinent to the operation of the facility
as a Retirement Home facility has been considered in valuing the subject
property. Included in this category are institutional type kitchen equipment,
stainless steel sinks, food preparation counters, ovens, stoves, dishwashers,
walk-in coolers and freezers, exhaust fans and grease traps. Laundry
equipment includes 4 Uni-Mac and 1 Maytag washers and 5 Huebsch and 1 Maytag
dryers rated average in condition. Kitchen equipment includes one Hobart
dishwasher, one Penn walk-in freezer, one Penn walk-in cooler, two Hobart
freestanding coolers and one Vulcan range/oven rated average in condition.
ROOM FURNISHINGS: Include a bed, night stand, chair, and retractable privacy
curtain.
WALKS & DRIVES: Walks are approximately 41" wide and constructed of 2 1/2"
concrete.
LANDSCAPING: Rated good. The lawn is well established.
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HealthCare Property Appraisers of America, Inc. 51
<PAGE>
COST APPROACH TO VALUE
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- ------------------------------------------------------------------------------
<PAGE>
The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
COST APPROACH TO VALUE
The Cost Approach is frequently a reliable indicator of a property's value.
The Principle of Substitution dictates that The McCurdy Residential Center
will be worth no more than the cost to reproduce improvements with equal
utility on an equally desirable site. Conversely, in an active building
market, most properties are usually worth at least as much as their cost to
reproduce. Otherwise, developers would not be building comparable buildings.
The initial step in the Cost Approach was the estimation of land value. The
appraiser next estimated the current construction costs to replace subject's
building improvements. The appraiser also considered the possible existence
of the three types of depreciation: Physical Deterioration, Functional
Obsolescence, and External Obsolescence.
To estimate the actual construction cost of the improvements, the appraiser
consulted with various contractors and architects familiar with this type
construction. We also have personal knowledge of comparable structures which
have been built and are familiar with their actual costs. Finally, we checked
with Marshall and Swift Valuation Service to ascertain the current cost
factors for this type construction in Evansville.
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The McCurdy Residential Center, Evansville, Indiana
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SITE VALUATION
There are several methods which appraisers may use to estimate vacant land
values. These methods include the direct sales comparison, allocation, land
residual technique, direct capitalization of ground rent, and the land
development method. The direct sales comparison method is based upon the
principle of substitution. This is the best method whenever adequate
quantities of verified comparable sales data is available. We have used both
the direct sales comparison and allocation methods. For Retirement Home
sites, the land residual or land development methods are not a reliable
indicator of value.
DIRECT SALES COMPARISON
The direct sales comparison technique is based on the economic principle of
substitution. This principle states the value of a property tends to be fixed
by the costs of acquiring an equally desirable substitute property with the
same or similar utility and physical characteristics. Comparisons are made
between the property appraised and the sales of similar properties which have
occurred in the marketplace. Typically, units of comparison are derived such
as a sales price per square foot, sales price per front foot, or sales price
per building unit. In the case of an apartment property, the economic
indicator might be cost per apartment, whereas in the case of a nursing home,
the unit of value would be cost per patient bed. The comparables are adjusted
to reflect similarities and dissimilarities of each to the subject for such
characteristics as location, time of sale, existing market conditions, and
the physical characteristics of the property. The adjusted sales prices of
the comparables then become an indication of value for the subject. In the
case of the subject, we have looked to properties with similar zoning and
land use which have sold within the Evansville area.
The comparable sales utilized in this analysis are summarized in the land
sales summary and the adjustment grid which follow this section. A complete
description of the individual sales used is also included within this section.
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<PAGE>
The McCurdy Residential Center, Evansville, Indiana
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LAND SALE #1
<TABLE>
<S> <C>
LOCATION: 111-127 NW Fifth Street
BUYER: Old Jail Management Corp.
SELLER: People's Savings Bank
DATE OF SALE: 01/97
SIZE: 22,265 s.f.
FRONTAGE: 150 FF
ZONING: C-3
SALE PRICE: $200,000
COST/UNIT: $8.98 s.f.
COMMENTS: Parking lot.
</TABLE>
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The McCurdy Residential Center, Evansville, Indiana
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LAND SALE #2
<TABLE>
<S> <C>
LOCATION: 101 S. Fulton
BUYER: RDR Parking
SELLER: Boetticher & Kellogg Property
DATE OF SALE: 09/95
SIZE: 3.65 Acres
FRONTAGE: Irregular
ZONING: M-1 /M-3
SALE PRICE: $1,725,000
COST/UNIT: $10.85 s.f.
COMMENTS: Land size 2.82 Acres plus an estimated .83 acres of vacated GoodSell and
NW 1st street. Sale price includes demolition costs of $225,000. Located
across the street from the new River Boat Casino dock. Purchased for
casino parking.
</TABLE>
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<PAGE>
The McCurdy Residential Center, Evansville, Indiana
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LAND SALE #3
<TABLE>
<S> <C>
LOCATION: 212-214 Vine
BUYER: The EVV Printing Company
SELLER: N/A
DATE OF SALE: 02/96
SIZE: 2 Acres
FRONTAGE: 150 FF
ZONING: C-3
SALE PRICE: $495,000
COST/UNIT: $5.70 s.f.
COMMENTS: This was an offer that was not accepted. The broker felt another
10% to 20% would have consummated the transaction.
</TABLE>
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The McCurdy Residential Center, Evansville, Indiana
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LAND SALE #4
<TABLE>
<S> <C>
LOCATION: 516-526 Court Street
BUYER: Kenneth Rueger
SELLER: W. J. Thurgood
DATE OF SALE: 05/94
SIZE: 19,235 s.f.
FRONTAGE: 155 FF
ZONING: C-4
SALE PRICE: $85,000
COST/UNIT: $4.42 s.f.
</TABLE>
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<PAGE>
The McCurdy Residential Center, Evansville, Indiana
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LAND SALE #5
<TABLE>
<CAPTION>
<S> <C>
LOCATION: 5th and Walnut
BUYER: Wellbourne Memorial Baptist
SELLER: O'Daniel Ranes
DATE OF SALE: 02/94
SIZE: 132,000 s.f.
FRONTAGE: Corner
SALE PRICE: $1,201,677
COST/UNIT: $9.09 s.f.
COMMENTS: Older buildings valued at $200,000 were included. Seller also
received a tax deduction for gift donation of one parcel. A
downward adjustment of $250,00 is appropriate to the actual
sale price of $1,201,677.
</TABLE>
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The McCurdy Residential Center, Evansville, Indiana
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LAND SALE #6
<TABLE>
<S> <C>
LOCATION: 122 NW 4th Street
BUYER: Southern Industrial Properties
SELLER: Robbie Kent
DATE OF SALE: 10/91
SIZE: 15,000 s.f.
ZONING: C-4
SALE PRICE: $120,000
COST/UNIT: $8.00 s.f.
</TABLE>
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The McCurdy Residential Center, Evansville, Indiana
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<TABLE>
<CAPTION>
LAND SALES SUMMARY & ADJUSTMENT GRID
- ---------------------------------------------------------------------------------------------------------------------------------
Comparison # Subject No. 1 No. 2 No. 3 No. 4 No. 5 No. 6
Address 101 SE 113-127 101 S 212-214 Vine 516-526 5th & 122 NW
First NW 5th Fulton Evansville Court Walnut 4th
Evansville Evansville Evansville IN Evansville Evansville Evansville
IN IN IN IN IN IN
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SITE DATA
Size (SF) 31,450 22,275 158,994 86,892 19,235 132,147 15,000
Size (Acres) 0.72 0.51 3.65 1.99 0.44 3.03 0.34
Zoning C-3 C-3 M1/M3 C-3 C4 C-3/4 C-4
Topography Level Level Level Level Level Level Level
Utilities All All All All All All All
SALE DATA
Reported Sale Price $200,000 $1,725,000 $495,000 $85,000 $951,677 $120,000
Sale Price / SF $8.98 $10.85 $5.70 $4.42 $7.20 $8.00
Sale Price / Acre $391,111 $472,603 $248,149 $192,493 $313,704 $348,480
Transaction Type ---- Closed Closed Offer Not Closed Closed Closed
Accepted
Rights Conveyed ---- Fee Simple Fee Simple Fee Simple Fee Fee Simple Fee
Simple Simple
Financing Terms ---- Cash Cash Cash Cash Cash Cash
adjustment ---- ---- ---- ---- ---- ---- ---
Condition of Sale ---- Arm's Arm's Offer Not Arm's Arm's Arm's
Length Length Accepted Length Length Length
---- ---- $25,000 ---- ---- ---
Recorded Sale Date ---- 1/97 9/95 2/96 5/94 2/94 10/91
adjustment ---- ---- 4% 3% 10% 10% 15%
Location ---- Similar Superior Inferior Inferior Similar Similar
adjustment ---- ---- -25% 50% 75% ---- ---
Size ---- Similar Larger Similar Similar Larger Similar
adjustment ---- ---- 10% ---- ---- 10% ---
Zoning ---- Similar Similar Similar Similar Similar Similar
adjustment ---- ---- ---- ---- ---- ---- ---
Topography ---- Similar Similar Similar Similar Similar Similar
adjustment ---- ---- ---- ---- ---- ---- ---
Frontage/Visability ---- Similar Similar Similar Similar Similar Similar
adjustment ---- ---- ---- ---- ---- ---- ---
Utilities ---- Similar Similar Similar Similar Similar Similar
adjustment ---- ---- ---- ---- ---- ---- ---
Adjstd Price / Sq Ft $8.98 $9.31 $9.25 $8.51 $8.71 $9.20
Avg Price / Sq Ft $8.99
Adjstd Price / Acre $391,111 $405,493 $383,391 $370,549 $379,582 $400,752
Avg Price / Acre $388,480
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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The McCurdy Residential Center, Evansville, Indiana
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RECONCILIATION OF COMPARABLE SALES
The comparables have already been adjusted to the subject in respect to
location, size, zoning, topography, corner influence, and utilities. The
unadjusted sales prices range from $4.42 to $10.85 per square foot. After the
adjustments, the comparables form a tighter range of $8.51 to $9.31 per
square foot. The average adjusted price per square foot was $8.99. Typically,
the comparables which have the least adjustments are most representative of
the subject. Accordingly, it is our opinion that the subject 31,363 sf site
has a market value of $285,000 or $9.00 sf.
Considering the land sales data available and prices being paid by developers
of Retirement Homes in similar communities, we estimate the land value of the
site supporting the building and improvements to be $285,000 or $9.00 s.f.
This represents the following value per indicator:
<TABLE>
<CAPTION>
<S> <C>
Land Value Per Size Unit $9.00 sf
Land Value Per Unit (bed/apt) $963/bed
Land Value as % of Project Cost 1.44%%
SITE VALUE $285,0008
---------
---------
</TABLE>
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The McCurdy Residential Center, Evansville, Indiana
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BUILDING COSTS
This appraisal firm compiles construction cost data on new and proposed
facilities throughout the United States. The hard construction costs vary
considerable depending upon geographical location and quality of
improvements. To estimate the Replacement Cost of The McCurdy Residential
Center, the appraiser utilized the Segregated Cost Method of cost estimating.
This method is designed to give separate consideration to all the major
construction components of a building. Many parts of a building, such as
floor, ceiling and lighting, increase in cost directly as the floor area of
the building increases. Other building costs vary with relation to parameters
other than the floor area. However, most costs can be related to floor area,
wall area, roof area, or sometimes an individual count of unit installations.
To facilitate the application of these individualized costs, they are grouped
so that all costs related to floor area can be added together and applied to
the total floor area, all wall area costs can be added together and applied
to the wall area, and all roof costs can be applied to the ground floor or
roof area.
The appraiser utilized the Marshall and Swift Valuation Service, which is the
most widely recognized cost estimating manual in the world. This manual
separates each type of building by occupancy, type of construction, and
quality. It also makes adjustments for current cost factors on a monthly
update basis.
Using the Marshall and Swift Valuation Service, the appraiser selected the
particular construction characteristics of The McCurdy Residential Center
building improvements and selected the appropriate quantity cost factors and
adjustments.
Using the computer program, a Replacement Cost New of subject's building
improvements as well as individual estimates of depreciation for each
component item were developed. The computer
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calculations included all Direct Costs. The Marshall and Swift Valuation
Service includes architectural fees, loan interest and some other minor
Indirect Costs. It specifically excludes some of the costs of doing business,
or Indirect Costs, which we have estimated as follows:
<TABLE>
<CAPTION>
<S> <C>
Taxes 0.4%
Marketing 0.4%
Loan Points and Fees 2.0%
Legal 0.5%
Accounting 0.2%
Government Licensure & Permits 4.5%
Working Capital 4.0%
-----
Total Indirect Costs 12.0%
</TABLE>
Our estimate of Indirect Costs and Developer's Profit and Overhead were based
on a percentage of Total Cost-New (depreciated at the same rate as the
building improvements). The Total Cost-New includes not only Direct Cost of
construction, as developed by the Marshall and Swift Valuation Service, but
also the cost of land, furniture, fixtures and equipment.
The Developer's Profit and Overhead was estimated at 15% of the Total
Cost-New. As an alternative to investors, Baa Bonds are currently yielding
seven to eight percent. The developer's profit should be higher than the Baa
Bond rate as it is somewhat riskier.
HealthCare Property Appraisers of America, Inc. compiles cost data on
furniture, fixtures and equipment budgets for facilities like subject. A
summary of some of the more recent transactions follows:
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The McCurdy Residential Center, Evansville, Indiana
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NURSING HOME EQUIPMENT COST DATA
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PRICE OF COST OF
DATE SOLD CITY STATE # BEDS FF&E FF&E/BED
--------- ---- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C>
05/92 Clearwater FL 120 $210,000 $1,750
02/90 Fluvanna VA 60 $225,000 $3,750
03/90 Goochland VA 72 $250,000 $3,472
04/92 Decaturville TN 60 $210,000 $3,500
02/92 Charlotte NC 120 $420,000 $3,500
05/92 Asheville NC 120 $420,000 $3,500
01/92 Virburnum MO 60 $120,000 $2,000
09/91 Corrigan TX 90 $160,000 $1,778
09/91 Wells TX 96 $168,000 $1,750
09/91 Brownwood TX 130 $230,000 $1,769
10/91 Port Orange FL 120 $600,000 $5,000
07/91 Orange City FL 120 $600,000 $5,000
05/91 Covington TN 196 $350,000 $1,786
02/91 Melbourne FL 120 $315,000 $2,625
04/91 Whites Creek TN 97 $280,000 $2,887
07/92 Casper WY 120 $350,804 $2,923
07/92 Palm City FL 116 $650,000 $5,603
07/92 Ashland TN 90 $260,000 $2,889
02/94 Lychburg VA 100 $380,000 $3,800
06/93 Ashland City TN 90 $260,000 $2,889
05/94 Hilo HI 120 $490,000 $4,083
12/95 Dyer TN 120 $400,000 $3,333
------
Average $3,163
Minimum $1,750
Maximum $5,603
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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The McCurdy Residential Center, Evansville, Indiana
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After considering the geographical location, size, and quality of the
subject property, we believe a cost new of $3,500 per unit to be appropriate.
This indicates a personal property value for the subject as follows:
<TABLE>
<CAPTION>
FF&E COST NEW X # OF INCOME = FF&E COST NEW
(PER UNIT) GENERATING UNITS (TOTAL)
-------------- ---------------- ------------
<S> <C> <C>
$3,500 X 296 Beds = $1,036,000
</TABLE>
Our on-site inspection of The McCurdy Residential Center did not reveal any
obvious Physical Deterioration-Curable (deferred maintenance). Overall, the
property appeared to be well maintained and only normal maintenance
situations were observed. Physical Deterioration-Incurable, caused by natural
aging of the building structure in existing buildings, was estimated by the
Marshall & Swift Valuation Service based upon a data bank of sold depreciated
properties.
The depreciation section of the Marshall and Swift Valuation Service is
primarily designed to measure Physical Deterioration-Incurable only. It does
not measure Physical Deterioration-Curable, i.e., Deferred Maintenance, or
any loss in value due to Functional Obsolescence that might be found in the
specific subject property, or External Obsolescence that might exist in the
subject neighborhood. The Marshall and Swift Valuation Service calculations
are based upon analysis of actual sales data from a large number of
properties of subject's type that have been sold within the last year. These
sales prices, after deletion of personal property and land values, are
compared to construction cost figures for new and similar properties. The
resulting depreciation estimate by the Marshall and Swift Valuation Service
will not exactly equal depreciation when calculated on an age-life basis
(which is basically an accounting method that has little or nothing to do
with the market place.) The Marshall and Swift market data method is
considered to be a more refined and accurate method as it is based on actual
data from the market.
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The real estate is functional in all respects and considered to be
competitive with Retirement Homes being constructed today. Therefore, no
Functional Obsolescence was deducted.
Our inspection of the neighborhood and the surrounding properties did not
reveal any situations which would detract from subject's value. Therefore, no
deduction was made for External Obsolescence.
Our physical inspection of the subject indicated that the personal property,
i.e. furniture, fixtures and equipment, is generally in good condition
relative to its age. We have assumed an average useful life of ten years and
an effective age of 5 years, indicating depreciation of 50% (5 years divided
by 10 years).
Depreciation on the personal property is estimated as follows:
<TABLE>
<CAPTION>
FF&E COST NEW X % DEPRECIATED = DEPRECIATION
------------- ------------- ------------
<S> <C> <C>
$1,036,000 X 50% = $518,000
</TABLE>
Following is a component breakdown of Replacement Costs for the improvements
and depreciation:
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OCCUPANCY: CONVALESCENT HOSPITAL
<TABLE>
<CAPTION>
CLASS: C Masonry COST RANK: 3.5 Above Average/High
EFFECTIVE AGE: 30 YEARS CONDITION: 3.0 Average
NUMBER OF STORIES: 8.0 AVERAGE STORY HEIGHT: 10.0
FLOOR AREA: 135,350 Sq. Ft. COST AS OF: 4/97
REPLACEMENT COST
COMPONENT UNITS COST NEW DEPR
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EXCAVATION & SITE PREPARATION:
Site Preparation................... 16,919 0.28 4,737 2,605
FRAME:
Concrete, Reinforced............... 135,350 12.08 1,635,028 899,265
FLOOR STRUCTURE:
Concrete, Elevated Slab............ 117,754 9.89 1,164,592 640,526
Concrete on Ground................. 17,595 3.69 64,927 35,710
SUBTOTAL........................... 1,229,519 676,236
FLOOR COVER:
Carpet and Pad..................... 81,210 5.09 413,359 227,347
Tile, Ceramic...................... 5,414 10.95 59,283 32,606
Tile, Quarry....................... 4,060 10.95 44,462 24,454
Vinyl Composition Tile............. 6,767 1.91 12,926 7,109
Vinyl Sheet........................ 27,070 4.56 123,439 67,891
Marble ........................... 10,828 33.94 367,502 202,126
SUBTOTAL........................... 1,020,971 561,533
CEILING:
Acoustical, Organic Fiber.......... 40,605 1.69 68,622 37,742
Finish Only........................ 40,605 0.75 30,454 16,750
Gypsum Board, Taped & Paint........ 54,140 1.46 79,044 43,474
SUBTOTAL........................... 178,120 97,966
INTERIOR CONSTRUCTION:
Interior Construction, Framed...... 13,535 21.63 292,762 161,019
Interior Construction, Masonry..... 121,815 23.50 2,862,652 1,574,459
SUBTOTAL........................... 3,155,414 1,735,478
PLUMBING:
Plumbing........................... 135,350 10.85 1,468,547 807,701
HEATING AND COOLING:
Gas Steam Radiator................. 121,815 4.28 521,368 286,752
Warm and Cooled Air................ 13,535 12.14 164,315 90,373
Refrigerated Cooling............... 67,675 6.04 408,757 224,816
Window Air Conditioner............. 175 1,202 210,350 115,693
SUBTOTAL........................... 1,304,790 717,634
ELECTRICAL:
Electrical......................... 135,350 14.11 1,909,788 1,050,383
EXTERIOR WALL:
Face Brick......................... 108,280 2.33 252,292 138,761
STORE FRONT:
Store Front........................ 500 51.11 25,555 14,055
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<CAPTION>
REPLACEMENT COST
COMPONENT UNITS COST NEW DEPR
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ROOF STRUCTURE:
Concrete Joists, Slab.............. 16,919 9.11 154,130 84,772
ROOF COVER:
Hypalon-Neoprene................... 16,919 4.38 74,104 40,757
ELEVATORS:
Elevator.......( 8 Stops).......... 3 118,846 356,538 196,096
SUBTOTAL SUPERSTRUCTURE 135,350 94.34 12,769,533 7,023,242
BASEMENT:
Concrete Reinforced Wall........... 20,155 16.97 342,030 188,117
Interior Const., Part Finished..... 20,155 12.11 244,077 134,242
Electrical, Finished............... 20,155 13.40 270,077 148,542
SUBTOTAL........................... 856,184 470,901
YARD IMPROVEMENTS:
Paving, Asphalt.................... 30,000 2.30 69,000 37,950
- ------------------------------------------------------------------------------------------------------------------------
TOTAL.................................. 13,694,717 7,532,093
ARCHITECT'S FEES....................... 7.4% 1,011,127 556,120
- ------------------------------------------------------------------------------------------------------------------------
REPLACEMENT COST NEW................... 135,350 108.65 14,705,844
DEPRECIATION........................... (45.0%) (6,617,631)
DEPRECIATED COST....................... 8,088,213
- ------------------------------------------------------------------------------------------------------------------------
ROUNDED TO NEAREST $100 14,705,800 8,088,200
Cost Data by MARSHALL & SWIFT
</TABLE>
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SUMMARY OF COST APPROACH
<TABLE>
- ------------------------------------------------------------------------------
<S> <C> <C>
Bldg. Improvements-Replacement Cost $14,705,800
Indirect Costs 1,923,216
Developer's Profit & Overhead @ 15% 2,404,020
-----------
Total Costs: $19,033,036
Less Depreciation:
Physical Deterioration - Curable $0
Physical Deterioration - Incurable
Replacement Costs 6,617,631
Physical Deterioration - Incurable
Indirect Costs 865,450
Physical Deterioration - Incurable
Devel. Profit & Overhead 1,081,812
Functional Obsolescence 0
External Obsolescence 0
----------
Total Depreciation 8,564,893
-----------
Depreciated Value $10,468,143
Land Value $285,000
-----------
Market Value--Real Estate $10,753,143
Add Furniture, Fixtures, Equipment $1,036,000
Less Depreciation 518,000
----------
Depreciated Value of FF&E $518,000
-----------
MARKET VALUE OF REAL & PERSONAL $11,271,143
PROPERTY BY COST APPROACH -- "AS IS"
(R) $11,270,000
-----------
-----------
- ------------------------------------------------------------------------------
</TABLE>
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INCOME CAPITALIZATION APPROACH TO VALUE
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INCOME CAPITALIZATION APPROACH TO VALUE
To estimate The McCurdy Residential Center's Market Value through the Income
Capitalization Approach, the appraiser estimated the total gross income the
project will generate by: (a) studying local and regional markets, (b)
considering the economic feasibility of the project itself, and (c)
considering competing projects and the underlying demand for this type
facility.
From the total Gross Income estimate was deducted an estimate for Vacancy and
Credit Loss. Even developments with extremely heavy demand usually experience
some loss of rent due to "down time," when living units are re-decorated
between residents. In addition, there are generally some bad debt losses in
most projects. The appraiser also deducted an estimate of all Expenses the
typical property owner might expect to incur. From this Net Operating Income
estimate, the appraiser processed an estimate of the property's Market Value.
This process is known as Capitalization, and is simply a conversion of Net
Operating Income into Market Value.
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GROSS INCOME
A Retirement Home's Effective Gross Income is determined by three factors:
(a) various daily charge rates, (b) payor type mix or census and (c)
occupancy rate. Daily charge rates vary significantly from property to
property, reflecting the services offered and the various payor sources. To
develop an accurate estimate of revenue, the appraiser typically interviews
the facility's administrator, financial officers and the reimbursement
specialist. Due to the confidential nature of this assignment, these
interviews as well as detailed financial statements were not available. The
appraiser was furnished and has analyzed the last year's profit and loss
statement. Our income for a stabilized year was projected by inflating the
historical data by 5%.
SUBJECT
The McCurdy Residential Center is licensed by the state for 10 Skilled Care
(SNF), 282 Intermediate Care (ICF), 15 Non-Certified Corp. and 4 Residential
Beds. The subject property is certified in accordance with federal
regulations pursuant to the Social Security Act as a provider of Medicaid
(Title XIX) Services and is certified for Medicare. It is currently
configured and operated with 296 beds. All units are either suites with
sitting room, bedroom and bath or a single bedroom with bath. The
administrator could not tell us how many of each.
INDIANA MEDICAID REIMBURSEMENT RATES
After years of battle with the state's nursing home industry that included a
number of Boren Amendment, and other court cases, Indiana's Office of Medicaid
Policy and Planning (OMPP) finally revised its 11-year-old rate-setting
methodology, which had limited annual rate increases to about 3.5 percent per
year (while the actual costs rose approximately 7.9 percent per year),
limited Medicaid payments for oxygen and other nonroutine medical supplies,
and automatically downgraded many resident conditions to intermediate care.
The new all-inclusive per diem system, which was developed after more than a
year of negotiations between OMPP and the
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state's nursing home industry, took full effect in February 1995. According
to OMPP, highlights of the new system include coverage of 90 percent of total
aggregate nursing facility Medicaid costs, increases in reimbursement for 43
percent of all facilities, improved incentives to care for patients with
extensive care needs (laying the groundwork for movement to a case mix
system), and inclusion of oxygen and other ancillary costs into the daily
rate. The state plans to transition the industry to a full-blown case
mix-based reimbursement system effective January 1, 1997. Approximately 68
percent of Indiana's nursing home residents are Medicaid beneficiaries.
As part of the Indiana Association of Homes for the Aging's new Quality Care
Indicator Program, the association's members will soon receive reports
documenting patient care information. Participation facilities will send
minimum data set information to the University of Wisconsin in Madison for
analysis, and the university will then create reports analyzing care
practices. The program is part of an association effort to establish an
objective way to measure quality and compare facilities' care practices.
MEDICAID
Indiana's current Medicaid system sets rates using actual prior-year
expenditures, inflated by the HCFA/SNF index to the mid-point of the current
rate year. Prior to February 1995, the state determined rates using projected
budgets. The current per diem rate is examined for each of eight cost centers
using the inflated prior year expenditures. Calculation of reimbursement for
most fixed costs is done on the basis of an occupancy level of 95 percent or
actual occupancy, whichever is higher. Rates are calculated separately for
facilities that have at least 20 percent or a minimum of eight skilled care
residents that meet the state's extensive care requirement. The
classification of residents as extensive care is based on the RUG-III system.
This special rate is reimbursed up to 115 percent of the median for these
facilities, and supplied oxygen and therapies are included in the per diem.
The state hopes this new reimbursement system will help transition the
industry to a case mix-based reimbursement system effective January 1, 1997.
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Currently, there is a staffing limit (excluding laundry workers) that limits
ICFs to no more than 4 hours of paid staff time per patient day, SNFs to no
more than 5.25 hours per patient day, and extensive care facilities to no
more than 6 hours per patient day. Prior to February 1995, the ICF and SNF
limits were set at 3.7 and 4.7 hours, respectively. Currently, all oxygen,
billable supplies, and therapies are included in the daily rate. Prior to
February 1995, these costs were billed outside the per diem rate and were
limited to item-specific rates set at the median of a sample of wholesale
prices. As an incentive for efficient operation, the current reimbursement
methodology includes a profit add-on equal to 50 percent of the difference
between a facility's costs and the median costs of comparable facilities,
with a cap of 5 percent of median costs. Only facilities with costs at or
below the median are eligible. all rates are subject to an overall rate limit
of 115 percent of the weighted median of allowable costs of comparable
facilities. This limit is calculated separately for intermediate and skilled
care. There are also separate levels of care for ventilator-dependent,
traumatic brain injury, and HIV patients, each with its own 115 percent
ceiling. As of March 1, 1996, the average per diem Medicaid reimbursement
rate was $71.04 for ICFs and $99.40 for SNFs.
CERTIFICATE OF NEED
Prior to July 1, 1996, Indiana required a CON for any increase in
Medicaid-eligible beds. The addition of uncertified beds did not always
require a CON; however, the state's board of health was required to confirm
that the additional beds were exempt from the CON process before construction
began. Facilities that violated this procedure were in danger of having their
nursing home licenses revoked. Nursing homes that wanted to add up to 15
private-pay non-Medicaid beds could also file for exemption, along with
religious or fraternal organizations that planned to build or add to nursing
homes that served only their members. In addition, nursing homes could build
replacement facilities provided they did not subsequently add supplementary
beds. Hospitals could also convert up to 30 acute care beds to SNF beds and
an additional 20 beds to either SNF or ICF beds without a CON. Further,
ownership of CONs could be sold or transferred if proper notification was
given to the state. However, Indiana's CON process expired effective July 1,
1996, and a renewal of the process has yet to be implemented as this book
goes to press.
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BED NEED METHODOLOGY
Prior to July 1, 1996, Indiana determined the number of beds needed for each
of its 92 counties by using the projected population and current utilization
rates for four age groups, assuming a 90 percent occupancy rate. This method
projected the number of beds needed three years forward from the current year
of utilization data. For example, 1996 bed need was based on 1993 utilization
data. If the current utilization rate fell below 90 percent or if additional
beds would have caused the utilization to fall below 90 percent, there was a
statutory presumption that no more beds were needed. However, since Indiana's
CON process expired effective July 1, 1996, the state no longer published
current bed need estimates or future bed need projections. Currently, nursing
homes in the state maintain an average occupancy rate of 83.5 percent. (The
Guide To The Nursing Home Industry, 1996 by HCIA Inc. and Arthur Anderson
LLP).
OCCUPANCY
The appraiser researched occupancy of this type facility on a national, state
and local basis. National statistics indicate long-term care facilities are
experiencing a nationwide occupancy of 91.0%. Indiana's Department of Human
Resources' most recent survey indicated a statewide occupancy of 84%. The
twelve month statement we reviewed indicates the subject had occupancy last
year of approximately 90%.
We believe a potential purchaser would likely project a stabilized occupancy
of 95.0% for the foreseeable future.
CENSUS OR PATIENT/RESIDENT MIX
The appraiser researched census-mix (the ratio of various payor types) in the
market area. Patient distribution between government reimbursed programs and
privately funded sources varies from state to state and facility to facility.
Statewide factors contributing to a high self-pay census-mix include the
existence of a Certificate of Need "CON" program, social factors, the state's
restrictiveness on qualifying residents, statewide occupancy, and the
adequacy of the
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state's reimbursement program. Indiana is considered medium in these areas.
Factors contributing to a high, self-pay census-mix in an individual facility
in Indiana include reputation, quality of care, facility's age, participation
in the Medicare program, competitiveness of rate structure, and therapeutic
programs offered. The subject rates medium in these areas.
The subject is currently experiencing the following census breakdown:
<TABLE>
<CAPTION>
Skilled + ICF + Residential = Total
------- --- ----------- -----
<S> <C> <C> <C> <C>
Current
Census 4% + 93% + 3% = 100%
Breakdown
</TABLE>
We believe a potential purchaser would project a stabilized nonmedicaid
(self pay, VA, medicare) ratio of 100% for the immediately foreseeable
future. Accordingly, we have used that nonmedicaid rate in our projections.
ANCILLARY/MISCELLANEOUS INCOME
Ancillary income generally refers to revenue generated from profit centers
other than room, board and basic healthcare (i.e., occupational, physical or
speech therapy). These additional services typically will average $1.00 to
$3.00 per patient day in an average facility and $5.00 to $15.00 in a
facility with a large high skilled census and substantial therapy programs.
The subject's ancillary charges have historically been between $1.75 and
$2.50 per day.
REVENUE SUMMARY
The appraiser reviewed the subject's historical operating statements to
compare the reasonableness of our projections. Management's operating
statements indicated an Effective Gross Revenue of:
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1996 $8,697,545
After studying actual historical financial statements, the operator's
projections, comparable rates, occupancy and census-mix, the appraiser
projected the subject's Effective Gross Revenue. The appraiser inflated the
most recent income and expenses by 5% and estimated an Effective Gross
Revenue of:
Appraiser's Effective Gross Revenue: $8,958,472
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EXPENSES
To estimate expenses for the subject, the appraiser reviewed the last 12
month operating statement from the subject.
HEALTHCARE DEPARTMENT expenses include all those services required to provide
nursing and/or personal care and all ancillary and therapy services.
Stabilized staffing includes: directors of nursing (DON), ward clerks,
therapists, social services, in-service coordinator, activities director,
activities staff, registered nurses, licensed practical nurses and certified
nursing assistants.
HEALTHCARE EXPENSES
<TABLE>
<CAPTION>
$ %
Annual EGI
---------- -----
<S> <C> <C>
1996 Historical $3,508,995 40.3%
Appraiser's Stabilized $3,614,265 40.3%
</TABLE>
ADMINISTRATIVE and general expenses include salaries for administrators,
secretaries, clerks and bookkeepers. Expenses also include payroll benefits,
taxes, insurance, state provider or licensure fees (if applicable), phone,
legal, accounting management, transportation, miscellaneous and supplies.
ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
$ %
Annual EGI
------ ---
<S> <C> <C>
1996 Historical $1,325,035 15.2%
Appraiser's Stabilized $1,364,786 15.2%
</TABLE>
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THE DIETARY DEPARTMENT provides food service for patient/residents and staff
and is an important ingredient in the subject's overall marketing package.
The facility provides three meals a day, seven days a week. Stabilized
staffing includes: dietician/food service managers, cooks and server/helpers.
DIETARY EXPENSES
<TABLE>
<CAPTION>
$ %
Annual EGI
------ ---
<S> <C> <C>
1996 Historical $910,807 10.5%
Appraiser's Stabilized $938,131 10.5%
</TABLE>
HOUSEKEEPING AND LAUNDRY expenses include salaries for: directors of
housekeeping and laundry, housekeepers and laundry workers.
HOUSEKEEPING AND LAUNDRY EXPENSES
<TABLE>
<CAPTION>
$ %
Annual EGI
------ ---
<S> <C> <C>
1996 Historical $540,283 6.2%
Appraiser's Stabilized $713,387 6.2%
</TABLE>
MAINTENANCE expenses include all those necessary to operate and maintain the
physical plant. Staffing includes: maintenance manager, skilled maintenance
personnel and unskilled personnel. This category covers all day-to-day
repairs, periodic repainting and cosmetic work and lawn and service contracts.
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MAINTENANCE EXPENSES
<TABLE>
<CAPTION>
$ %
Annual EGI
------ ---
<S> <C> <C>
1996 Historical $713,387 8.2%
Appraiser's Stabilized $734,789 8.2%
</TABLE>
TOTAL EXPENSES are stabilized at $7,208,462 or 80.5% of effective gross income.
TOTAL EXPENSES
<TABLE>
<CAPTION>
$ %
Annual EGI
------ ---
<S> <C> <C>
1996 Historical $6,998,506 80.5%
Appraiser's Stabilized $7,208,462 80.5%
</TABLE>
Following is the appraiser's reconstructed pro forma operating statement
with stabilized income and expenses for subject property:
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RECAP OF HISTORICAL VS STABILIZED INCOME
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
11
MOS
1996 APPRAISER'S
ANNUALIZED STABILIZED
---------- -----------
<S> <C> <C>
Eff. Gross Income $8,697,545 $8,958,472
Less Expenses*
Healthcare Unit $3,508,995 $3,614,265
Administration $1,325,035 $1,364,786
Dietary $910,807 $938,131
Housekeeping/Laundry $540,283 $556,491
Maintenance $713,387 $734,789
---------- ----------
Fixed/Operating Exps $6,998,506 $7,208,462
---------- ----------
NET INCOME $1,699,039 $1,750,010
---------- ----------
---------- ----------
- ------------------------------------------------------------------------------
</TABLE>
* Some expenses may have been eliminated as non-recurring or reclassified to
facilitate comparison with the appraiser's estimates and may not match
historical statements.
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CAPITALIZATION
Most investors, in determining what price they would pay for The McCurdy
Residential Center, begin with the net income (estimated in the preceding
section). This net income is converted into a value estimate by means of
capitalization; the overall capitalization rate is simply the ratio of net
income to value.
The typical investor, when selecting his desired rate of return (or overall
capitalization rate), considers: (a) the term for which he will hold the
property and (b) his initial cash investment. The investor's initial equity
is his actual downpayment at the time of purchase. His return is considered
to be all of the income stream during the holding period and the cash he
receives when he sells the property. The investor's equity may increase due
to loan amortization and is further affected by appreciation or depreciation
in property value.
Most investors consider the actual yield on equity more important than yield
on purchase price. Today's market requires an after tax yield of 10% to 25%,
depending upon the property type and the degree of risk.
The appraiser developed a Capitalization Rate using both a Direct
Capitalization method and a Yield Capitalization method.
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DIRECT CAPITALIZATION
LONG TERM CARE FACILITY SALES
Capitalization rates on typical investment type real estate currently range
from 8% to 10%. Historically, properties like subject, with some Going
Concern Value or Special Use characteristics, have commanded an increase in
capitalization rate of 1% to 3% over typical investment type property.
SUMMARY RETIREMENT HOME FACILITY SALES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
OCCU- PRVT SF/ SP/ SP/ CAPT
UNITS AGE PANCY PAY UNIT SF UNIT EGIM RATE
----- ----- ------ ------ ------- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Averages 100 23 86% 33% 292 $99 $29855 1.17 13.1%
Total Facilities 20
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The data suggests a current rate of 13% to 15% (adjusted for today's market).
YIELD CAPITALIZATION
MORTGAGE EQUITY ANALYSIS
The appraiser prepared a Mortgage Equity Analysis and developed a Weighted
Average Capitalization Rate sufficient to service the mortgage debt and
equity position. The Appraisal Foundation publishes a monthly of mortgage
interest rates derived from a survey of major institutional investors in the
U.S. Although interest rates for Retirement Homes are not included in the
survey, lenders advise that a premium of 1% to 3% should be added to the
general apartment rate to reflect the increased risk for any property
containing some Going Concern Value.
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To develop an Overall Capitalization Rate by Band of Investment, Mortgage -
Equity, we assumed a first mortgage of 70% loan to value and 10.5%
interest rate, amortized over 20 years. Retirement Home lenders confirm this
criteria would be currently acceptable. The Equity Yield Rate was estimated
at 25%. The appraiser consulted with two major purchasers of this type
property, who reported that this return is sufficient to attract equity
capital.
The weighted average does not reflect equity buildup from mortgage
amortization during the holding period. Mortgage amortization would accrue to
the equity position and satisfy part of the owner's yield requirements. To
reflect this, the appraiser deducted an appropriate rate from the weighted
average. The mortgage amortization rate is calculated by multiplying the loan
to value ratio, times the portion of the loan that will be paid off at the
end of the holding period; this product is multiplied by the Sinking Fund
Factor at the equity yield rate.
The weighted average rate does not incorporate the value appreciation or
depreciation that can be anticipated for this type property in this location
over the investment period. Studies show that well located real estate will
appreciate in value at a rate at least equal to the inflation rate. To adjust
the weighted average for this anticipated change, we multiplied the
anticipated rate of change by the Sinking Fund Factor at the equity yield
rate and adjusted the weighted average accordingly.
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NATIONAL MARKET INDICATORS
<TABLE>
<CAPTION>
REGIONAL MALL CBD OFFICE
--------------- ----------------
3rd Qtr Prior Qtr 3rd Qtr Prior Qtr
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount Rate (IRR)(a)
Range 10.00%-14.00% 10.00%-14.00% 10.00%-15.00% 10.00%-15.00%
Average 11.56% 11.50% 11.93% 11.99%
Change (b.p.) -- +6 -- -6
Overall Cap Rate (OAR)(a)
Range 6.25%-11.00% 6.25%-11.00% 7.00%-12.00% 8.00%-12.00%
Average 8.33% 8.17% 9.47% 9.53%
Change (b.p.) -- +16 -- -6
Residual Cap Rate
Range 7.50%-11.00% 7.00%-11.00% 8.25%-12.00% 8.25%-12.00%
Average 8.71% 8.56% 9.67% 9.67%
Change (b.p) -- +15 -- 0
<CAPTION>
INDUSTIRAL APARTMENT
--------------- ----------------
3rd Qtr Prior Qtr 3rd Qtr Prior Qtr
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount Rate (IRR)(a)
Range 8.50%-14.00% 9.000%-14.00% 10.00%-12.50% 10.00%-12.50%
Average 11.19% 11.22% 11.30% 11.35%
Change (b.p.) -- -3 -- -5
Overall Cap Rate (OAR)
Range 7.25%-13.00% 7.25%-13.00% 7.25%-13.00% 8.00%-10.50%
Average 9.23% 9.23% 9.23% 9.03%
Change (b.p.) -- 0 -- +5
Residual Cap Rate
Range 8.00%-11.00% 8.00%-11.00% 8.50%-10.50% 8.00%-10.50%
Average 9.55% 9.51% 9.32% 9.29%
Change (b.p) -- +4 -- +3
</TABLE>
(a) Rate on unleveraged, all-cash transactions
- --------------------------------------------------------------------------------
Definitions:
b.p.: Basis Points
DISCOUNT RATE (IRR): Internal rate of return on equity in an all-cash
transaction, based on annual year-end compounding; formerly termed the Free
and Clear Equity IRR in the Korpacz Survey.
OVERALL CAPITALIZATION RATE (OAR): Initial cash-on-cash rate of return on
the equity investment in an all-cash transaction; formerly termed the Free
and Clear Equity Cap Rate in the Korpacz Survey.
RESIDUAL CAP RATE: Overall capitalization rate used in calculation of
residual price at conclusion of forecast period.
Source: Korpacz Real Estate Investor Survey. Personal survey of a cross
section of major institutional equity real estate market participants
conducted in October 1995 by Peter F. Korpacz & Associates, Inc. Published
Fall 1996 in VALUATION INSIGHTS & PERSPECTIVES.
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
AS % REQUIRED CAPT.
OF TOTAL X ANNUAL = RATE
RETURN
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Mortgage 70% X 11.98% = 8.39%
Equity 30% X 25.00% = 7.50%
Weighted Average 15.89%
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
LESS CREDIT FOR EQUITY BUILDUP:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
LOAN RATIO X PART SINKING
LOAN X FUND FACTOR =
PAID OFF
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
70.0% X 9.68% X 0.12180% = 0.83%
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
ADJUSTMENT FOR DEPRECIATION/APPRECIATION:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
PLUS DEPRECIATION SINKING FUND
(OR MINUS FACTOR =
APPRECIATION) X
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
0.0% X 0.12180 = 0.00%
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
OVERALL CAPITALIZATION RATE:
<TABLE>
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
<S> <C>
TOTAL 15.06%
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
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DISCOUNTED CASH FLOW
HealthCare Property Appraisers of America, Inc.'s Discounted Cash Flow (DCF)
program generates a "Going In" Capitalization Rate and a value estimate using
mortgage and equity requirements, selected by the appraiser, . This value is
(1) the present value of any mortgage and (2) the present value of the equity
position (i.e., the sum of all cash flow from operations -- after debt
service and resale of the property, discounted by the equity yield rate).
The appraiser used the same mortgage input requirements in this method as in
the Mortgage Equity Analysis. The Equity Yield was estimated at 25.0 %,
which approximates the return from stock investment (a more similar risk).
The DCF program also considers: (a) anticipated changes in income, (b)
appreciation or depreciation of the residual property or (c) selection of a
Terminal Capitalization Rate. This analysis developed a "Going In" Overall
Capitalization Rate of 15.06%, which will give an equity dividend (cash on
cash) of approximately 22.2% and a projected equity yield over the five-year
holding period of 25.0%.
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<TABLE>
<CAPTION>
DATE INPUT DATA OUTPUT
- ------------ ------------
<S> <C> <C> <C>
EQUITY YIELD RATE 25.00000 BEFORE TAX YIELD 25.00000
HOLDING PERIOD 5 OVERALL RATE 0.15061
LOAN NUMBER 1 MORTGAGE CONSTANT 0.11981
INTEREST RATE 0.10500 MORTGAGE VALUE $8,133,785
LOAN TERM 20.00000
PAYMENTS PER YEAR 12 EQUITY VALUE $3,485,908
LOAN VALUE RATIO 0.70000 EQUITY DIVIDEND 0.22247
CHANGE IN VALUE 0.00000
LAND VALUE $0
DEPRECIATION METHOD NONE
COST RECOVERY PERIOD 0
NET OPERATING INCOME $1,750,000 VALUE $11,619,692
CHANGE IN NOI 0.00000
INCOME ADJUSTMENT FACTOR G1
</TABLE>
C A S H F L O W S U M M A R Y
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ----------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
NOI $1,750,000 $ 1,750,000 $ 1,750,000 $ 1,750,000 $1,750,000
DEBT SER#l -$ 974,474 -$ 974,474 -$ 974,474 -$ 974,474 -$ 974,474
BTCF $ 775,526 $ 775,526 $ 775,526 $ 775,526 $ 775,526
RESALE PRICE 11,619,692
LOAN BALANCE # 1 -$ 7,346,310
BEFORE TAX PROCEEDS $ 4,273,382
</TABLE>
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CAPITALIZATION RATE SUMMARY
- ----------------------------
Our analyses indicate capitalization rates of:
<TABLE>
<S> <C>
Direct Capitalization (Sales Data) 13 % to 15%
Mortgage Equity 15.1%
Discounted Cash Flow 15.1%
</TABLE>
An overall capitalization rate of 15.06% was selected for our analysis,
indicating a value by the Income Capitalization Approach of:
<TABLE>
<CAPTION>
NET INCOME divided by CAPT.RATE = VALUE
------------ ----------- ---------
<S> <C> <C> <C> <C>
$1,750,010 divided by 15.06% = $11,620,254
MARKET VALUE OF REAL PROPERTY, PERSONAL (R) $11,620,000
PROPERTY & BUSINESS VALUE
</TABLE>
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SALES COMPARISON APPROACH TO VALUE
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SALES COMPARISON APPROACH TO VALUE
The sales comparison approach is defined as "a set of procedures in which an
appraiser derives a value indication by comparing the property being
appraised to similar properties that have been sold recently, applying
appropriate units of comparison, and making adjustments, based on the
elements of comparison, to the sales prices of the comparables." (This
information taken from THE DICTIONARY OF REAL ESTATE APPRAISAL, American
Institute of Real Estate Appraisers, second edition.)
In this approach, the market value of the subject is estimated by comparing
it to similar properties that have sold recently. This approach is predicated
on the direct relationship between subject property's market value and the
sale prices of comparable properties. In the case of a Retirement Home, such
as the subject, these properties are sold and purchased by investors on a
regional and national basis. For selection of comparable properties, we
sought recent sales first within Indiana and then in the United States.
The accurate application of this approach is based, in part, on the choice of
an appropriate unit of comparison, as shown on the summary grid. We extracted
from each comparable two physical indicators and one economic indicator. The
physical indicators included sales price per revenue-generating unit (beds or
apartments) and sales price per square foot. The economic indicator used was
an effective gross income multiplier (EGIM). The following section presents
information on the sales analysis of comparables for an indicated value of
the subject property.
This appraiser interviewed Mr. Rich Buchannon, Program Director, Facility
Services, Indiana Board of Health concerning whether the property owner could
operate the subject facility and participate in the state nursing home
reimbursement program, in the event the current lessee does not extend the
lease. It was the opinion of Mr. Buchannon that there are no legal or
regulatory requirements that would prohibit the property owner from obtaining
a new tenant or management company to operate the nursing home facility. The
reader is cautioned that the appraiser is not an expert on nursing home or
medicaid matters and this critical assumption
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should be confirmed by legal counsel. If this assumption is not accurate it
could have a dramatic impact on the property's value.
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<TABLE>
<CAPTION>
Regional Facilities
OCCU- PRIV. SF/ SP/ SP/ CAPT
COMP# STATE DATE BEDS AGE PANCY PAY BED SF BED GIM RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1740 IL FEB 94 119 .86 .43 33613 1.36 .111
1741 IL FEB 94 49 10 .80 .50 265 113 30000 1.13 .085
1753 IL Nov 94 62 18 .92 .25 228 92 20968 1.01 .156
1754 IL Jun 94 74 24 .96 .41 241 118 28377 2.10 .150
1755 IL Jan 95 68 29 .98 .39 237 87 20529 1.03 .114
1756 IL Sep 94 106 27 .90 .12 248 75 18623 1.42 .143
1757 IL Mar 95 121 19 .85 .19 231 114 26446 1.05 .109
1758 IL Jan 95 97 26 .72 .36 273 94 25660 1.32 .113
1759 IL Aug 95 150 .70 .57 397 160 63333 1.45 .128
1760 IL Mar 95 70 21 .95 .32 219 98 21429 1.06 .071
1761 IL Aug 95 127 28 .75 .25 310 89 27559 1.12 .127
1651 KS MAR 94 100 31 .94 .29 274 52 14240 0.46 .332
1652 KS JUL 94 80 31 .96 437 41 18008 0.65 .158
1653 KS JAN 94 100 31 .96 .21 274 66 18000 0.59 .235
1566 MO Jan 94 100 17 .87 .15 286 77 22000 1.02 .168
1575 MO Jan 94 120 .75 .25 273 51 13958 0.62 .069
1514 OH Jan 94 100 11 .80 .73 313 109 33977 0.65 .069
1549 OH DEC 96 168 24 284 163 46393 2.17 .075
1643 OH Apr 95 100 .96 .33 380 150 57000 1.63 .103
1784 OH APR 95 100 380 150 57000 1.63 .103
Averages: 100 23 .86 .33 292 99 29855 1.17 .131
Total Facilities: 20
</TABLE>
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The McCurdy Residential Center, Evansville, Indiana
- --------------------------------------------------------------------------------
COMPARABLE #1757
<TABLE>
<S> <C>
Property: Midwest Care Center (Prairie Rose Health Care)
Location: 900 South Chestnut Street Christian County
Pana, IL
Seller: Mid-America Care Foundation
Buyer: Midwest Care Centers, Inc.
Level of Care: NF
Date of Sale: Mar 95
Sale Price: $3200000
Terms: $3,200,000 in industrial revenue bonds issued by City of
Pana.
Building Notes: Concrete block with steel frame on 6.74 acres of land.
Building Date: 1976
No. of Units: 121
Occupancy: 0.85
Building SF: 28000 SF
SF/Unit: 231 SF
Non-Medicaid Ratio: 0.19
Effective Gross Income: $3050000
Expenses: $2700000
Net Income: $350000
Price/SF: $114/SF
Price/Unit: $26446/Unit
EGIM: 1.05
Capt. Rate: 0.1090
</TABLE>
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COMPARABLE #1761
<TABLE>
<S> <C>
Property: The Abbey of Carbondale
Location: 120 N. Tower Road
Rosalie, IL
Seller: Abbey Management
Buyer: ABS Management
Level of Care: NF
Date of Sale: Aug 95
Sale Price: $3500000
Terms: Cash to Seller
Building Notes: One story concrete block and brick structure in average
condition.
Building Date: 1967
No. of Units: 127
Occupancy: 0.75
Building SF: 39404 SF
SF/Unit: 310 SF
Non-Medicaid Ratio: 0.25
Effective Gross Income: $3125317
Expenses: $2682094
Net Income: $443223
Price/SF: $89/SF
Price/Unit: $27559/Unit
EGIM: 1.12
Capt. Rate: 0.1270
Comments: Income and expense data are from projections in appraisal from
June 1995. Sale included a 108 bed pediatric skilled care unit
which was closed by state for patient care violations. Above
price is allocated from $3.5 million dollars actual sale price.
</TABLE>
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COMPARABLE #1713
<TABLE>
<S> <C>
Property: Michigan City Health Care
Location: 1101 East Coolspring Avenue
Michigan City, IN
Seller: Internat'l Elderely Care, Inc.
Buyer: Metro Health Foundation, Inc.
Level of Care: NH
Date of Sale: OCT 93
Sale Price: $12750000
Building Notes: 1-story, concrete block with brick exterior. Average
condition.
Building Date: 1972
No. of Units: 264
Occupancy: 0.57
Building SF: 62560 SF
SF/Unit: 237 SF
Non-Medicaid Ratio: 0.17
Effective Gross Income: 4480000
Expenses: 4956003
Net Income: $476003
Price/SF: $204/SF
Price/Unit: $48295/Unit
EGIM: 2.85
Capt. Rate: -0.0370
Comments: 331,492 SF site.
</TABLE>
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COMPARABLE #1715
<TABLE>
<S> <C>
Property: New Harmonie Healthcare Center
Location: SR 66, 1300 Church Street
New Harmony, IN
Seller: Cardinal Group Corporation
Buyer: Healthcare Realty Trust
Level of Care: NH
Date of Sale: MAY 93
Sale Price: $3600000
Building Notes: 1-story.
Building Date: 1987
No. of Units: 96
Occupancy: 0.64
Building SF: 29500 SF
SF/Unit: 307 SF
Non-Medicaid Ratio: 0.45
Effective Gross Income: $2157676
Price/SF: $122/SF
Price/Unit: $37500/Unit
EGIM: 1.67
Comments: Occupancy based on revenue.
</TABLE>
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COMPARABLE #1717
<TABLE>
<S> <C>
Property: Whitley County Memorial Hospital
Location: 411 North Wolff Road
Columbia City, IN
Seller: Alfran Nursing Home, Inc.
Buyer: Whitley County Mem. Hosp.
Level of Care: NH
Date of Sale: JAN 93
Sale Price: $2650000
Building Date: 1972
No. of Units: 82
Occupancy: 0.85
Building SF: 24398
SF/Unit: 298 SF
Non-Medicaid Ratio: 0.41 SF
Effective Gross Income: $2003552
Expenses: $1523690
Net Income: $479862
Price/SF: $109/SF
Price/Unit: $32317/Unit
EGIM: 1.32
Capt. Rate: 0.1810
</TABLE>
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- --------------------------------------------------------------------------------
COMPARABLE #1643
<TABLE>
<S> <C>
Property: Huenfeld Care Center
Location: 401 West Airport Highway
Swanton, OH
Seller: Huenfeld Care Center, Inc.
Buyer: Meditrust of Ohio, Inc.
Level of Care: SNF
Date of Sale: Apr 95
Sale Price: $5700000
Terms: Arm's length and cash equivalent
Building Notes: single story, brick veneer
No. of Units: 100
Occupancy: 0.96
Building SF: 38000 SF
SF/Unit: 380 SF
Non-Medicaid Ratio: 0.33
Effective Gross Income: $3496968
Expenses: $2908968
Net Income: $588000
Price/SF: $150/SF
Price/Unit: $57000/Unit
EGIM: 1.63
Capt. Rate: 0.1030
Comments: Grantee AKA Harborside; gross land area 10 acres; incl. 49
beds for Alzheimers; Medicaid is 63%, balance from therapy
and rehab services.
</TABLE>
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<TABLE>
<CAPTION>
SALES COMPARISON SUMMARY GRID
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
COMP # SUBJECT #1757 #1761 #1101 #1715 #1717 #1643
NAME MCCURDY MIDWEST ABBEY MICHGN CT NEW WHITLEY HUENFELD
RETIREMENT CARE CARBONDI HLTH CARE HARMONIE CO MEM CARE
CITY EVANSVILLE PANA ROSALIE MICHGN CT NW HARMON COLUMB CTY SWANTON
STATE IN IL IL IN IN IN OH
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY DATA
Year Built 1917,88 1976 1967 1972 1987 1972 n/a
Beds 296 121 127 264 96 82 100
GBA (sf) 135,350 28,000 39,404 62,560 29,500 24,309 38,000
SF/Bed/Apt 457 231 310 237 307 296 380
SALE DATA
Date of Sale 3/95 8/95 10/95 5/93 1/93 4/95
Sale Price $3,200,000 $3,500,000 $12,750,000 $3,600,000 $2,650,000 $5,700,000
Price/Bed $26,446 $27,559 $48,295 $37,500 $32,317 $57,000
Price/SF $114.29 $88.82 $203.80 $122.03 $109.01 $150.00
CUMULATIVE ADJUSTMENTS
Rights Conveyed 0% 0% 0% 0% 0% 0%
Adjusted Price $26,446 $27,559 $48,295 $37,500 $32,317 $57,000
$114 $89 $204 $122 $109 $150
Financing Terms 0% 0% 0% -5% 0% 0%
Adjusted Price $26,446 $27,559 $48,295 $35,625 $32,317 $57,000
$114 $89 $204 $116 $109 $150
Conditions of Sale 0% 0% 0% 0% 0% 0%
Adjusted Price $26,446 $27,559 $48,295 $35,625 $32,317 $57,000
$114 $89 $204 $116 $109 $150
Market 0% 0% 0% 5% 5% 0%
Conditions
Adjusted Price $26,446 $27,559 $48,295 $37,406 $33,933 $57,000
$114 $89 $204 $122 $114 $150
NON-CUMULATIVE ADJUSTMENTS
Physical Characteristics:
Location 0% 0% 0% 0% 0% 0%
Quality/Design 0% 0% 0% 0% 0% 0%
Conditions/Age 0% 0% 0% 0% 0% 0%
Area/Bed 10% 0% 10% 0% 0% 0%
Economic Factors 15% 15% -15% 0% 0% 25%
Non-Cumulative Adjustments 25% 15% -5% 0% 0% -25%
ADJUSTED VALUE INDICATORS
Sale Price/Bed $33,058 $31,693 $45,881 $37,406 $33,933 $42,750
Sale Price/SF $143 $102 $194 $122 $114 $113
Average Sale Price/Bed $37,453
Average Sale Price/SF $131
</TABLE>
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ADJUSTMENTS TO COMPARABLE SALES
Since investment grade properties are bought for their income producing
capabilities, investors will pay more for a property with a higher income. To
adjust for this economic difference in the sales comparables, we used a net
income differential multiplier, which recognizes any percentage change
between the comparables' and the subject's net income on a per bed or per
square foot basis. For example, the subject's net income on a per bed basis
was ERR of Comparable Number # 1757's net operating income. Accordingly, an
economic multiplier of ERR was applied to that comparable's sales indicator.
This analysis was used for all of the comparables, on both a per square foot
basis and per revenue generating unit (bed or apartment) basis. Since the
economics of a property are a direct reflection of the physical features,
amenities, and location, no further adjustments for these items was
considered necessary.
SALES PRICE PER BED
HealthCare Property Appraisers maintains a nationwide data bank on long term
health care facilities, which currently includes sales of over 1,800
facilities. Facilities which are of good quality but predominantly medicaid
funded are selling on a nationwide basis for approximately $25,000 to $50,000
per bed. Higher quality homes, which offer better services, amenities, and
therapy areas, or homes with unusual profit potential, generally sell for
$45,000 to $75,000 per bed.
The comparables selected for close analysis have an unadjusted sales price
per bed ranging from $26,446 to $57,000, with an average of $38,186. Factors
which affect the sales price per bed include unit mix, number of residents
per room, project amenities, and average area per bed. A property which has a
larger average area per bed will typically sell at a higher unit price.
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- --------------------------------------------------------------------------------
After adjusting the comparables to the subject using the net income
differential multiplier, the sales price per bed formed a range of $31,693 to
$45,881, with an average of $37,453. Giving further consideration to
subject's average bed area and other physical characteristics, the value
range on a per bed basis is estimated at $37,000 to $38,000. Applying this
range to the subject's 296 Beds indicates a value range of $10,952,000 to
$11,248,000.
<TABLE>
<CAPTION>
# BEDS X SALE PRICE PER BED = INDICATED VALUE
- -------- ------------------- ---------------
<S> <C> <C> <C> <C>
296 Beds X $37,000 to $38,000 = $10,952,000 to
$11,248,000
</TABLE>
SALES PRICE PER SQUARE FOOT
The unadjusted comparables formed a sales price range from $89 to $204 per
square foot, with an average of $131. An inverse relationship usually exists
between the sales price per square foot and the average area per bed,
assuming all amenities and services are similar (i.e., a smaller unit usually
generates more income on a per square foot basis than a larger unit). This
relationship is reflective of staffing costs because per resident day costs
are typically not directly influenced by unit size. It is also reflective of
the fixed costs of furniture, fixtures, and equipment, which are spread over
the total square footage. After economic adjustments, the comparables formed
a sales price per square foot range of $102 to $194, with an average of $131.
Considering the subject's functional utility, area per resident, quality and
condition, we believe a value range of $130 to $132 per square foot to be
indicated. Applying the unit values to the subject's 135,350 of gross
building area indicates a value range of $17,595,500 to $17,866,200.
<TABLE>
<CAPTION>
BUILDING SIZE X SALE PRICE PER SF = INDICATED VALUE
------------- ----------------- ---------------
<S> <C> <C> <C> <C>
135,350 X $130 to $132 = $17,595,500 to
$17,866,200
</TABLE>
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RECONCILIATION OF SALES COMPARISON INDICATORS
The value ranges developed by the indicators are summarized below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
INDICATORS OF VALUE VALUE RANGE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<S> <C>
SALES PRICE PER BED $10,952,000 to $11,248,000
- ------------------------------------------------------------------------------
SALES PRICE PER SQUARE FOOT $17,595,500 to $17,866,200
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
The sales price per bed tends to be a good indicator if the comparables have
similar rates, per patient day occupancy, and self pay ratios. The sales
price per square foot can be a good indicator, if all the comparables happen
to be similar to size. The flaws or deficiencies of the physical indicators
have been tempered with economic adjustment. The subject is substantially
larger per square foot than the comparables which distorts this indicator.
Giving consideration to current market conditions and the subject's physical
and economic characteristics, the sales comparison approach is best
represented by a narrower range of $10,950,000 to $11,250,000
The usefulness of the Sales Comparison Approach in providing a value range is
limited by differences in location, services and many other variables. A
precise comparison between the comparable sales and the subject property is
extremely difficult. We made economic adjustments to lessen these differences
somewhat. Moreover, there is no accurate way to determine whether the sales
prices actually paid represent fair market values, due to the unknown
variables of buyers' and sellers' exact motivations or any special conditions
that may have influenced the sales. We believe the sales comparison approach
has limited application for indicating an exact value estimate. Accordingly,
the reconciled range is intended primarily to test the reasonableness of the
Cost and Income Capitalization Approaches.
<TABLE>
<S> <C>
INDICATED MARKET VALUE $10,950,000 to $11,250,000
</TABLE>
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RECONCILIATION AND FINAL VALUE ESTIMATE
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
INDICATED VALUE BY COST APPROACH $11,270,000
INDICATED VALUE BY INCOME APPROACH $11,620,000
INDICATED VALUE BY SALES COMPARISON APPROACH $10,950,000
to $11,250,000
- --------------------------------------------------------------------------------
</TABLE>
To estimate the final Market Value for The McCurdy Residential Center, it is
necessary to reconsider all three approaches, correlate the data, and
determine what emphasis to give each approach.
THE COST APPROACH was based upon a component cost breakdown prepared by a
computer utilizing the Marshall and Swift Valuation Service Cost Data Bank.
This nationally recognized building costs service prepared a very accurate
estimate of replacement costs for subject's improvements. From replacement
costs (direct and indirect) was deducted depreciation based upon observation
and age of the improvements and sales data as well as consideration of
Functional and External Obsolescence. Subject's 31,363 sf of land were valued
at $9 sf or 1970,88. This approach indicated a market value for the real
estate and the Furniture, Fixtures, and Equipment in The McCurdy Residential
Center of $11,270,000, which includes an estimated $518,000 for FF&E.
The Principle of Substitution does not recognize the fact that it is very
difficult to take a long-term care project from the initial construction
stages through all of the regulatory agencies, obtain a Certificate of Need
(CON) from the state, operate the facility successfully, and generate the
reputation for excellence necessary to attract a strong private pay census.
The application and approval of the Certificate of Need necessary to operate
will quite often take as long as two years and is by no means a guarantee of
success. Once a CON has been
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- --------------------------------------------------------------------------------
obtained, it is sometimes sold prior to construction. Sales prices of $50,000
to $500,000 for an approved CON have been reported. The business expertise
necessary to deal with the Medicaid and Medicare authorities as well as the
multitude of governmental agencies regulating and supervising a nursing home
also requires considerable specialized knowledge. None of this expertise was
reflected by the Cost Approach to Value. Therefore, the least emphasis was
placed upon the Cost Approach to Value in this analysis.
Under the INCOME APPROACH to value, the appraiser analyzed the subject
property from the standpoint of a potential investor who would be most
interested in its income stream. After reviewing the owner's operating
statements for the subject property as well as other comparable properties,
the appraiser believes the subject's estimated income stream is a reasonable
expectation. Our stabilized income stream was based upon an anticipated
Effective Gross Income of $8,958,500 and Expenses of $7,208,462 (or 80.5% of
Effective Gross Income). The projected Net Income to Real Estate of
$1,750,010 was capitalized at 15.06%. Based upon a consideration of current
financing, available alternatives, and equity demands, the Market Value of
The McCurdy Residential Center was indicated by the Income Approach to be
$11,620,000, which includes $518,000 for Furniture, Fixtures and Equipment.
Under the SALES COMPARISON APPROACH, the appraiser reviewed a considerable
number of sales of Retirement Homes. Analysis of this data after adjustments
for property differences indicated a Market Value for The McCurdy Residential
Center of $10,950,000 to $11,250,000, based on $37,000 to $38,000 per unit.
The $10,950,000 to $11,250,000 value includes Furniture, Fixtures and
Equipment estimated at $518,000.
We believe equal emphasis can be placed on the Income Capitalization and
Sales Comparison Approaches to Value. Based on the enclosed data and
analyses, I believe the Subject Property described herein has the following
estimated Final Market Value as of April 5, 1997 at Stabilized Census,
Occupancy and Rates:
FINAL MARKET VALUE OF SUBJECT PROPERTY: $11,250,000
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MARKETING PERIOD
Due to the fairly strong market and demand for Retirement Homes, The McCurdy
Residential Center should be readily saleable. Although the market is not as
strong today as it was a few years ago, there are a number of buyers seeking
for this type property. In fact, the market for this type property is strong
enough that they generally are not listed with real estate brokers, but are
usually sold "off the market." The appraiser is familiar with the sale of a
number of Retirement Homes that have taken place over the past year. The
average sales time for those properties was approximately six months. If the
subject property were fairly priced and adequately marketed, we believe it
could be sold at our appraised value within approximately twelve months.
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ALLOCATION OF VALUE BETWEEN REAL PROPERTY, PERSONAL PROPERTY AND
BUSINESS ENTERPRISE
The total value of a real estate property frequently consists of only land
and improvements. However, in the case of a "Going Concern" property in which
a business is operated, such as a Retirement Home, the total value may also
contain personal property and/or intangible assets (i.e., "Business Value")
consisting of business enterprise, goodwill, and going-concern value). Income
generated from the property is derived from tangible real and personal
property and intangible assets.
Both the real estate and the business enterprise are required to generate
income. To estimate the value of the real estate, the appraiser must divide
the net operating income between the two components of real estate and
business enterprise. In the case of a Retirement Home, the intangible assets
(i.e., in-place management, staff, operations, stabilized occupancy, good
will, percentage of nonsubsidized residents and general reputation of the
property) are difficult to relocate. Consequently, the value attributable to
them is considered to be tied to the real estate.
The operation of a Retirement Home is a highly specialized business
enterprise, requiring extensive knowledge of national and state health care
systems, over and above a knowledge of health care and the business acumen
required to operate any business. This is evidenced by the fact that the
State Department of Public Health requires very specific licensing of the
professionals and real estate that provide these services.
Management of this specialized business can be contracted out to a
professional management firm for a specified fee arrangement (typically 3%
to 6% of effective gross income). The management firm will provide the
business acumen to operate the business enterprise. However, the management
company, while operating this business on behalf of an owner, will not assume
the ownership risk of that business. Any liability risk, entrepreneurship
risk, and/or losses to be covered are the responsibility of the owner of the
business enterprise. Accordingly,
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- --------------------------------------------------------------------------------
the real estate interest and the operating business enterprise interest are
two separate components that are frequently bought, sold, and leased
independently from each other.
To study the value of the real estate separate from the value of the business
enterprise, the appraiser first examined leases of various facilities. Our
study of Retirement Home leases did not develop a consistent pattern of
rental rates per bed or any other common denominator that could be applied to
the subject appraisal assignment. The lease rate paid on a Retirement Home is
affected by a large number of variables (e.g., the funding program for
government subsidized residents, accounting methods used, occupancy and
census ratio) in addition to the usual array of variables found in any real
estate. These factors vary to such an extent that analysis of other leases in
comparison to the subject property did not develop any meaningful or helpful
data.
Analysis of leases on a specific subject property may also be less than
helpful in estimating the value of the fee simple estate. An old lease may
have a contract rental different from the market rental rate, developing some
leasehold estate value. The leased fee value and the leasehold value can be
ascertained by studying the fair market rental or economic rental of the
subject property. However, it is not necessary to consider an old lease to
develop a value for the fee simple estate.
The appraiser considered several methods for studying the Business Value by
investigating the relationship between: (a) the COST OF TANGIBLE ASSETS
versus the total VALUE OF ALL ASSETS, (b) capitalization rates of typical
investment properties versus Going Concern properties and (c) the debt
coverage ratio required for Going Concern type real property.
COST ANALYSIS
Under the Cost Approach to Value, we estimated the replacement cost of all
tangible components, such as land and direct and indirect construction costs.
The difference between
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- --------------------------------------------------------------------------------
the reproduction costs of the tangible assets and the Final Market Value of
the total subject property was considered to be an indication of Business
Value.
<TABLE>
<S> <C>
Final Market Value $11,250,000
Less Cost Approach $11,270,000
-----------
Indicated Business Value (20,000)
</TABLE>
CAPITALIZATION RATE ANALYSIS
Properties which include intangibles like Going Concern Value, normally have
a higher Overall Capitalization Rate than properties without any Business
Value. The higher Overall Capitalization Rate recognizes, in part, the
greater risk of owning a business versus owning real estate or other tangible
assets. Comparison of the subject's Capitalization Rate to the Capitalization
Rate for properties not having any Business Value (but having similar age,
construction, location and value) indicates the portion of the total value
attributable to the business enterprise. The higher Capitalization Rate of
Retirement Homes includes the return necessary on the real estate, the
business portion, and furniture, fixtures and equipment. In our subject study
we developed an Overall Capitalization Rate of 15.06% for the subject
property. A fair market Capitalization Rate for a comparable property without
any Business Value is considered to be 9.00%. Dividing the real estate
Capitalization Rate of 9.00% by subject's Capitalization Rate of 15.06%
indicates the portion of subject's value representing tangible real property
and business value to be:
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REAL PROPERTY divided SUBJECT = % TANGIBLE
CAPT. RATE by CAPT. RATE REAL ESTATE
------------- ---------- -----------
<S> <C> <C> <C> <C>
9.00% divided 15.06% = 60.0% (R)
by
</TABLE>
<TABLE>
<CAPTION>
FINAL % TANGIBLE VALUE OF
MARKET VALUE X REAL ESTATE = REAL PROPERTY
------------- ----------- -------------
<S> <C> <C> <C> <C>
$11,250,000 X 60.0%(R) = $6,750,000
</TABLE>
<TABLE>
<S> <C>
Final Market Value (Total Property) $11,250,000
Less Value Of Real Property $6,750,000
-----------
Business Value and Furniture, Fixtures And Equipment $4,500,000
Less Furniture, Fixtures And Equipment $ 518,000
-----------
Indicated Business Value $3,982,000
</TABLE>
DEBT COVERAGE RATIO ANALYSIS
An indication of the subject property's Business Value can be developed by
separating net income into real estate and business components. (Personal
property is handled in our income model with a replacement reserve.)
Investors in Retirement Home real estate and Retirement Home business
enterprises have specific income rate of return and "debt coverage"
requirements. The relationship between the "debt coverage" requirements of a
real estate investor and the requirements of a business enterprise investor
can be ascertained mathematically.
REAL ESTATE INVESTOR
There are several investors for real estate entities that do not contain the
business enterprise component. Many investors want to be passive real estate
investors, without the management problems or risk associated with operating
a Retirement Home. The typical investor is a
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- --------------------------------------------------------------------------------
health-care oriented, real estate investment trust (REIT) who purchases 100%
of a Retirement Home's real estate. The appraiser surveyed acquisition
officers of several REITs to ascertain their rate of return and "debt
coverage" (i.e., rent coverage) requirements:
- Omega Healthcare is currently seeking 11.8% on a variable
return and underwrites debt coverage with a minimum of 1.25X.
- Healthcare REIT's current yield requirement is based on 500
points over the 10 year T bill rate. Today, this is a
total return of 11.84%. Their minimum debt coverage
ratio is 1.25X.
- Health Equity Properties' current return requirement is 12%
to 12.5%. Their minimum debt coverage ratio is 1.25X to
1.4X, depending on the credit.
From the above data, it appears that the real estate in a Retirement Home
like the subject property can be sold and leased back, giving a return to the
passive real estate investor of approximately 11.8% to 12.5%, or an average
(mode) of 12%. The most common "debt coverage" factor is 1.20X to 1.50X, or
an average of 1.35X.
BUSINESS ENTERPRISE INVESTORS
Many Retirement Home operators and individual investors will purchase the
business enterprise operating within a Retirement Home property.
Consequently, the real estate in a Retirement Home is frequently sold to a
real estate investor, such as a REIT. The new real estate owner will then
lease it to a management company who will own and operate the business
enterprise. Management companies and individual investors try to group their
property operations within a specific state for obvious reasons; however,
they will usually consider an individual acquisition within any state that
has a viable government assistance program. We surveyed companies and
individuals who invest in Retirement Home businesses to determine their
requirements for investing in a Retirement Home business enterprise. The
results of this survey include:
- Health Prime, Inc., an active purchaser of Retirement Home
going concerns and business enterprises, reported they
would acquire a health care business (without the
underlying real estate) if the investment would provide
a return of 15% to 17%. This assumes they had no other
facilities within the area, were not attempting to fill
out their management team, and had no other ulterior
motives.
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- Life Care Affiliates reported that their investors require
a 15% return on cash invested, assuming the real estate
is owned by another entity and the investors are
strictly buying the business operation with no interest
in the underlying real or personal property assets.
- Regency Health Care reported that they would be willing to
consider purchasing a leasehold estate or the business
interest in a going concern property, assuming a cash-on-cash
return of 15% to 18%.
There are many potential purchasers actively seeking the acquisition of
Retirement Homes either as "going concerns" (i.e., containing both real
estate and the business enterprise) or as the operating business enterprise
only. As evident from the above, the business enterprise operating within the
subject real estate can probably be sold to an investor who would require a
15% cash-on-cash return after satisfying all requirements of real estate,
personal property and management.
DISTRIBUTION OF INCOME BETWEEN REAL ESTATE AND BUSINESS ENTERPRISE
The subject property's Economic Rental is the amount of net operating income
available to satisfy a potential purchaser of the real estate and his
requirements for rate of return and "debt coverage." Conversely, the income
available to an investor in the business enterprise is the income available
after satisfying the priority claim on income by ownership of the real and
personal property. The division of income (and value) between the various
components of the total going concern entity (i.e., real property, personal
property and business enterprise) can be developed by studying their
mathematical relationship.
Debt coverage ratios for this type property range from 1.10X to 3.00X,
depending on the quality of the property and dependability of its income
stream. We believe the subject ranks average in credit risk and estimate a
debt coverage ratio of 1.35X to be appropriate.
When a potential purchaser of real estate requires a "debt coverage" factor
of 1.35, he is requiring that a minimum of 26% of the net operating income be
available to compensate the
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business enterprise owner. Without that minimum return, no one will provide
the requirements of business enterprise ownership for this facility. This is
demonstrated mathematically as follows:
<TABLE>
<CAPTION>
MAXIMUM INCOME
DEBT AVAILABLE TO
FACILITY'S NET divided COVERAGE REAL
OPERATING INCOME by RATIO = ESTATE OWNER
- ---------------- -------- ---------------
<S> <C> <C> <C> <C>
100% divided 1.35X = 74%
by
</TABLE>
<TABLE>
<CAPTION>
INCOME
ALLOWABLE
TO REAL INCOME REQUIRED
FACILITY'S ESTATE FOR BUSINESS
OPERATING INCOME - OWNER = OWNER
- ---------------- ---------- ---------------
<S> <C> <C> <C> <C>
100% - 74% = 26%
</TABLE>
This analysis of the capital requirements of purchasers of Retirement Home
real estate demonstrates that a minimum of 26% of the net operating income
must be allocated to the business enterprise component. Conversely, a maximum
of 74% of the property's net operating income is available for economic
rental to the owner of the underlying real estate. Accordingly, the appraiser
allocated 26% of net operating income to provide the necessary compensation
for the required business enterprise ownership.
DISTRIBUTION OF VALUE BETWEEN REAL, PERSONAL AND BUSINESS PROPERTY
The personal property component has already been estimated and its respective
capital requirement previously deducted. The remaining net income can be
distributed between real property and business enterprise as shown above. By
studying the capital return requirements of real property versus a business
enterprise, a mathematical relationship between the value of those two
components can be established.
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Ownership of the real estate component requires a 10% return, according to
the typical REIT investors in real estate. Ownership of the business
enterprise component requires a 15% return on investment, according to
typical purchasers of business property. A distribution of income and related
values for the two property components is shown below. Assuming a $100,000
net operating income, and the required rate of return and debt coverage
factors previously discussed, the "Going Concern" value of a Retirement Home
would be distributed between real estate and business enterprise as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Distribution of Income
Between Real Estate Distribution of Percentage Distribution
Ownership & Business divided Required Rate Value Between of Value Between Real
Enterprise Ownership by of Return = Components Estate & Business
(Assumes 1.35X Debt
Coverage & $100K NOI)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real Estate = divided
$74,000 (74%) by 10% = $740,000 81%
- --------------------------------------------------------------------------------------------------------------------
Business Enterprise = divided
$ 26,000 (26%) by 15% = $173,333 19%
- --------------------------------------------------------------------------------------------------------------------
Total Property =
$100,000 (100%) $913,333 100%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Indicated Business Value: $11,250,OOOX 19% = $2,137,500
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SUMMARY
The two methods of estimating Business Value have indicated values as follows:
<TABLE>
<S> <C>
Cost Analysis ($20,000)
Capitalization Rate Analysis $3,982,000
Debt Coverage Ratio Analysis $2,137,500
</TABLE>
After considering all methods, it was our opinion that the subject property's
final Market Value of $11,250,000 included a Business Value of:
<TABLE>
<S> <C>
BUSINESS VALUE $2,000,000
</TABLE>
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SUMMARY OF VALUES
It was our opinion that the Subject Property described herein had the
following Market Value, as of April 5, 1997, at current occupancy and in its
present physical condition, subject to the Underlying Assumptions and
Limiting Conditions contained in this report:
<TABLE>
<S> <C>
Land $285,000
Building Improvements $8,447,000
----------
Total Real Estate $8,732,000
Personal Property $518,000
Business Value $2,000,000
----------
Total Property $11,250,000
</TABLE>
SPECIAL CONDITION
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have
a dramatic impact on the property's value.
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UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS
1. The Appraiser assumes no responsibility for legal matters
nor renders an opinion of title. Good title to The McCurdy
Residential Center is assumed.
2. The commissioning and/or possession of this report does not
carry with it the right of publication, nor does it oblige
the appraiser to appear in court, commission, or in any
other capacity without prior arrangements and additional
compensation.
This appraisal report has been prepared for the exclusive
benefit of its intended user, Capitol Senior Living, Inc..
It may not be used or relied upon by any other party. Any
party who uses or relies upon any information in this
report without the preparer's written consent is an
unintended user, and does so at his own risk.
3. The separate values for land, equipment, business value
and/or buildings must not be used in reference to any other
appraisal and are invalid if so used. The distribution of
total value applies only to existing utilization.
4. The factual information in this report--furnished by others
or taken from public records--is believed to be reliable,
but no responsibility is assumed for its accuracy. We do
not guarantee the correctness of estimates, opinions,
sketches and other exhibits.
5. One (or more) of the signatories of this appraisal report
is a Member of the Appraisal Institute. The Bylaws and
Regulations of the Institute require each Member to control
the use and distribution of each appraisal report signed by
such Member. Therefore, except as hereinafter provided, the
party for whom this appraisal report was prepared may
distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the
party for whom this appraisal report was prepared. However,
selected portions of this appraisal report shall not be
given to third parties without prior written consent of the
signatories of this appraisal report. Further, neither all
nor any part of this appraisal report shall be disseminated
to the general public by use of advertising, public
relations, news, sales, or other media for public
communication without the prior written consent of the
signatories of this appraisal report.
6. The soil and subsoil, unless otherwise detailed, appear
firm and solid. No engineering study has been made and the
appraiser is not responsible for any adverse condition that
may be found in these matters.
7. The appraiser is not an expert in pest detection or
control. The value estimate tendered, unless qualified,
assumes these matters (including but not limited to
termites, dry rot, wet rot, and other wood-destroying
organisms) are not present or have been detected and
properly corrected.
8. Any description of improvements is intended to be general,
for descriptive purposes only, and based primarily upon
observation. All foundations and mechanical, plumbing,
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electrical, heating, ventilation, air conditioning, and
roof systems are assumed to be adequate, in good working
order and capable of performing the function for which they
were designed. The appraiser has no expertise in this area
and cannot certify the condition or functional adequacy of
these items. A qualified inspector should be utilized for
that purpose. The appraiser assumes no responsibility for
any hidden or unapparent conditions of the property, soil,
subsoil, or structures that would affect its value.
9. Any site or building improvement, whether existing or
proposed, is assumed by the appraiser to comply with all
applicable building codes, zoning and environmental
regulations for this jurisdiction and is assumed to be a
legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be
retained for verification purposes.
10. The existence (if any) of potentially hazardous material
(such as, but not limited to, formaldehyde foam insulation,
radon, asbestos or toxic waste) was not considered. The
appraiser is not qualified to detect such substances and we
urge the client to retain an expert in this field.
11. The appraiser has not researched the subject property for
liens nor reviewed any mortgage documents. Our analysis is
based upon the assumption that any mortgages encumbering
subject are of such amount, rates, and terms as to be
considered typical in the market place and would neither
contribute to nor detract from the property's market value.
The property is therefore appraised as though it were free
and clear of any debt encumbrances or subject to financing
which is generally acceptable in the market.
12. The value estimate and estimated income and expenses assume
responsible ownership and typical, competent management.
13. Gross area of land and improvements is estimated by methods
and from sources considered reliable and the data is
believed to be accurate. However, no responsibility is
assumed for its accuracy and it is recommended that a
licensed surveyor be employed for that purpose. The
appraiser's Final Market Value estimate is primarily
predicated upon the economic viability of the project
itself and its projected income stream. Any minor
difference in the subject's actual land or improvement size
would have little or no effect on its true market value.
Any statement by the appraiser contained herein as to the
size of land or building improvements is for descriptive
purposes and is a statement of the appraiser's opinion as
to the property's functional utility and not a statement of
fact as to its physical size.
14. The subject property is subject to licensing and
certification by several regulatory agencies. Our value
estimate is predicated upon the subject property
maintaining its Certificate Of Need and/or License and
Certification to Operate as a Retirement Home. The loss of
either one of those items could affect the value of the
subject property.
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15. In the event that any residents are funded by public or
third party payors, we have assumed that all payments will
be made promptly.
16. The Market Value estimate is predicated upon an assumption
of stabilized occupancy, rates and census.
17. The appraiser's projections of income and expenses are not
predictions of the future. They are our best estimates of
current market thinking about what future income and
expenses might be. We make no warranty or representations
that these projections will materialize.
18. To the best of the appraiser's knowledge, the subject
property is not currently under any option, listing or
agreement of sale. There may have been transactions of this
type, but the relevant details were not available. While
any present or past listing, option or sales data on the
subject available to the appraiser have been considered in
this analysis, the Final Market Value was estimated as
though subject were available for sale on the open market.
19. To the best of the Appraiser's knowledge, this report
conforms to the current requirements prescribed by the
Uniform Standards of Professional Appraisal Practice of the
Appraisal Standards Board of the Appraisal Foundation as
required by the Financial Institutions Reform, Recovery and
Enforcement Act (FIRREA) and the Appraisal Institute.
20. The Americans with Disabilities Act "ADA" became effective
January 26, 1992. We have 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 we have no direct
evidence relating to this issue, I (we) did not consider
possible noncompliance with the requirements of ADA in
estimating the value of the property. Based on our personal
inspection, we are not aware of any irregular or apparent
non-compliant handicap items.
21. The final value conclusions in this report are predicated
upon the assumption that the property is not subject to any
management contract or lease and that the property would be
available for negotiation of a new lease or management
contract at this time.
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SPECIAL CONDITION
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have
a dramatic impact on the property's value.
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HealthCare Property Appraisers of America, Inc. 124
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APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- The statements of fact contained in this appraisal
report are true and correct.
- The reported appraisal 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
personal interest or bias with respect to the parties
involved.
- My compensation is not contingent upon the reporting of
a predetermined value or direction in value that favors
the cause of the client, the amount of the value
estimate, the attainment of a stipulated result, or the
occurrence of a subsequent event.
- My analyses, opinions and conclusions were developed,
and this report has been prepared, in conformity with
the Uniform Standards of Professional Appraisal Practice
of the Appraisal Standards Board of the Appraisal
Foundation as required by the Financial Institutions
Reform, Recovery and Enforcement Act (FIRREA) and the
Code of Professional Ethics and Standards of
Professional Appraisal Practice of the Appraisal
Institute.
- As of the date of this report, J. Michael Burroughs,
MAI, SRA has completed the requirements of the
continuing education program 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.
- The subject property was inspected by Franklin M. Ramsey
and was not inspected by J. Michael Burroughs.
- Eve L. Burroughs and Bonny J. Sinclair provided valuable
assistance in compiling data for this report. No one
else provided significant professional assistance to the
undersigned. The appraiser gratefully acknowledges the
contribution of data from several sources.
- The appraiser has complied with the USPAP competency
provision.
- The USPAP departure provision does not apply.
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- This appraisal assignment was not based on a requested minimum
or maximum valuation, a specific valuation, or the approval of
a loan.
I do not authorize the out-of-context quoting from or partial reprinting
of this appraisal report. Further, neither all nor any part of this appraisal
report shall be disseminated to the general public by the use of media for
public communication without the prior written consent of the appraiser(s)
signing this appraisal report.
/s/ J. Michael Burroughs
---------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
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REFERENCES
The appraiser would like to acknowledge the following
resources:
1. Laventhol & Horwath, Retirement Housing Industry 1989
(Laventhol & Horwath, Philadelphia, PA 1990).
2. Laventhol & Horwath, Nursing Home Industry 1988 (Laventhol &
Horwath, Philadelphia, PA 1989).
3. Marshall and Swift Computerized Services, Los Angeles, CA.
4. National Planning Data Corporation, Ithaca, NY.
5. SMG Marketing Group, Inc.-C- 1993.
6. Ernst & Young and American Association of Homes for the
Aging Study. Continuing Care Retirement Communities: An
Industry in Action, Analysis and Developing Trends, 1989.
7. THE DICTIONARY OF REAL ESTATE APPRAISAL, American Institute
of Real Estate Appraisers, second edition.
8. THE APPRAISAL OF REAL ESTATE, ninth edition.
9. THE GUIDE TO THE NURSING HOME INDUSTRY, 1993. A joint
publication of Health Care Investment Analysts, Inc. and
Arthur Andersen & Co.
10. U. S. Bureau of Census.
11. MARION MERRELL DOW MANAGED CARE DIGEST LONG TERM CARE
EDITION 1993. Marion Merrell Dow, Inc.
12. AN OVERVIEW OF THE ASSISTED LIVING INDUSTRY, October 1993,
Coopers & Lybrand and The Assisted Living Facilities
Association of America.
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QUALIFICATIONS OF APPRAISER
J. MICHAEL BURROUGHS, MAI & SRA
POST OFFICE BOX 2227
HWY 64 EAST, LAUREL TERRACE, 2ND FLOOR
CASHIERS, NORTH CAROLINA 28717
BUSINESS EXPERIENCE
J. Michael Burroughs has been engaged in the preparation of appraisals,
feasibility studies, economic analyses, and general consulting on all types
of properties for various clients. In the mid-1970s, Mr. Burroughs began
specializing in the appraisal of long-term health care facilities and housing
for the elderly. Since 1985, Mr. Burroughs has worked exclusively with
long-term health care and housing for the elderly in the areas of appraising,
brokerage, and finance.
Assignments have been in more than 44 of the 50 United States. Current
assignments include all types of healthcare and senior housing real estate:
Nursing Homes
Continuing Care Retirement Communities (Both Rental and Endowment)
Assisted Living Facilities
Acute Care Hospitals
Psychiatric Hospitals
Congregate Living Facilities
Properties appraised total approximately 3,000 in number and exceed $7
Billion in appraised value. Mr. Burroughs has also been active as a general
partner in five successful apartment to condominium conversion projects and
is actively engaged in the buying and selling of investment real estate for
his own account and for clients. He is a nationally recognized convention
speaker and published author on healthcare appraising and financing.
EMPLOYMENT
HealthCare Property Appraisers of America, Inc. -- President
June, 1973 to Present
Atlantic Mortgage and Investment Company -- First Vice President
January, 1972 to July, 1973, Winston-Salem, NC
Wachovia Mortgage Company - Asst. VP and Manager of the Charlotte Income
Property Loan Department
May, 1970 to January, 1972, Charlotte, NC
Prudential Insurance Company - Real Estate and Mortgage Loan Department
Regional Appraiser
December, 1964 to April, 1969, Montgomery, Alabama May 1969 to May, 1970,
Charlotte, N. C.
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GENERAL EDUCATION
Mars Hill College--Associate of Arts--1962
University of North Carolina at Chapel Hill--B.S. in Business Administration
(Major: Banking and Finance) 1964
REAL ESTATE EDUCATION
American Institute of Real Estate Appraisers--Real Estate Valuation--Course I--
University of Mississippi, 1966.
American Institute of Real Estate Appraisers--Real Estate Valuation--Course II--
Tulane University, 1967.
Various Seminars in Tax Deferred Exchanging and Computer Applications for
Real Estate Analysis.
PROFESSIONAL CONTRIBUTIONS
Mr. Burroughs has authored articles for national industry periodicals and is
a nationally recognized speaker on the valuation of healthcare and senior
living properties.
MEMBERSHIPS AND PROFESSIONAL DESIGNATIONS
The Appraisal Institute--MIA, SRA
Licensed Real Estate Broker
The Academy of Real Estate Exchangers
State Certified General Appraiser
AREA OF SPECIALTY--LONG-TERM HEALTH CARE
HEALTHCARE AND NURSING HOME FACILITIES
Facilities Appraised: 2500
Location: Located in 44 States
Type: Skilled, ICF, Personal Care, Head Trauma, Long-Term
Pediatric Care, Substance Abuse, Mentally Retarded
(MR), Rehabilitation, Alzheimer's, Acute, Sub-Acute,
Rehab, and Psychiatric Hospitals
RETIREMENT HOUSING
Facilities Appraised: 60+
Location: Located in over 14 States
Type: Lease Rental, Condo Ownership, Retirement Apartments
with or without Nursing Home, Assisted Living, and
Luxurious Hotel-type for the well elderly. Housing
for the elderly requiring some personal care and
services.
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TYPICAL NURSING HOME CLIENTS (PARTIAL LIST)
MORTGAGE/BOND LENDERS
Bank One, Indianapolis, IN
Bear Sterns Investment Bankers, New York, NY
Dominion Bank, Richmond, VA
First American National Bank, Nashville, TN
First National of Maryland, Baltimore, MD
Grove Capital, Atlanta, GA
Healthcare REIT, Toledo, OH
Hibernia National Bank, New Orleans, LA
J. C. Bradford, Nashville TN and Pensacola, FL
Maryland National Bank, Baltimore, MD
Society Bank, Dayton, Ohio
Southtrust Bank, N.A., Birmingham, AL
Van Kampen Merritt, Philadelphia, PA
Wachovia Bank & Trust, Raleigh, NC
Wright One Financial, Dayton, OH
HEALTHCARE MANAGEMENT COMPANIES
American Retirement Corporation, Nashville, TN
The Angell Group, Winston-Salem, NC
Asheville Psychiatric Hospital, Asheville, NC
Beverly Enterprises, Ft. Smith, AR
Brian Management Group, Hickory, NC
The Brunner Companies, Dayton, OH
Charlotte Memorial Hospital, Charlotte, NC
Convalescent Services, Atlanta, GA
Cumberland Health Systems, Nashville, TN
Denver Health Group, Denver, CO
Diversicare Corporation of America, Franklin, TN
Elmhurst Psychiatric Hospital, Portland, CT
Genesis Health, West Point, PA
Health Care Capital, Atlanta, GA
Health Care Concepts, Atlanta, GA
Health Prime, Atlanta, GA
Meridian Healthcare, Towson, MD
Multicare Management, Inc., Hackensack, NJ
National Health Corporation, Murfreesboro, TN
Nomura, New York, NY
Quest Rescue, Atlanta, GA
Quorum Health Services, Inc., Wellesley, MA
Regency Health Care, Ormond Beach, FL
Resource Housing of America, Atlanta, GA
Royal Care, Inc., Cleveland, TN
Southern Care Enterprises, Atlanta, GA
TheraTx, Baltimore, MD
Total Care Systems, Inc., West Point, PA
WellCare, Inc., Atlanta, GA
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<PAGE>
ADDENDA
- ---------------------------------------------------------
<PAGE>
CURRENT DATE MCCURDY HEALTHCARE CENTER
12/23/96
P R O F I T A N D L O S S (B U D G E T)
PERIOD ENDING 11/30/96
INCOME
<TABLE>
<CAPTION>
------------------CURRENT PERIOD----------------- ---------------YEAR - TO - DATE--------------
ACTUAL BUDGET VARIANCE ACTUAL BUDGET VARIANCE
<S> <C> <C> <C> <C> <C> <C>
ROUTINE SERVICE REVENUE 702619.10 655639.00 7 7849727.70 721549.00 9
SPECIAL SERVICE REVENUE 86167.73 47225.00 82 1087114.85 525875.00 107
NURSING SERVICE REVENUE 10321.77 11145.00 7 142060.96 123772.00 15
OTHER REVENUE ITEMS 16451.17 18530.00 11 189635.81 203830.00 7
ALLOWANCES/CONTRACTUALS -133712.29 -33727.00 296 -1295788.77 -376157.00 244
TOTAL INCOME 681847.48 698812.00 2 7972750.55 7692379.00 4
</TABLE>
EXPENSES
<TABLE>
<CAPTION>
------------------CURRENT PERIOD----------------- ---------------YEAR - TO - YEAR--------------
ACTUAL BUDGET VARIANCE ACTUAL BUDGET VARIANCE
<S> <C> <C> <C> <C> <C> <C>
ROUTINE SERVICE EXPENSE 211442.63 213839.00 1 2343275.34 2322166.00 1
SPECIAL SERVICE EXPENSE 59841.05 45011.00 33 635904.90 499229.00 27
MEDICAL RECORDS DEPT 7261.29 6955.00 4 30986.61 76440.00 6
ACTIVITY DEPARTMENT EXP 9684.64 11667.00 17 108858.12 128322.00 15
SOCIAL SERVICE DEPT EXP 5543.07 3596.00 54 47556.19 39513.00 20
DIETARY DEPARTMENT EXP 80093.46 73794.00 9 834906.93 806641.00 4
LAUNDRY DEPARTMENT EXP 14919.50 16069.00 7 180855.56 175266.00 3
HOUSEKEEPING DEPT. EXP 27153.13 28218.00 4 314404.22 308535.00 2
MAINTENANCE DEPT. EXP 30608.05 29942.00 2 406186.33 328779.00 24
PLANT OPERATION EXPENSE 29212.18 19665.00 49 247752.83 264023.00 6
R/E & PROPERTY EXP 15612.00 16411.00 5 178926.78 180521.00 1
GENERAL & ADMINISTRATIVE 164184.25 181496.00 10 1990223.59 2001844.00 1
AMORTIZATION & MISC EXP 6283.89 8321.00 24 98894.64 97271.00 2
TOTAL EXPENSES 661839.14 654984.00 1 7468732.04 7228553.00 3
NET PROFIT 20008.34 43828.00 54 504018.51 463826.00 9
</TABLE>
Data Provided
By Owner
<PAGE>
FEDERAL EMERGENCY MANAGEMENT AGENCY See the Attached O.M.B. No. 3067 0264
STANDARD FLOOD HAZARD DETERMINATION Instructions Expires April 30, 1998
- --------------------------------------------------------------------------------
SECTION I - LOAN INFORMATION
- --------------------------------------------------------------------------------
1. LENDER NAME AND ADDRESS 2. COLLATERAL (Building/Mobile Home/Personal
Property) PROPERTY ADDRESS
(LEGAL DESCRIPTION MAY BE ATTACHED.)
HEALTHCARE PROPERTY APPRAISERS
HWY 64 EAST BOX 2227 101 SE 1ST ST
CASHIERS, NC 28717 EVANSVILLE, IN 47708-1406
- --------------------------------------------------------------------------------
3. LENDER ID. NO. 4. LOAN IDENTIFIER 5. AMOUNT OF FLOOD INSURANCE REQUIRED
2 $ 0
- --------------------------------------------------------------------------------
SECTION II
- --------------------------------------------------------------------------------
A. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) COMMUNITY JURISDICTION
- --------------------------------------------------------------------------------
NFIP COMMUNITY COUNTY(IES) STATE NFIP COMMUNITY
NAME NUMBER
- --------------------------------------------------------------------------------
EVANSVILLE, CITY OF VANDERBURGH IN 180257
- --------------------------------------------------------------------------------
B. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) DATA AFFECTING BUILDING/MOBILE HOME
- --------------------------------------------------------------------------------
NFIP MAP NUMBER OR
COMMUNITY-PANEL NUMBER NFIP MAP PANEL
(COMMUNITY NAME, IF NOT EFFECTIVE/REVISED NO. NFIP
THE SAME AS "A") DATE LOMA/LOMR FLOOD ZONE MAP
1802570007B 10/15/81 C
---- -----
Yes Date
- --------------------------------------------------------------------------------
C. FEDERAL FLOOD INSURANCE AVAILABILITY (CHECK ALL THAT APPLY)
- --------------------------------------------------------------------------------
/X/ Federal Flood Insurance is available (community participates in NFIP).
/X/ Regular Program / / Emergency Program of NFIP
/ / Federal Flood Insurance is not available because community is not
participating in the NFIP
/ / Building/Mobile Home is in a Coastal Barrier Resources Area (CBRA),
Federal Flood Insurance may not be available.
CBRA designation dates:
----------------------------
- --------------------------------------------------------------------------------
D. DETERMINATION
- --------------------------------------------------------------------------------
IS BUILDING/MOBILE HOME IN SPECIAL FLOOD HAZARD AREA
(ZONES BEGINNING WITH LETTERS "A" OR "V")? / / YES /X/ NO
If yes, flood insurance is required by the Flood Disaster Protection Act of
1973.
If no, flood insurance is not required by the Flood Disaster Protection Act of
1973.
- --------------------------------------------------------------------------------
E. COMMENTS (OPTIONAL):
Name: Cert No.: 1405426-0
Type: REGULAR Client ID: 7425
Priority: REGULAR
Requested By: EVE OR BONNY Fax: 1-(704) 743-1730
- --------------------------------------------------------------------------------
This determination is based on examining the NFIP map, any Federal Emergency
Management Agency revisions to it, and any other information needed to locate
the building/mobile home on the NFIP map.
- --------------------------------------------------------------------------------
F. PREPARER'S INFORMATION
- --------------------------------------------------------------------------------
NAME, ADDRESS, TELEPHONE NUYMBER (IF OTHER THAN LENDER) DATE OF DETERMINATION
BANKERS HAZARD DETERMINATION SERVICES-BHDS 3/19/97
PO BOX 33001
ST. PETERSBURG, FL 33733
PHONE: 1-800-723-6327
- --------------------------------------------------------------------------------
FEMA FORM 81-93, JUN 95
<PAGE>
The Crenshaw Creek Rehabilitation Center
134 East Rebound Road
Lancaster, South Carolina
<PAGE>
APPRAISAL REPORT
ON
The Crenshaw Creek
Rehabilitation Center
134 East Rebound Road
Lancaster, South Carolina
PREPARED BY:
HealthCare Property Appraisers of America, Inc.
Hwy 64 East, Laurel Terrace, 2nd Floor
Post Office Box 2227
Cashiers, North Carolina 28717
Copyright 1997, HealthCare Property Appraisers of America, Inc.
<PAGE>
SUBJECT
[picture]
<PAGE>
HealthCare Property Appraisers MICHAEL BURROUGHS, MAI, SRA
Of America, Inc. PRESIDENT
[LOGO]
Post Office Box 2227
Hwy. 64 E., Laurel Terrace, 2nd Floor
Cashiers, North Carolina 28717
Phone: 704-743-5204
Fax: 704-743-1730
April 10, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
14160 Dallas Parkway
Dallas, TX 75240
Re: The Crenshaw Creek Rehabilitation Center
Lancaster, South Carolina
Dear Mr. Brickman:
HealthCare Property Appraisers of America, Inc. has inspected The Crenshaw Creek
Rehabilitation Center for the purpose of estimating the Market Value of its fee
simple estate. All factors which might influence the value of this property were
investigated and fully considered to the best of our ability. We have performed
a Complete Appraisal and report our findings here in the form of a
Self-Contained Appraisal Report, which describes the appraisal method and
contains the information necessary for forming realistic conclusions. The
supporting data analyses and conclusions are an integral part of this report.
The maps, sketches, and statistics are included to aid the reader in visualizing
the property. Your attention is directed to the section entitled: "Underlying
Assumptions and Limiting Conditions Section" which provides the basis for all
conclusions and the Final Value Estimate.
Based on the enclosed data and analyses, we believe the Subject Property
described herein had a Market Value, as of March 25, 1997 in its present
physical condition of-
$240,000
The above value includes no value for the building improvements and assumes a
buyer cannot be found who can use and will pay something for the building
improvements. We rate the probability of the subject's being able to attract
such a buyer who would allocate any value to the building improvements as FAIR
to POOR.
The value conclusions in this report assume that this property is not subject to
any existing leases or management contracts. We have assumed that any new owner
would be free to negotiate a new lease or management contract if they so
desired.
After studying the sales history of similar properties, the Appraiser estimates
a reasonable marketing period for the subject property to be twelve months.
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by the Uniform Standards of
Professional Appraisal Practice (USPAP).
I appreciate the opportunity to provide these appraisal services to you. If you
have any questions on this report or any other matters, please do not hesitate
to call.
Respectfully submitted,
HealthCare Property Appraisers of America, Inc.
/s/ J. MICHAEL BURROUGHS
J. MICHAEL BURROUGHS, MAI, SRA
State Certified General Appraiser, #A218
President
JMB:ela
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HealthCare Property Appraisers of America, Inc.
3
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
SUMMARY OF IMPORTANT CONCLUSIONS
Self-Contained Report of a Complete Appraisal
Subject Property: The Crenshaw Creek
Rehabilitation Center
Property Location: 134 East Rebound Road
Lancaster, South Carolina
Effective Date: March 25, 1997
Report Date: April 10, 1997
Purpose of Appraisal: Market Value
Area of Site: 43.92 acres (approx.)
Highest and Best Use: For Office Use
Improvements:
Number of Beds: 36 Beds
Building Size: 37,250 sf (approx.)
Building Date: 1988
Market Value:
(Assumes No Building Value)
Land $240,000
Building Improvements 0
---------
Total Real Estate $240,000
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
TRANSMITTAL LETTER.....................................................2
SUMMARY OF IMPORTANT CONCLUSIONS.......................................4
TABLE OF CONTENTS......................................................5
GENERAL IDENTIFICATION OF PROPERTY.....................................6
PROPERTY RIGHTS APPRAISED..............................................6
SCOPE OF APPRAISAL.....................................................6
HISTORY OF PROPERTY....................................................7
THE PURPOSE OF THE APPRAISAL...........................................8
METHOD OF APPRAISAL...................................................11
REGIONAL ANALYSIS.....................................................13
MARKET AREA AND NEIGHBORHOOD..........................................34
SITE DATA.............................................................38
DESCRIPTION OF IMPROVEMENTS...........................................44
COST APPROACH TO VALUE................................................49
INCOME CAPITALIZATION APPROACH TO VALUE...............................66
SALES COMPARISON APPROACH TO VALUE....................................71
RECONCILIATION AND FINAL VALUE ESTIMATE...............................92
SUMMARY OF VALUES.....................................................96
UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS........................97
APPRAISER'S CERTIFICATION............................................100
QUALIFICATIONS OF APPRAISER..........................................103
</TABLE>
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HealthCare Property Appraisers of America, Inc.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
GENERAL IDENTIFICATION OF PROPERTY
The subject property, known as The Crenshaw Creek Rehabilitation Center, is
located at 134 East Rebound Road, Lancaster, South Carolina. The subject site
and improvements are described further in subsequent sections of this report.
The subject of this analysis includes real property only.
PROPERTY RIGHTS APPRAISED
The appraiser, in completing this appraisal assignment, considered the subject
property to include all of those rights that may be lawfully owned and are
legally referred to as being held in "fee simple".
Definition of Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate; subject
only to the limitations of eminent domain, escheat, police power, and
taxation.(The Dictionary of Real Estate Appraisal, American Institute of
Real Estate Appraisers, Third Printing, October, 1987)
SCOPE OF APPRAISAL
In conducting this appraisal, our staff
- Inspected the subject property.
- Developed and analyzed significant data from primary and secondary
sources, confirming that data where possible.
- Analyzed sales, income and expense data and projected a reasonable
cash flow for the subject.
- Completed Income Capitalization, Cost and Sales Comparison Approaches
To Value and reached a Final Market Value conclusion as reported
herein.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by USPAP.
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HealthCare Property Appraisers of America, Inc.
6
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
HISTORY OF PROPERTY
To the best of the appraiser's knowledge, the subject property has not been
sold, listed or placed under contract within the past three years. The subject
property is listed at the county courthouse as being owned by Jacque Miller.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
THE PURPOSE OF THE APPRAISAL
The purpose of the Complete Appraisal contained in this Self-Contained Appraisal
Report is to estimate the Market Value of The Crenshaw Creek Rehabilitation
Center. This report is for the internal use of Capital Realty Group.
Definition of Market Value
The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the
buyer and seller each acting prudently and knowledgeably, and assuming
the price is not affected by undue stimulus. Implicit in this
definition is the consummation of a sale as of a specified date and the
passing of title from seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated.
(2) Both parties are well informed or well advised, and acting in
what they consider their own best interests.
(3) A reasonable time is allowed for exposure in the open market.
(4) Payment is made in terms of cash in U.S. dollars or in terms
of financial arrangements comparable thereto.
(5) The price represents the normal consideration for the property
sold unaffected by special or creative financing or sales
concessions granted by anyone associated with the sale.*
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
COMPETENCY
The Office of the Comptroller of the Currency has issued the following Final
Rule, which requires lenders to evaluate appraiser competency for each specific
appraisal assignment:
"Not all appraisers are competent to perform every type of appraisal
that will be needed in connection with federally related transactions.
For instance, an appraiser who is experienced in appraising shopping
centers may not possess sufficient expertise to appraise a golf course.
A financial institution should look beyond an individual's title to
determine if he or she has the experience and training needed to
perform the appraisal. This provision is not intended to prohibit, in
every circumstance, an individual from appraising a type of property
with which he or she is not familiar. However in such instances, an
appraiser may perform the appraisal only in accordance with the
Competency Provision in the USPAP."
HealthCare Property Appraisers of America, Inc. is a national appraisal firm
limiting its appraisal practice to Health Care and Senior Housing properties.
HealthCare Property Appraisers of America, Inc. has prepared over 3,000
appraisal reports in 42 states on a wide variety of health care-oriented
facilities and housing for the elderly. Property types encompass the complete
continuum of health care facilities including:
- General and Acute Care Hospitals
- Psychiatric Hospitals
- Substance Abuse Facilities
- Skilled Nursing Homes
- Assisted Living Homes
- Rest Homes, Personal Care and Homes for the Aged
- Facilities for the Developmentally Disabled
- Independent Living Apartments for Retirees
- Continuing Care Retirement Communities
Our office maintains a constant dialogue with public health departments,
medicaid reimbursement officials and healthcare licensing agencies in all 50
states. We constantly update our data bank in accordance with changes within the
various state health care programs. HealthCare Property Appraisers of America,
Inc. maintains an in-house database which currently contains in excess of 1,300
sales of health care-related and senior housing properties.
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HealthCare Property Appraisers of America, Inc.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
Source of Definitions
- ---------------------
* Title XI. Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 (FIRREA) [Pub. L. No. 101-73, 103 Stat. 183 (1989)], 12 U.S.C.
3310, 3331-3351, and section 5(b) of the Bank Holding Company Act, 12
U.S.C. 1844(b); Part 225, Subpart G: Appraisals Paragraph 225.62(f).
* Uniform Standards of Professional Appraisal Practice, Page I-7.
* Federal Reserve System, 12 CFR Parts 208 and 225, Sec. 225.62.
* Office of the Comptroller of the Currency, 12 CFR part 34, Sec. 34.42.
* FDIC, 12 CFR Part 323, Sec. 323.2.
* Office of Thrift Supervision, 12 CFR Part 564, Sec. 564.2.
* NCUA, 12 CFR Part 722, Sec. 722.2.
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HealthCare Property Appraisers of America, Inc.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
METHOD OF APPRAISAL
The Appraisal Profession generally recognizes three approaches to value:
1. Cost Approach to Value: The appraiser: (a) estimates the land value as
though the site were vacant and available for development and (b)
estimates the cost to replace subject's improvements (at their same
stage of depreciation). The depreciated Replacement Cost is usually
based upon consultation with local contractors and construction cost
data services.
2. Income Capitalization Approach to Value: The Appraiser compiles and
analyzes market data to estimate subject property's economic rental and
expenses. The net income thus derived is capitalized into a value
estimate. This indicates the property's value to an investor receiving
this income stream and develops the present value of perceived future
benefits and property reversion.
3. Sales Comparison Approach to Value (also known as the Comparative
Approach or Market Data Method): The Appraiser researches sales of
Offices in this market area and developes units of comparison which are
adjusted and applied to the subject property.
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HealthCare Property Appraisers of America, Inc.
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<PAGE>
REGIONAL ANALYSIS
- -------------------------------------------------------------------------------
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
REGIONAL ANALYSIS
OVERVIEW
The subject property is located in Lancaster, Lancaster County, South Carolina.
Located in the North Central region of the state, the site is approximately 38
miles south/southeast of Charlotte, North Carolina and 61 miles northwest of
Columbia, South Carolina.
TERRAIN AND CLIMATE
The Lancaster County area is primarily level, typical of North Central South
Carolina. A mild climate, averaging a low temperature of 31 degrees in January
and a high of 88 degrees in July, has encouraged growth in the Lancaster County
area. This climate provides a long growing season.
POPULATION AND DEMOGRAPHICS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE PROJECTED CHANGE
1990-1996 1996-2001
--------------------------------------------------
<S> <C> <C>
UNITED STATES 6.5% 4.9%
STATE 6.9% 4.8%
COUNTY 3.5% 2.4%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The area enjoys a broadly diversified economic base including textiles,
manufacturing and agriculture industries which contribute to the growth of the
area. According to Claritas, Inc., a demographics survey firm, the estimated
1996 population of the United States has increased 6.5% since 1990, and an
additional 4.9% increase can be expected by 2001.
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HealthCare Property Appraisers of America, Inc.
13
<PAGE>
According to the 1990 Census, South Carolina's population totaled 3,486,703
residents. Claritas estimates the current population at 3,726,282,
representing an increase of 6.9%. By 2001, the population is projected to reach
3,905,421 residents, an increase of 4.8%.
The 1990 Census indicates County's population totaled 54,516 residents. Claritas
estimates the current population at 56,442, representing an increase of 3.5%. By
2001, the population is projected to reach 57,799 residents, an increase of
2.4%.
DEMOGRAPHICS OF THE ELDERLY POPULATION
Percentage of Change - Elderly Population
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1990-1996 1996-2001
--------- ---------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
----- ----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
U. S. 14.4% 21.0% 32.9% 11.3% 12.4% 19.0%
STATE 21.8% 30.7% 51.2% 12.4% 18.4% 27.7%
COUNTY 16.3% 36.6% 44.7% 8.0% 14.7% 29.4%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The market segments of primary interest in this demographics study are the age
groups: (a) 75 to 79, (b) 80 to 84, and (c) 85 and over. Between 1990 and 1996,
the estimated increase nationally in the 75 to 79 year old age bracket was
14.4%. In the 80 to 84 age group the change was 21.0% and the change in the 85
and over age group was 32.9%. By 2001, the 75 to 79 age group is projected to
increase by an additional 11.3%, the 80 to 84 group by 12.4% and the age group
85 and over by 19.0%.
In the state of South Carolina, the 75 to 79 age group is currently estimated at
90,955 which is an increase of 21.8% since the last census. The age group 80 to
84 has shown an increase of 30.7% in that same time period and the 85 and over
age group has shown an increase of 51.2%. It is estimated that by 2001, there
will be 12.3, 8.3 and 7.2 residents in these age groups or a change of 12.4%,
18.4%, and 27.7% respectively.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
In the County, the 75 to 79 age group is currently estimated at 1,521 which is
an increase of 16.3% since the last census. The age group 80 to 84 has shown an
increase of 36.6% in the time period between 1990 and 1996 and the 85 and over
age group has shown an increase of 44.7%. It is estimated that by 2001, there
will be 12.7, 8.9 and 7.5 residents in these age groups or a change of 8.0%,
14.7%, and 29.4% respectively.
Median Household Income - Ages 75+
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1990-1996 1996-2001
--------- ---------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
----- ----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
U.S. +$3,462 +$3,355 +$3,233 +$3,344 +$3,359 +$3,357
STATE +$2,977 +$2,966 +$3,089 +$3,267 +$3,185 +$3,100
COUNTY +$2,737 +$2,930 +$3,111 +$2,227 +$2,260 +$2,159
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Nationally, the 75 to 79 age group median household income increased $3,462
between 1990 and 1996 and is projected to increase an additional $3,344 by 2001.
The 80 to 84 age group showed an increase nationally in median household income
of $3,355 between 1990 and 1996 and is projected to increase an additional
$3,359 by 2001. The age group 85 and over showed an increase between 1990 and
1996 of $3,233 and is projected increase an additional $3,357 by 2001.
In the state of South Carolina, the median household income for the 75-79 age
group increased $2,977 between 1990 and 1996, and is projected to reach $17,455
or increase an additional $3,267 by 2001. The median household income for the 80
to 84 age group during the time period 1990 to 1996 increased $2,966 and is
expected to reach $17,201 or increase an additional $3,185 by 2001. The age
group 85 and over showed an increase of $3,089 between 1990 and current
estimates and is projected to reach $17,083 or increase an additional $3,100 by
2001.
In the County, median household income for the 75-79 age group increased $2,737
between 1990 and 1996, and is projected to reach $14,701 or increase an
additional $2,227 by 2001. The
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
median household income for the 80 to 84 age group during the 1990-1996 time
period increased $2,930 and is expected to reach $15,462 or increase an
additional $2,260 by 2001. The age group 85 and over showed an increase of
$3,111 between 1990 and current estimates and is projected to reach $15,412
or an additional increase of $2,159 by 2001.
Elderly Households With Income $35,000+
(As a % of Total Household Income For 55+ population)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1990 1996 2001
ESTIMATED PROJECTED
-------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES 42.4% 52.0% 58.3%
STATE 35.6% 47.4% 55.2%
COUNTY 33.4% 46.0% 53.8%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
One of the best indicators of the ability of the subject's residents to be self
supporting (rather than government funded) is their level of affluence. The
appraiser compared the subject's potential local market with that of South
Carolina and the USA as a whole. The comparison was based upon the percentage of
population aged 55+ with an annual household income exceeding $35,000.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
GOVERNMENT AND SERVICES
The subject property falls within the jurisdiction of the county of Lancaster,
which has a Council/Administrator form of government. Police protection is
provided by the Lancaster County Sheriff's Department. Fire protection is
provided by volunteer companies in the county.
UTILITIES
Water and sewer service are provided by private wells/city water (in some areas)
and septic tanks. Electricity is supplied by Duke Power, gas service is provided
by Lancaster County Natural Gas Company, and telephone service by Lancaster
Telephone Service.
EDUCATION
The Lancaster County school district has 17 public schools and an enrollment of
10,825. York Tech provides vocational-technical education in the area. Among the
area's facilities for higher education are Winthrop University in Rock Hill,
USC-Lancaster in Lancaster. Additionally, Charlotte which 38 miles away provides
UNC-Charlotte, Queens College, Central Piedmont Community College, Kings College
and Johnson C. Smith University.
TRANSPORTATION
The area's principal highways include Interstate I-77, U.S. Hwys 521, 601, and
21; and S.C. Hwys 9, 601, and 21. Airports are located throughout the area, with
the major commercial airport being Charlotte Douglas Airport in Charlotte, 38
miles away., with 487 daily flights. Airlines serving that airport include
American/American Eagle, Delta, TWA, American, United/United Express, US Air,
and US Air Express. Additionally, the county is served by McWhirter Field with a
6,000 foot runway. The nearest Foreign Trade Zone is in Columbia, 56 miles away.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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Freight rail service by CSX. Trucking companies serving the area include 43
carriers with one truck terminal. Overnight package carriers include UPS and
Federal Express.
HEALTH CARE
There is one hospital with a total of 194 beds serving the County. In Charlotte,
hospital care is available at Mercy Hospital, Presbyterian Hospital, University
Hospital, and Carolina Medical Center. Medical assistance is provided by 80
physicians and 16 dentists.
ECONOMY
The largest employer in the County is Springs Industries, a textile
manufacturing company. Employment distribution by sector and percentage of
employees for the county is as follows:
<TABLE>
<CAPTION>
Sector Percentage
- ------ ----------
<S> <C>
Services 19.4%
Manufacturing 43.5%
Wholesale/Retail Trade 17.6%
Construction 7.9%
Transportation/Communications/Utilities 3.7%
Finance/Insurance/Real Estate 3.7%
Government 2.0%
Agriculture/Forestry/Fishing 1.8%
Mining 0.4%
</TABLE>
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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The county's major employers are:
<TABLE>
<CAPTION>
Company Name # Employees Product/Service
- ------------ ----------- ---------------
<S> <C> <C>
Springs Industries 2,872 Fabrics, Sheets & Pillows
Duracell USA 1,003 Alkaline Batteries
US Textile Corporation 250 Women's Hosiery
Joslyn Clark Controls, Inc. 240 Electric Motor Controls
Thomas & Betts 152 Electric Transmission/
Wind Towers
America's Best 132 T-shirts
</TABLE>
United States/State/County Household Income
(General Population)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
% OF CHANGE
-------------------------------------------------
1990 - 1996 1996 - 2001
-------------------------------------------------
<S> <C> <C>
UNITED STATES 21.7% 15.4%
STATE 25.3% 20.0%
COUNTY 26.5% 20.6%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
An important indicator of economic health is growth in Median Household Income.
The national increase in Median Household Income between 1990 and 1996 was
21.7%. Claritas projects the National Median Household Income will reach $42,259
(i.e. increase by 15.4%) by 2001.
Median Household Income for South Carolina in 1996 is estimated at $32,978, or
an increase of 25.3% since 1989. It is projected that by 2001 the Median
Household Income will reach $39,585, or increase by 20.0%.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
Median Household Income for the County in 1996 has increased to $31,883, or
26.5%, since 1989. It is projected that by 2001 the Median Household Income will
reach $38,449, or increase 20.6%.
Number of Housing Units
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
% OF CHANGE
-------------------------------------------------
1990 - 1996 1996 - 2001
-------------------------------------------------
<S> <C> <C>
UNITED STATES 7.6% 5.5%
STATE 10.9% 6.2%
COUNTY 6.8% 3.4%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Growth in the number of housing units in a specified area is another good
indication of economic health. Housing units increased 7.6% nationally between
1990 and 1996. By 2001, it is projected that total housing units nationally will
have increased by an additional 5.5%.
The number of housing units in South Carolina is currently estimated at
1,579,588, which is an increase of 10.9% since the 1990 Census. It is estimated
that by 2001, this figure will reach 1,676,820, or increase by 6.2%.
The number of housing units in the County is currently estimated at 22,361,
which is an increase of 6.8% since the 1990 Census. It is estimated that by
2001, this figure will reach 23,130, or increase by 3.4%.
METROPOLITAN STATISTICAL AREA (MSA) DATA
While not a part of the Charlotte MSA, the appraiser believes that MSA's
economic overview is important to the subject area. Many residents of Lancaster
County commute to the Charlotte area for work, shopping, entertainment and
medical care.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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The appraiser considered the cost of living in the Charlotte MSA as this factor
affects The Crenshaw Creek Rehabilitation Center in two ways: (a) the likelihood
of retirees remaining in the area or being attracted to it and (b) payroll
costs. The Places Rated Almanac Cost of Living Index ranks the subject MSA of
the 343 MSAs nationwide (with the first place MSA having the lowest cost of
living). Ranked against the national average of 100, the MSA indexes are:
<TABLE>
<S> <C>
Housing:
Median Price: 94
Utilities: 95
Property Taxes: 109
Miscellaneous Living Cost Indexes:
College Tuition: 81
Food: 95
Health Care: 118
Transportation: 96
</TABLE>
According to the Places Rated Almanac, the County ranks of the nation's 343 MSAs
in the area of employment opportunity. The area is projected to show a growth
rate of 9.44% in new jobs, with an increase of 50,847 white collar and 21,751
blue collar positions expected.
The Places Rated Almanac rates and ranks 343 metropolitan areas on ten factors
that greatly influence the quality of an area: costs of living, job outlook,
housing, transportation, education, health care, crime, the arts, recreation,
and climate. The County is ranked as follows:
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
21
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Costs of Living 183
Job Outlook 15
Housing 223
Transportation 44
Education 79
Health Care 278
Crime 319
The Arts 63
Recreation 217
Climate 43
</TABLE>
Based on these factors, the County had an overall rank of 100 of the 343
Metropolitan Statistical Areas.
TRENDS, FUTURE OUTLOOK, CONCLUSIONS
Lancaster County's growth rate is slower than both the state and the nation.
Projections are for that trend to continue to the year 2000 and for the slowing
to increase. The area's proximity to a major metropolitan area (Charlotte) that
is continuing to grow will eventually have a positive impact on the area. As the
city of Lancaster expands, the need for suburban housing and services will
increase also. The subject lies between Lancaster and Charlotte and therefore is
in a growth corridor. The subject's neighborhood is the focus of much interest
as local officials feel this corridor has the most development potential of any
part of the county. The four-laned Highway 521 and proximity to Charlotte should
benefit this area but it will not see rapid development in the near future.
*All population and household income figures were taken from the most recent
U. S. Census (if actual numbers) or were provided to the appraiser by
Claritas, Inc. (if projected numbers) or by the local Chamber of Commerce.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
22
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
(State: 45, South Carolina County: 057, Lancaster County, SC)
(Weight: 100.0%)
Household Trend Report
<TABLE>
<CAPTION>
1980 1990 % Chg 1996 % Chg 2001 % Chg
Universe (Census) (Census) 80-90 (Est.) 90-96 (Proj.) 96-01
- -------- -------- -------- ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Population .... 53361 54516 2.2 56442 3.5 57799 2.4
Households .... 17820 19778 11.0 20889 5.6 21608 3.4
Families ...... 14479 15313 5.8 15968 4.3 16343 2.3
Housing Units . 19212 20929 8.9 22361 6.8 23130 3.4
Grp Qrt. Pop .. 277 399 44.0 401 0.5 403 0.5
Household Size 2.98 2.74 -8.1 2.68 -2.0 2.66 -1.0
</TABLE>
<TABLE>
<CAPTION>
1979 1989 % Chg 1996 %Chg 2001 % Chg
Income (Census) (Census) 79-89 (Est.) 89-96 (Proj.) 96-01
- ------ -------- -------- ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate($MM) 309 597 93.0 840 40.6 1092 30.1
Per Capita .... 5803 10960 88.9 14883 35.8 18902 27.0
Avg. Household 17345 30058 73.3 40016 33.1 50242 25.6
Median Hhold .. 15750 25205 60.0 31883 26.5 38449 20.6
Avg. Family HH 19401 34701 78.9 46247 33.3 57695 24.8
Med. Family HH 18029 30232 67.7 39105 29.3 46913 20.0
Avg. HH Wealth 123835 145523 17.5
Med. HH Wealth 71677 83071 15.9
</TABLE>
<TABLE>
<CAPTION>
Households
--------------------------------------------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total ........................... 19778 20889 21608
Less than $5,000........... 1527 7.7% 1099 5.3% 859 4.0%
$5,000 to $9,999........... 2282 11.5% 1908 9.1% 1650 7.6%
$10,000 to $14,999........... 2072 10.5% 1813 8.7% 1642 7.6%
$15,000 to $19,999........... 2028 10.3% 1677 8.0% 1446 6.7%
$20,000 to $24,999........... 1901 9.6% 1780 8.5% 1467 6.8%
$25,000 to $29,999........... 1732 8.8% 1574 7.5% 1531 7.1%
$30,000 to $34,999........... 1630 8.2% 1441 6.9% 1381 6.4%
$35,000 to $39,999........... 1374 6.9% 1225 5.9% 1186 5.5%
$40,000 to $44,999........... 1364 6.9% 1407 6.7% 1163 5.4%
$45,000 to $49,999........... 807 4.1% 1062 5.1% 998 4.6%
$50,000 to $59,999........... 1282 6.5% 2200 10.5% 2227 10.3%
$60,000 to $74,999........... 965 4.9% 1684 8.1% 2582 11.9%
$75,000 to $99,999........... 504 2.5% 1326 6.3% 1932 8.9%
$100,000 to $124,999........... 161 0.8% 356 1.7% 985 4.6%
$125,000 to $149,999........... 58 0.3% 169 0.8% 252 1.2%
$150,000 to $249,999........... 51 0.3% 115 0.6% 224 1.0%
$250,000 to $499,999........... 37 0.2% 37 0.2% 60 0.3%
$500,000 or More................. 3 0.0% 16 0.1% 23 0.1%
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
23
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
(State: 45, South Carolina County: 057, Lancaster County, SC)
(Weight: 100.0%)
Senior Life Report (Page 1 of 7)
<TABLE>
<CAPTION>
Population Age 55 and Over
--------------------------------------------------------
Population by Age and Sex 1990 1996 Estimate 2001 Proj.
- ------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Population Age 55+............... 11557 100.0% 12239 100.0% 12953 100.0%
55 to 59 .................... 2499 21.6% 2636 21.5% 3013 23.3%
60 to 64 .................... 2383 20.6% 2171 17.7% 2294 17.7%
65 to 69 .................... 2313 20.0% 2150 17.6% 1989 15.4%
70 to 74 .................... 1802 15.6% 2009 16.4% 1894 14.6%
75 to 79 .................... 1308 11.3% 1521 12.4% 1643 12.7%
80 to 84 .................... 733 6.3% 1001 8.2% 1148 8.9%
85 +......................... 519 4.5% 751 6.1% 972 7.5%
Males Age 55+.................... 4891 42.3% 5174 42.3% 5506 42.5%
55 to 59 .................... 1213 10.5% 1266 10.3% 1460 11.3%
60 to 64 .................... 1085 9.4% 1013 8.3% 1063 8.2%
65 to 69 .................... 1009 8.7% 950 7.8% 896 6.9%
70 to 74 .................... 723 6.3% 841 6.9% 803 6.2%
75 to 79 .................... 485 4.2% 570 4.7% 634 4.9%
80 to 84 .................... 246 2.1% 336 2.7% 390 3.0%
85 +......................... 130 1.1% 198 1.6% 260 2.0%
Female Age 55 +.................. 6666 57.7% 7065 57.7% 7447 57.5%
55 to 59 .................... 1286 11.1% 1370 11.2% 1553 12.0%
60 to 64 .................... 1298 11.2% 1158 9.5% 1231 9.5%
65 to 69 .................... 1304 11.3% 1200 9.8% 1093 8.4%
70 to 74 .................... 1079 9.3% 1168 9.5% 1091 8.4%
75 to 79 .................... 823 7.1% 951 7.8% 1009 7.8%
80 to 84 .................... 487 4.2% 665 5.4% 758 5.9%
85 +......................... 389 3.4% 553 4.5% 712 5.5%
</TABLE>
<TABLE>
<CAPTION>
Population
--------------------------------------------------------
Population by Age and Sex 1990 1996 Estimate 2001 Proj.
- ------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total Population: ............... 54516 100.0% 56442 100.0% 57799 100.0%
White Population ........... 40562 74.4% 41273 73.1% 41826 72.4%
Age 65 and Over ........... 5467 10.0% 6159 10.9% 6368 11.0%
Black Population ........... 13829 25.4% 15016 26.6% 15795 27.3%
Age 65 and Over ........... 1203 2.2% 1268 2.2% 1269 2.2%
Asian Population ........... 64 0.1% 87 0.2% 112 0.2%
Age 65 and Over ........... 1 0.0% 1 0.0% 4 0.0%
Am. Indian Population....... 61 0.1% 66 0.1% 66 0.1%
Age 65 and Over ........... 4 0.0% 4 0.0% 5 0.0%
Hispanic Population .......... 212 0.4% 269 0.5% 323 0.6%
Age 65 and Over ........... 22 0.0% 27 0.0% 30 0.1%
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
24
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
(State: 45, South Carolina County: 057, Lancaster County, SC)
(Weight: 100.0%)
Senior Life Report (Page 2 of 7)
<TABLE>
<CAPTION>
Households with Householder Age 55 and Over
Household Income by ----------------------------------------------------------
Age of Householder 1990 1996 Estimate 2001 Proj.
- -------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 55 to 64......... 2898 100.0% 2832 100.0% 3117 100.0%
Under $5,000................... 208 7.2% 133 4.7% 115 3.7%
$5,000-$9,999................... 303 10.5% 220 7.8% 204 6.5%
$10,000-$14,999.................. 319 11.0% 240 8.5% 225 7.2%
$15,000-$24,999.................. 503 17.4% 422 14.9% 394 12.6%
$25,000-$34,999.................. 511 17.6% 404 14.3% 400 12.8%
$35,000-$49,999.................. 544 18.8% 538 19.0% 492 15.8%
$50,000-$74,999.................. 330 11.4% 535 18.9% 716 23.0%
$75,000-$99,999.................. 99 3.4% 197 7.0% 291 9.3%
$100,000-$149,999................ 55 1.9% 103 3.6% 209 6.7%
$150,000-$249,999................ 16 0.6% 30 1.1% 49 1.6%
$250,000-$499,999................ 9 0.3% 8 0.3% 16 0.5%
$500,000 or More................. 1 0.0% 2 0.1% 6 0.2%
Median Income ................... 27270 34925 41722
Householder Age 65 to 69......... 1467 100.0% 1473 100.0% 1371 100.0%
Under $5,000 ................... 177 12.1% 122 8.3% 87 6.3%
$5,000-$9,999 ................... 330 22.5% 264 17.9% 198 14.4%
$10,000-$14,999 ................. 229 15.6% 222 15.1% 184 13.4%
$15,000-$24,999 ................. 347 23.7% 321 21.8% 262 19.1%
$25,000-$34,999 ................. 163 11.1% 196 13.3% 207 15.1%
$35,000-$49,999 ................. 133 9.1% 158 10.7% 167 12.2%
$50,000-$74,999 ................. 67 4.6% 135 9.2% 171 12.5%
$75,000-$99,999 ................. 11 0.7% 38 2.6% 55 4.0%
$100,000-$149,999 ............... 7 0.5% 10 0.7% 30 2.2%
$150,000-$249,999 ............... 1 0.1% 3 0.2% 8 0.6%
$250,000-$499,999 ............... 2 0.1% 3 0.2% 1 0.1%
$500,000 or More ................ 0 0.0% 1 0.1% 1 0.1%
Median Income ................... 14945 19003 23263
Householder Age 70 to 74......... 1266 100.0% 1299 100.0% 1267 100.0%
Under $5,000 ................... 155 12.2% 109 8.4% 84 6.6%
$5,000-$9,999 ................... 291 23.0% 237 18.2% 186 14.7%
$10,000-$14,999 ................. 210 16.6% 201 15.5% 177 14.0%
$15,000-$24,999 ................. 282 22.3% 284 21.9% 246 19.4%
$25,000-$34,999 ................. 142 11.2% 168 12.9% 191 15.1%
$35,000-$49,999 ................. 112 8.8% 140 10.8% 152 12.0%
$50,000-$74,999 ................. 53 4.2% 110 8.5% 148 11.7%
$75,000-$99,999 ................. 11 0.9% 33 2.5% 48 3.8%
$100,000-$149,999 ............... 7 0.6% 12 0.9% 29 2.3%
$150,000-$249,999 ............... 2 0.2% 4 0.3% 4 0.3%
$250,000-$499,999 ............... 1 0.1% 1 0.1% 2 0.2%
$500,000 or More ................ 0 0.0% 0 0.0% 0 0.0%
Median Income ................... 14452 18609 22581
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
25
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
(State: 45, South Carolina County: 057, Lancaster County, SC)
(Weight: 100.0%)
Senior Life Report (Page 3 of 7)
<TABLE>
<CAPTION>
Households with Householder Age 55 and Over
Household Income by ---------------------------------------------------------
Age of Householder 1990 1996 Estimate 2001 Proj.
- ------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 75 to 79......... 878 100.0% 1016 100.0% 1107 100.0%
Under $5,000................... 151 17.2% 128 12.6% 103 9.3%
$5,000-$9,999................... 304 34.6% 286 28.1% 254 22.9%
$10,000-$14,999.................. 154 17.5% 190 18.7% 209 18.9%
$15,000-$24,999.................. 136 15.5% 183 18.0% 206 18.6%
$25,000-$34,999.................. 56 6.4% 87 8.6% 130 11.7%
$35,000-$49,999.................. 35 4.0% 54 5.3% 78 7.0%
$50,000-$74,999.................. 39 4.4% 64 6.3% 79 7.1%
$75,000-$99,999.................. 2 0.2% 21 2.1% 31 2.8%
$100,000-$149,999................ 1 0.1% 3 0.3% 16 1.4%
$150,000-$249,999................ 0 0.0% 0 0.0% 1 0.1%
$250,000-$499,999................ 0 0.0% 0 0.0% 0 0.0%
$500,000 or More................. 0 0.0% 0 0.0% 0 0.0%
Median Income ................... 9737 12474 14701
Householder Age 80 to 84......... 494 100.0% 607 100.0% 654 !00.0%
Under $5,000 ................... 83 16.8% 68 11.2% 60 9.2%
$5,000-$9,999 ................... 159 32.2% 158 26.0% 138 21.1%
$10,000-$14,999 ................. 92 18.6% 121 19.9% 123 18.8%
$15,000-$24,999 ................. 74 15.0% 100 16.5% 130 19.9%
$25,000-$34,999 ................. 34 6.9% 51 8.4% 68 10.4%
$35,000-$49,999 ................. 23 4.7% 43 7.1% 47 7.2%
$50,000-$74,999 ................. 27 5.5% 46 7.6% 57 8.7%
$75,000-$99,999 ................. 1 0.2% 14 2.3% 21 3.2%
$100,000-$149,999 ............... 1 0.2% 3 0.5% 10 1.5%
$150,000-$249,999 ............... 0 0.0% 2 0.3% 0 0.0%
$250,000-$499,999 ............... 0 0.0% 0 0.0% 0 0.0%
$500,000 or More ................ 0 0.0% 1 0.2% 0 0.0%
Median Income ................... 10272 13202 15462
Householder Age 85+.............. 315 100.0% 397 100.0% 467 100.0%
Under $5,000 ................... 51 16.2% 44 11.1% 43 9.2%
$5,000-$9,999 ................... 105 33.3% 107 27.0% 101 21.6%
$10,000-$14,999 ................. 53 16.8% 73 18.4% 86 18.4%
$15,000-$24,999 ................. 51 16.2% 75 18.9% 85 18.2%
$25,000-$34,999 ................. 20 6.3% 29 7.3% 51 10.9%
$35,000-$49,999 ................. 18 5.7% 27 6.8% 34 7.3%
$50,000-$74,999 ................. 16 5.1% 31 7.8% 41 8.8%
$75,000-$99,999 ................. 1 0.3% 10 2.5% 18 3.9%
$100,000-$149,999 ............... 0 0.0% 1 0.3% 8 1.7%
$150,000-$249,999 ............... 0 0.0% 0 0.0% 0 0.0%
$250,000-$499,999 ............... 0 0.0% 0 0.0% 0 0.0%
$500,000 or More ................ 0 0.0% 0 0.0% 0 0.0%
Median Income ................... 10142 13253 15412
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
26
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
(State: 45, South Carolina County: 057, Lancaster County, SC)
(Weight: 100.0%)
Senior Life Report (Page 4 of 7)
<TABLE>
<CAPTION>
Total Households
---------------------------------------------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
- ---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total............................ 19778 100.0% 20889 100.0% 21608 100.0%
Under $5,000................... 1527 7.7% 1099 5.3% 859 4.0%
$5,000-$9,999................... 2282 11.5% 1908 9.1% 1650 7.6%
$10,000-$14,999.................. 2072 10.5% 1813 8.7% 1642 7.6%
$15,000-$24,999.................. 3929 19.9% 3457 16.5% 2913 13.5%
$25,000-$34,999.................. 3362 17.0% 3015 14.4% 2912 13.5%
$35,000-$49,999.................. 3545 17.9% 3694 17.7% 3347 15.5%
$50,000-$74,999.................. 2247 11.4% 3884 18.6% 4809 22.3%
$75,000-$99,999.................. 504 2.5% 1326 6.3% 1932 8.9%
$100,000-$124,999................ 161 0.8% 356 1.7% 985 4.6%
$125,000-$249,999................ 58 0.3% 169 0.8% 252 1.2%
$150,000-$249,999................ 51 0.3% 115 0.6% 224 1.0%
$250,000-$499,999................ 37 0.2% 37 0.2% 60 0.3%
$500,000 or More................. 3 0.0% 16 0.1% 23 0.1%
Median Household Income ......... 25205 31883 38449
</TABLE>
<TABLE>
<CAPTION>
Total Specified Owner-Occupied Housing Units
---------------------------------------------------------
Housing Value 1990 Census 1996 Estimate 2001 Proj.
- ------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total 10370 10928 11284
Less than $15,000.......... 492 4.7% 411 3.8% 353 3.1%
$15,000 to $19,999.......... 318 3.1% 183 1.7% 138 1.2%
$20,000 to $24,999.......... 389 3.8% 279 2.6% 178 1.6%
$25,000 to $29,999.......... 514 5.0% 345 3.2% 249 2.2%
$30,000 to $34,999.......... 728 7.0% 438 4.0% 303 2.7%
$35,000 to $39,999.......... 897 8.6% 570 5.2% 366 3.2%
$40,000 to $44,999.......... 1062 10.2% 702 6.4% 460 4.1%
$45,000 to $49,999.......... 899 8.7% 782 7.2% 543 4.8%
$50,000 to $59,999.......... 1415 13.6% 1566 14.3% 1222 10.8%
$60,000 to $74,999.......... 1557 15.0% 1755 16.1% 1855 16.4%
$75,000 to $99,999.......... 1259 12.1% 1871 17.1% 2147 19.0%
$100,000 to $124,999.......... 444 4.3% 1007 9.2% 1472 13.0%
$125,000 to $149,999.......... 215 2.1% 460 4.2% 844 7.5%
$150,000 to $174,999.......... 89 0.9% 242 2.2% 447 4.0%
$175,000 to $199,999.......... 51 0.5% 144 1.3% 263 2.3%
$200,000 to $249,999.......... 25 0.2% 116 1. 269 2.4%
$250,000 to $299,999.......... 7 0.1% 31 0.3% 104 0.9%
$300,000 to $399,999.......... 1 0.0% 17 0.2% 47 0.4%
$400,000 to $499,999.......... 2 0.0% 1 0.0% 15 0.1%
$500,000 and over............. 6 0.1% 8 0.1% 9 0.1%
Median Housing Value............. 49366 61607 74798
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
27
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
(State: 45, South Carolina County: 057, Lancaster County, SC)
(Weight: 100.0%)
Senior Life Report (Page 5 of 7)
<TABLE>
<CAPTION>
Household Household
Type and Relationship Population 65+ Type and Relationship Population 65+
- --------------------- -------------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Total...................... 6671 100.0%
In Family Households.... 4518 67.7% In Nonfamily Hhlds ...... 1993 29.9%
Householder............ 2421 36.3% Male Householder........ 363 5.4%
Spouse................. 1608 24.1% Living Alone........... 360 5.4%
Other Relative......... 468 7.0% Not Living Alone....... 3 0.0%
Nonrelative............ 21 0.3% Female Householder...... 1628 24.4%
Living Alone........... 1611 24.1%
In Group Quarters....... 160 2.4% Not Living Alone ...... 17 0.3%
Institutionalized...... 133 2.0% Nonrelative............ 2 0.0%
Other.................. 27 0.4%
</TABLE>
<TABLE>
<CAPTION>
Spec. Owner-Occ Units
----------------------------------------
Monthly Owner Costs as a By Age of Householder
Percent of 1989 HH Inc. Total Units 65 Yrs+
- ------------------------ ---------------- ---------------
<S> <C> <C> <C> <C>
Total............................ 10531 100.0% 2886 100.0%
Less than 20%................. 6846 65.0% 1762 61.1%
20 - 24%...................... 1220 11.6% 249 8.6%
25 - 29%...................... 813 7.7% 242 8.4%
30 - 34%...................... 396 3.8% 142 4.9%
35% or More................... 1150 10.9% 459 15.9%
Not computed.................. 106 1.0% 32 1.1%
</TABLE>
<TABLE>
<CAPTION>
Spec. Owner-Occ Units
----------------------------------------
Gross Rent as Percent By Age of Householder
of 1989 HH Income Total Units 65 Yrs+
- --------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Total............................ 4739 100.0% 782 100.0%
Less than 20%................. 1655 34.9% 117 15.0%
20 - 24%...................... 532 11.2% 101 12.9%
25 - 29%...................... 336 7.1% 57 7.3%
30 - 34%...................... 290 6.1% 44 5.6%
35% or More................... 1308 27.6% 314 40.2%
Not computed.................. 618 13.0% 149 19.1%
</TABLE>
<TABLE>
<CAPTION>
Occupied Housing Units
----------------------------------------
Attribute Total Hhldr 65+
- --------- ---------------- ---------------
<S> <C> <C> <C> <C>
Owner Occupied Units............. 14796 74.8% 3924 82.6%
Rnter Occupied Units............. 4982 25.2% 828 17.4%
Complete Plumbing Facil.......... 19573 99.0% 4650 97.9%
Lacking Plumbing Facil........... 205 1.0% 102 2.1%
With Telephone................... 17124 86.6% 4502 94.7%
No Telephone..................... 2654 13.4% 250 5.3%
One or More Vehicles............. 17482 88.4% 3633 76.5%
No Vehicles Available............ 2296 11.6% 1119 23.5%
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
28
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
(State: 45, South Carolina County: 057, Lancaster County, SC)
(Weight: 100.0%)
Senior Life Report (Page 6 of 7)
<TABLE>
<CAPTION>
1990 Households by Age of Householder
Poverty Status by ----------------------------------------------------------
Household Type Total Age 65-74 Age 75+
- ----------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Total ................................. 19750 100.0% 2713 100.0% 1699 100.0%
Married Couple Family............. 12172 61.6% 1489 54.9% 502 29.5%
Other Family ..................... 3176 16.1% 266 9.8% 164 9.7%
Male Householder ............. 653 3.3% 49 1.8% 32 1.9%
Female Householder............ 2523 12.8% 217 8.0% 132 7.8%
Nonfamily......................... 4402 22.3% 958 35.3% 1033 60.8%
HHer Living Alone............... 3949 20.0% 955 35.2% 1016 59.8%
HHer Not Living Alone........... 453 2.3% 3 0.1% 17 1.0%
Above Poverty....................... 16685 84.5% 2141 78.9% 1150 67.7%
Married Couple Family............. 11435 57.9% 1338 49.3% 427 25.1%
Other Family ..................... 2143 10.9% 212 7.8% 141 8.3%
Male Householder ............. 586 3.0% 47 1.7% 25 1.5%
Female Householder............ 1557 7.9% 165 6.1% 116 6.8%
Nonfamily......................... 3107 15.7% 591 21.8% 582 34.3%
HHer Living Alone............... 2745 13.9% 588 21.7% 577 34.0%
HHer Not Living Alone........... 362 1.8% 3 0.1% 5 0.3%
Below Poverty....................... 3065 15.5% 572 21.1% 549 32.3%
Married Couple Family............. 737 3.7% 151 5.6% 75 4.4%
Other Family ..................... 1033 5.2% 54 2.0% 23 1.4%
Male Householder ............. 67 0.3% 2 0.1% 7 0.4%
Female Householder............ 966 4.9% 52 1.9% 16 0.9%
Nonfamily......................... 1295 6.6% 367 13.5% 451 26.5%
HHer Living Alone............... 1204 6.1% 367 13.5% 439 25.8%
HHer Not Living Alone........... 91 0.5% 0 0.0% 12 0.7%
</TABLE>
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1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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(State: 45, South Carolina County: 057, Lancaster County, SC)
(Weight: 100.0%)
Senior Life Report (Page 7 of 7)
<TABLE>
<CAPTION>
Civilian Noninstitutionalized Persons Age 16+
Mobility and Disability Total Age 65+ Age 75+
- ----------------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Persons ................................ 41157 100.0% 6538 100.0% 2446 100.0%
With Mblty or Care Lmts.............. 3597 8.7% 1515 23.2% 874 35.7%
Mobility Limits Only............... 1077 2.6% 585 8.9% 353 14.4%
Self Care Limits Only.............. 1398 3.4% 260 4.0% 82 3.4%
Both Limits ....................... 1122 2.7% 670 10.2% 439 17.9%
No Mblty or Care Limits.............. 37560 91.3% 5023 76.8% 1572 64.3%
With a Work Disability............... 5960 14.5% 2692 41.2%
In Labor Force .................... 1096 2.7% 73 1.1%
Employed ......................... 977 2.4% 63 1.0%
Unemployed ....................... 119 0.3% 10 0.2%
Not in Labor Force ................ 4864 11.8% 2619 40.1%
Prevented from Working............ 4370 10.6% 2360 36.1%
Not Prevented from Wrk ........... 494 1.2% 259 4.0%
No Work Disability .................. 35197 85.5% 3846 58.8%
In Labor Force .................... 26449 64.3% 536 8.2%
Employed ......................... 24877 60.4% 518 7.9%
Unemployed ....................... 1572 3.8% 18 0.3%
Not in Labor Force ................ 8748 21.3% 3310 50.6%
</TABLE>
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1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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(State: 45, South Carolina County: 057, Lancaster County, SC)
(Weight: 100.0%)
1990 Demographic Overview Report
<TABLE>
<S> <C> <C> <C> <C> <C>
Population 54516 Housing Units 20929 Median Age 33.4
Households 19750 Group Quarters 388 Median HP Inc 25320
Families 15348 Avg. HH Size 2.74 Median Value 49300
Vehicles 35498
</TABLE>
<TABLE>
<CAPTION>
Income in 1989 Household Family Non-Family
- -------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Less than $5,000... 1507 7.6% 685 4.5% 884 20.1%
$5,000 to $9,999... 2278 11.5% 1087 7.1% 1255 28.5%
$10,000 to $12,499... 1071 5.4% 664 4.3% 397 9.0%
$12,500 to $14,999... 977 4.9% 688 4.5% 309 7.0%
$15,000 to $17,499... 1125 5.7% 798 5.2% 311 7.1%
$17,500 to $19,999... 907 4.6% 728 4.7% 185 4.2%
$20,000 to $22,499... 1019 5.2% 761 5.0% 248 5.6%
$22,500 to $24,999... 867 4.4% 723 4.7% 140 3.2%
$25,000 to $27,499... 968 4.9% 880 5.7% 106 2.4%
$27,500 to $29,999... 771 3.9% 698 4.5% 56 1.3%
$30,000 to $32,499... 968 4.9% 812 5.3% 171 3.9%
$32,500 to $34,999... 673 3.4% 585 3.8% 68 1.5%
$35,000 to $37,499... 693 3.5% 640 4.2% 39 0.9%
$37,500 to $39,999... 685 3.5% 657 4.3% 21 0.5%
$40,000 to $42,499... 798 4.0% 701 4.6% 44 1.0%
$42,500 to $44,999... 580 2.9% 551 3.6% 32 0.7%
$45,000 to $47,499... 500 2.5% 486 3.2% 7 0.2%
$47,500 to $49,999... 316 1.6% 315 2.1% 17 0.4%
$50,000 to $54,999... 734 3.7% 693 4.5% 18 0.4%
$55,000 to $59,999... 537 2.7% 543 3.5% 0 0.0%
$60,000 to $74,999... 959 4.9% 896 5.8% 52 1.2%
$75,000 to $99,999... 505 2.6% 462 3.0% 25 0.6%
$100,000 to $124,999... 163 0.8% 146 1.0% 17 0.4%
$125,000 to $149,999... 57 0.3% 57 0.4% 0 0.0%
$150,000 or More....... 92 0.5% 92 0.6% 0 0.0%
Aggregate Income ($Mil) 594 526 63
Median Income ......... 25320 29864 10390
Average Income ........ 30123 34286 14376
</TABLE>
<TABLE>
<CAPTION>
Persons Persons
Educational Attainment 25 Yrs & Over Employment Status 16 Yrs & Over
- ---------------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Less than 9th Grade ... 5859 17.0% In Labor Force.......... 27630 66.6%
9th - 12th Grade No Dip 7922 23.0% Civilian .............. 27545 66.4%
High School Graduate... 11475 33.3% Employed ............. 25854 62.3%
Some College, No Degree 4163 12.1% Male ................ 13796 33.2%
Associate Degree ...... 1696 4.9% Female .............. 12058 29.1%
Bachelor's Degree ..... 2127 6.2% Unemployed ........... 1691 4.1%
Graduate/Prof. Degree.. 1175 3.4% Not in Labor Force...... 13867 33.4%
</TABLE>
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Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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(Page 2 of 2)
(State: 45, South Carolina County: 057, Lancaster County, SC)
(Weight: 100.0%)
<TABLE>
<CAPTION>
Employed Employed
Industry Persons 16+ Occupation Persons 16+
- -------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Agriculture/Forest/Fish .... 459 1.8% Managerial/Prof. Spec.... 3770 14.6%
Mining...................... 103 0.4% Exec/Admin/Managerial... 1748 6.8%
Construction................ 2054 7.9% Prof. Speciality ........ 2022 7.8%
Manufacture-Nondurable...... 8018 31.0% Tech./Sales/Admin. Sup... 6729 26.0%
Manufacture-Durable......... 3231 12.5% Technician and Related.. 824 3.2%
Transportation.............. 438 1.7% Sales................... 2352 9.1%
Communication/Pub. Util..... 525 2.0% Administration Support.. 3553 13.7%
Wholesales Trade............ 880 3.4% Service Occupation....... 2231 8.6%
Retail Trade................ 3659 14.2% Private Household....... 83 0.3%
Finance/Ins/Real Estate..... 960 3.7% Protective Service...... 195 0.8%
Business & Repair Serv...... 730 2.8% Other Service........... 1953 7.6%
Personal Services........... 620 2.4% Farming/Forestry/Fish.... 354 1.4%
Entertain/Recreation........ 163 0.6% Precision/Craft/Repair... 4438 17.2%
Professional & Related...... 3505 13.6% Operator/Fab./Laborer.... 8332 32.2%
Health Services............ 1331 5.1% Mach.Op/Assem./Inspect.. 5582 21.6%
Educational Services....... 1327 5.1% Trans. & Material Move.. 974 3.8%
Other Professional......... 847 3.3% Laborers................ 1776 6.9%
Public Administration....... 509 2.0%
</TABLE>
<TABLE>
<CAPTION>
Transportation to Work Workers 16+ Travel Time to Work Workers 16+
- ---------------------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
Drive Alone................. 18533 73.1% Less than 10 Minutes..... 3213 12.7%
Carpooled................... 5782 22.8% 10 to 19 Minutes......... 8511 33.6%
Public Transportation....... 58 0.2% 20 to 29 Minutes......... 5024 19.8%
All Other................... 987 3.9% 30 Minutes or More....... 8612 34.0%
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Units In Structure Housing Units Year Structure Built Housing Units
- ------------------ ---------------- -------------------- ---------------
<S> <C> <C> <C> <C> <C>
1-Detached.................. 15163 76.7% 1989 To March 1990....... 374 1.9%
1-Attached.................. 129 0.7% 1985 To 1988............. 1981 10.0%
2........................... 311 1.6% 1980 To 1984............. 1937 9.8%
3 or 4...................... 497 2.5% 1970 To 1979............. 5400 27.3%
5 to 9...................... 442 2.2% 1960 To 1969............. 3564 18.0%
10 To 19.................... 117 0.6% 1950 To 1959............. 2827 14.3%
20 to 49.................... 8 0.0% 1940 To 1949............. 1795 9.1%
50 or More.................. 77 0.4% 1939 or before........... 900 9.6%
Other....................... 3034 15.3% Median Year Built........ 1969
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Year Hhlder Moved In Housing Units Vehicles Available: Housing Units
- -------------------- ---------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
1989 To March 1990.......... 2641 13.4% None..................... 2296 11.6%
1985 To 1988................ 4753 24.0% 1........................ 5729 29.0%
1980 To 1984................ 2697 13.6% 2........................ 7141 36.1%
1970 To 1979................ 4274 21.6% 3........................ 3370 17.0%
1960 To 1969................ 2533 12.8% 4........................ 971 4.9%
1959 or Before.............. 2880 14.6% 5 or More................ 271 1.4%
</TABLE>
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Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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MARKET AREA AND NEIGHBORHOOD
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MARKET AREA and NEIGHBORHOOD
NEIGHBORHOOD
The neighborhood in which Crenshaw Creek is located is known or referred to
locally as the Van Wyck (pronounced Van Wack)/Indianland area. Van Wyck is
actually an unincorporated community, approximately eight miles north of the
Lancaster City Limits. Dynamite and bricks are manufactured in Van Wyck.
Indianland is just north of Van Wyck, starting at twelve mile creek (which
bisects U. S. Hwy 521 just north of S. C. Hwy 75) and extends to the state
border on U. S. Hwy 521. These areas comprise what is known as the panhandle
area of Lancaster County. This area is characterized by unplanned mixed uses,
such as single family residential (stick built and mobile homes), light
industrial, used car dealerships, mobile home sales, mobile home parks,
convenience stores, and large unimproved tracts held primarily for speculation.
Most of the zoning here is General Development Moderate Intensity (GDM). The
subject is zoned GDM. There are some residential areas zoned Residential and a
couple of pockets zoned Industrial. GDM allows for most uses, including the
subject use, and is in an area that is projected to be served by sewer in the
future. I anticipate that all the properties bordering Hwy 521 in this area will
be rezoned within a year to some form of commercial. The plans have already been
made. The ordinance allowing for this rezoning should happen soon. There are
significant development pressures coming from the north (Charlotte) and from the
west (Union County). A significant event that has and will affect the subject
site is the widening and re-configuring of Highway 521 from the Mecklenburg
County line to the southern loop. This has created new linkages from the subject
neighborhood to the real growth areas to the north.
Land values are increasing faster than the CPI. The most significant drawback
here is lack of sewer. Sewer will be here within five years. There is water all
the way up Hwy 521 now, but not necessarily "off" of Hwy 521. All other typical
utilizes are available.
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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Home prices here are all over the board. Due to previous lack of land uses
controls, you can see a mobile home next door to an excellent quality single
family dwelling. You have mobile homes and then you have $200,000 homes. The
average price of a home here is about $90,000. You have several historic homes
here and you are beginning to see several good quality residential neighborhoods
here.
If the subject site were vacant, or could be made vacant at this time, it would
probably be held until it were served by sewer. The properties west of the
subject (not bordering U.S. 521) are being developed for residential uses.
Septic tanks are acceptable here for residential uses. Additionally, all the
properties bordering U.S. 521 will be rezoned to commercial soon. I envision
future development to be highway commercial uses and light industrial/warehouse
uses. This area is just now hitting the margins of the growth curve in terms of
its life cycle.
The boundaries of this neighborhood can best be described by physical
boundaries. The southern border of the neighborhood is the intersection of S.C.
Hwy 5 and U.S. Hwy 521. There are several potential industrial sites at this
intersection. The economic development department has had numerous industrial
prospects looking at sites here. The eastern boundary is the North Carolina
state line. The western boundary is the Catawba River (which is the York
County/Lancaster County border). The northern boundary is the North Carolina
border at Mecklenburg County.
The subject property is joined by undeveloped property and two older residential
properties across East Rebound Road on its north side and by wooded undeveloped
property on its south, east and west sides. Streets in the neighborhood are
primarily paved and do not have curbs, gutters, and storm drains. The
neighborhood has good access to the area's major traffic artery, U.S. Highway
521 (a north/south four-laned highway). This traffic artery provides good access
into Lancaster, ten miles south. The area receives water and sewer service from
Lancaster County. Electricity, gas and telephone services are provided by local
utility companies.
Neighborhoods generally evolve through a pattern of growth and development. They
evolve from vacant, unimproved land through slow growth, steady to rapid growth,
reach a built-up or stagnant
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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phase, and then begin to decline, with various plateaus and modernization
periods along the way. In that continuum of growth, development and aging, the
subject neighborhood is currently considered to be a rural area with some
residential development and the beginning of commerical/office/light industrial
use.
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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SITE DATA
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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SITE DATA
LOCATION: The Crenshaw Creek Rehabilitation Center site is located at 134 East
Rebound Road, approximately 10 miles north of Lancaster, South Carolina in
Lancaster County. It is within five minutes of the North Carolina state line.
PHYSICAL CHARACTERISTICS: The subject is a corner lot with approximately 1500
front feet along the south side of East Rebound Road, and approximately 500
front feet along the east side of Highway 521. It is slightly irregular in
shape and contains approximately 43.92 acres of gross area. The site contains
considerable excess land with frontage on East Rebound Road and Highway 521 that
could be sold off for possible residential, office or light industrial use.
ZONING: According to Becky Rhyner, of the Lancaster Building and Zoning
Department the subject property is zoned GDM (General Development), which
generally permits moderate intensity commercial or residential development. The
subject improvements are a legal conforming use.
TOPOGRAPHY: The subject site lies at street grade. General area topography is
slightly rolling. The subject site itself is basically level and moderately
wooded.
SOIL ANALYSIS: Mineral deposits, if any, were disregarded by the appraiser. No
soil analysis has been prepared as a part of this report. However, considering
the number and type of existing improvements on surrounding sites, it is assumed
the subject property has sufficient soilbearing qualities for any type building
or construction that might be contemplated thereon. Soil and subsoil appear to
be the red clay typically found in this part of South Carolina. It is assumed
that soils at the site are generally of medium plasticity, with shrink/swell
potential typical of the area. Soil conditions in this part of Lancaster do not
appear to have limited land development.
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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EASEMENTS AND ENCROACHMENTS: Our site inspection of The Crenshaw Creek
Rehabilitation Center revealed no adverse easements or encroachments. This
property is subject to typical street and utility easements. It should be noted
that we would defer to competent legal counsel for verification of these and all
other legal matters.
ACCESS: Access to the site is considered good. It has one access point from East
Rebound Road, a paved two-lane rural road. Access onto the site is down a
winding paved driveway (approximately 1/4 mile long) into driveways and parking
areas accessing the buildings on the site. The access driveway is approximately
500 feet each of Highway 521 on East Rebound Road. Other access to the subject
could be made available off Hwy 521.
VISIBILITY: The site's visibility is rated poor from East Rebound Road. The site
buildings are located approximately 1/4 mile off of East Rebound. Signage at the
driveway entrance and at Highway 521 is adequate. Visibility of the subject from
Highway 521 is excellent with considerable highway frontage. However, the
building improvements cannot be seen from any street or highway.
DRAINAGE/FLOOD ZONE: According to National Flood Certification Services, Inc.,
the subject property is located on a National Flood Insurance Program Map (NFIP)
designated flood hazard area. It is found on Community Panel # 450120045B, dated
01/06/83, in an area designated as Zone C. A copy of their certification is
located in the addenda of this report. This Zone generally refers to: "Areas of
minimal flooding."
UTILITIES: The site is served by all municipal utilities and services including
water and police and fire protection. Gas, telephone and electricity are
provided by public utility firms. The site has its own sewage treatment
facility.
TRAFFIC ARTERIES: The site has good proximity to major traffic arteries, being
located at the southeast corner of Highway 521 and East Rebound Road. U. S. 521
is a north/south four-
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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lane highway providing access into Lancaster, approximately 10 miles south, and
is the major connector to Rock Hill, South Carolina and Charlotte, North
Carolina.
TAXES: Ann Joiner in the Lancaster tax assessor's office reported that the
subject's reported tax value for real estate is $2,190,998 and the assessed
value is $131,460, or 6% of the reported tax value. The tax assessor's reported
tax value for personal property is $53,810 and the assessed value is $5,650, or
10.5% of the reported tax value. The tax rate for the county is 235.50 mils.
There is a credit on each tax bill which became effective when sales tax
increased. This indicates an annual tax of $29,750.53 for the subject property,
calculated as follows:
<TABLE>
<CAPTION>
Real Estate Tax Assessment X Tax Rate = Annual Taxes
- -------------------------- -------- ------------
<S> <C> <C> <C> <C>
$131,460 X .23550 = $30,958.83
Less L.O.S.T. Credit - 2,478.02
----------
Net Real Estate Tax $28,480.81
Personal Property Assessment
- ----------------------------
$5,650 X .23550 = $ 1,330.58
Less L.O.S.T. Credit - 60.86
----------
Net Personal Property Tax $ 1,269.72
TOTAL = $29,750.53
</TABLE>
TRY THIS ONE AND SEE IF YOU LIKE IT.
HIGHEST AND BEST USE
The Highest and Best Use of land is defined as being that use which may be
reasonably expected to produce the greatest net return to the land over a given
period of time. It is that legal use which will yield to the land the highest
present value which is economically feasible, legally permissible, and is
maximally productive.
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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The appraiser considered several alternative uses for the land underlying The
Crenshaw Creek Rehabilitation Center. No alternative utilization other than for
a Office was considered likely to give a higher return in the immediate future.
Therefore, the use contemplated by our study; i.e., Office use, is considered to
be in conformity with the subject property's Highest and Best Use.
The Highest and Best Use analysis is the basis for the final conclusions drawn
in this report. Land is valued as though it were unimproved and available for
whatever use would produce the maximum return. Improved property is valued on
the basis of the extent to which the improvements are consistent with or in
conflict with the Highest and Best Use of the site as if unimproved. In cases
where a site has existing improvements, the Highest and Best Use of the total
property "as improved" is quite often determined to be different from the
Highest and Best Use of the land when considered as though unimproved and
available for development. In the majority of cases, the existing use will
continue until the land value under its Highest and Best Use exceeds the total
value of the property in its existing use. As long as the improvements
contribute to the land, it is the Highest and Best Use.
The definition of Highest and Best Use given above sets forth the steps taken by
the appraiser in developing the Highest and Best Use of the subject property:
identification of the various reasonable, probable and legal uses; testing of
the physical possibility of such uses; testing of the strength of appropriate
support in the market for such uses; and testing of the financial feasibility of
those uses which survive the prior tests to determine that use which will result
in the optimum return.
Highest and Best Use - Unimproved
Those legal uses for the subject land, if unimproved, would include: Apartments,
Retirement Apartments, Commercial Retail, Nursing Home, Single-family
Residential, Condominiums, Agricultural, and Office.
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The physical characteristics of this site, i.e., size, shape, terrain, etc.
would permit the following uses: Apartments, Retirement Apartments, Offices,
Industrial, Commercial Retail, Institutional, Motel, Nursing Home, Single-family
Residential, Condominiums, Agricultural, and Office.
The appraiser next tested the existence of appropriate support in the market
place for all of the uses which met the two previous tests. Our market analysis
indicates there is sufficient demand in the general market place and in this
specific location for the following uses: Light Industrial, Speculative Land and
Office.
Finally, the appraiser analyzed the financial feasibility of those uses passing
the previous tests and determined that the following were economically feasible:
Light Industrial, Speculative Land and Office.
The most probable and reasonable uses for the subject property, if unimproved,
might include development of: Light Industrial, Acquisition for Land Speculation
and Office.
After comparison of the alternative uses, it is the appraiser's opinion that
utilization of the property for Office use would be the Highest and Best Use of
the subject property at this time, at the time of completion of the
improvements, and at the time of estimated stabilized occupancy.
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DESCRIPTION OF IMPROVEMENTS
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DESCRIPTION OF IMPROVEMENTS
Frank Ramsey of HealthCare Property Appraisers of America, Inc. made an
inspection of the subject property on March 20, 1997. The following description
of improvements the buildings as they appeared to our inspector on the date of
inspection.
SUBJECT IMPROVEMENTS
The subject site is improved with three one-story buildings formerly utilized as
The Crenshaw Creek Rehabilitation Center and presently vacant. The structure's
initial completion date is 1988. The appraiser considers the subject building
structures to contain a functional area of approximately 37,250 sf or 1035 sf
per bed. The three buildings are one story brick veneer. The buildings were
formerly utilized as (1) an administration and therapy building, (2) two
connected apartment buildings and (3) a residents building. All are of similar
construction and architecture.
The administration/education building contains mostly office type space. There
is also an in ground heated swimming pool outside this building as well as
therapy and gymnasium space. The residential building contains the dietary area,
resident bedrooms and meeting rooms. The apartment building consists of two
duplex type structures joined by a covered walkway. The structure has a total
possible utilization of 36 beds but is configured for 22 beds.
The subject's physical structure appears to be of good quality construction and
amenities. No Physical Deterioration-Curable (deferred maintenance) was
observed. The structure contains some Functional Obsolescence in its special
purpose layout. There is also some External Obsolescence due to the remoteness
of this site from town.
The Effective Age of the structure is 9 years, and the Remaining Economic Life
is considered to be 41 years.
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In all of our analysis, we have assumed and have described the subject
improvements as being Special Purpose buildings. That assumptions is based upon
not only the building improvements but also the surrounding area. In fact, the
building improvements are not so Special Purpose as to preclude alternative
uses. Almost any type of medical facility would find these buildings quite
adaptable. Furthermore, a general office user could also utilize this space with
substantial rehab of the interior. There is little or nothing about the interior
of these structures to preclude utilization by a commercial enterprise. However,
the limited demand for this type space in this location is a problem.
Following is a topical outline of the major improvements:
SITE PREPARATION: The building site was cleared, graded and prepared for
construction.
FOUNDATION: Foundation is concrete bearing walls.
FRAME: The frame is mill-type wood.
FLOOR STRUCTURE: The floor structure is concrete on ground.
FLOOR COVERING: Floor covering consists of carpet on pad and vinyl composition
tile.
CEILING: The ceiling is gypsum board, taped and painted with insulation.
INTERIOR CONSTRUCTION: Interior construction is framed.
PLUMBING: All patient bathrooms are two- or three-fixtured china/porcelain
fixtures including chrome hardware, grab bars and other invalid aids. Individual
bathtubs and showers feature non-slip surfaces, grab bars, shower hoses and
non-ambulatory lifts. The property's plumbing is adequate. Eleven rooms has a
rooms have a full private bath with a tub or shower.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
SPRINKLER: The resident building only is sprinklered.
HEATING, COOLING, VENTILATION: The property is heated with a heat pump which
also provides air conditioning. Additionally, the residents' rooms are air
conditioned with thru-the-wall heat pump units with electrical resistance
heating coils.
ELECTRICAL: Fully wired and lighted with three-phase wiring, adequate to provide
lighting and power for all equipment operation including fluorescent and
incandescent lighting, reading lights over each bed, nurse call system, fire
alarm system, and intercom system. The is one diesel generator with a KW rating
of 100.
EXTERIOR WALLS: Exterior walls are wood or steel stud walls with face brick
veneer and insulation.
ROOF STRUCTURE: The roof structure is wood joists with composition deck.
ROOF COVER: Roof cover is composition shingle.
PARKING: Parking and drives of 2" plant mix asphalt on a crushed stone base.
Marked parking areas.
DOORS & WINDOWS: Interior doors are solid core; windows are single-hung, slider
type in aluminum frame.
EQUIPMENT: Some specialized equipment was present but was not considered in
valuing the subject property. Included in this category are institutional
kitchen equipment, stainless steel sinks, food preparation counters, ovens,
stoves, dishwashers, walk-in coolers and freezers, exhaust fans and grease
traps. Laundry equipment includes two domestic brand washers and two domestic
dryers rated good in condition.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
The main kitchen is in the resident building. Kitchen equipment includes one
Hobart dishwasher, one Hobart walk-in freezer, one Hobart walk-in cooler and one
Vulcan range/oven rated good in condition. There are also kitchens in each
apartment (4) and a rehabilitation training kitchen in the
Administration/Therapy building. All are equipped with residential type stoves,
refrigerators and dishwashers.
ROOM FURNISHINGS: Include a bed, night stand, chair and retractable privacy
curtain.
WALKS & DRIVES: Walks are approximately 41" wide and constructed of 2 1/2"
concrete.
LANDSCAPING: Rated good. The lawn is well established. There is a 20' x 30'
concrete pool adjoining the Administration/Therapy building.
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<PAGE>
COST APPROACH TO VALUE
- --------------------------------------------------------------------------------
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
COST APPROACH TO VALUE
The Cost Approach is frequently a reliable indicator of a property's value. The
Principle of Substitution dictates that The Crenshaw Creek Rehabilitation Center
will be worth no more than the cost to reproduce improvements with equal utility
on an equally desirable site. Conversely, in an active building market, most
properties are usually worth at least as much as their cost to reproduce.
Otherwise, developers would not be building comparable buildings.
The initial step in the Cost Approach was the estimation of land value. The
appraiser next estimated the current construction costs to replace subject's
building improvements. The appraiser also considered the possible existence of
the three types of depreciation: Physical Deterioration, Functional
Obsolescence, and External Obsolescence.
To estimate the actual construction cost of the improvements, the appraiser
consulted with various contractors and architects familiar with this type
construction. We also have personal knowledge of comparable structures which
have been built and are familiar with their actual costs. Finally, we checked
with Marshall and Swift Valuation Service to ascertain the current cost factors
for this type construction in Lancaster.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
Site Valuation
There are several methods which appraisers may use to estimate vacant land
values. These methods include the direct sales comparison, allocation, land
residual technique, direct capitalization of ground rent, and the land
development method. The direct sales comparison method is based upon the
principle of substitution. This is the best method whenever adequate quantities
of verified comparable sales data is available. We have used both the direct
sales comparison and allocation methods. For Office sites, the land residual or
land development methods are not a reliable indicator of value.
Direct Sales Comparison
The direct sales comparison technique is based on the economic principle of
substitution. This principle states the value of a property tends to be fixed by
the costs of acquiring an equally desirable substitute property with the same or
similar utility and physical characteristics. Comparisons are made between the
property appraised and the sales of similar properties which have occurred in
the marketplace. Typically, units of comparison are derived such as a sales
price per square foot, sales price per front foot, or sales price per building
unit. In the case of an apartment property, the economic indicator might be cost
per apartment, whereas in the case of a nursing home, the unit of value would be
cost per patient bed. The comparables are adjusted to reflect similarities and
dissimilarities of each to the subject for such characteristics as location,
time of sale, existing market conditions, and the physical characteristics of
the property. The adjusted sales prices of the comparables then become an
indication of value for the subject. In the case of the subject, we have looked
to properties with similar zoning and land use which have sold within the
Lancaster area.
The comparable sales utilized in this analysis are summarized in the land sales
summary and the adjustment grid which follow this section. A complete
description of the individual sales used is also included within this section.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
LAND SALE #1
LOCATION: U. S. Highway 521
DEED REFERENCE: Book U-12, Page 78
TAX PARCEL #: 26-13.02
BUYER: Mark L. Johnson
SELLER: Melvin Graham
DATE OF SALE: 01/20/95
SIZE: 13.39 Acres
ZONING: GDM
TOPOGRAPHY: Similar to subject (2% - 6% slope)
IMPROVEMENTS: Light Industrial/Office Building
UTILITIES: Water, Electric, Cable, Gas
SALE PRICE: $120,000
TERMS: Cash
COST/UNIT: $9,133/Acre
FRONTAGE: Approximately 1,000 feet
VERIFICATION: Melvin Graham
COMMENTS: This is about 1/4 mile north of the subject on the same side of the
road.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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LAND SALE #2
LOCATION: U. S. Highway 521
DEED REFERENCE: Deed Book 14, Pg 27, Plat 97, Pg 21
TAX PARCEL #: 8-61.03
BUYER: Bill Howard
SELLER: J. Walton Hill
DATE OF SALE: 01/07/97
SIZE: 39.52 Acres
ZONING: GDM
TOPOGRAPHY: 2% - 6% Slope
IMPROVEMENTS: Vacant
UTILITIES: Same as Subject
SALE PRICE: $593,400
TERMS: Cash
COST/UNIT: $15,015/Acre
FRONTAGE: Approximately 30 FF
VERIFICATION: Zoning Official
COMMENTS: This site has been cleared. According to the zoning officials,
this will be some type of Highway Commercial Use. The site is
approximately 12 miles north of the subject. The location is
superior due to proximity to the Charlotte market. All other
factors, excepting frontage but including size and shape, are
similar to subject.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
LAND SALE #3
LOCATION: Doby's Bridge Rd & U.S. Hwy 521
DEED REFERENCE: Deed Book L-14, Page 16
TAX PARCEL #: 13-23
BUYER: Lancaster County School District
SELLER: Ft. Williams Company
DATE OF SALE: 11-12-96
SIZE: 50.187 Acres
ZONING: GDM
TOPOGRAPHY: 2% - 6% grade
UTILITIES: Same as Subject
SALE PRICE: $225,000
TERMS: Cash
COST/UNIT: $4,483/Acre
FRONTAGE: None on Hwy 521 - Site borders
existing High School which fronts
on U.S. Hwy. 521. The site also has
approximately 1,400 FF on S. C.
Hwy 160.
VERIFICATION: Superintendent
COMMENTS: This site is currently undeveloped. Purchased for future
expansion. It is a good example of an "off" Highway 521 sale.
Note the significant cost/unit differential between this sale
and Sale #2.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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LAND SALE #4
LOCATION: E. Rebound Road, West of Subject
TAX PARCEL #: 26-15.06
BUYER: Confidential
SELLER: Confidential
DATE OF SALE: 01/31/95
SIZE: 16.233 Acres
ZONING: GDM
TOPOGRAPHY: 2% - 6% slope
UTILITIES: Same as Subject
SALE PRICE: $41,500
COST/UNIT: $2,558/Acre
FRONTAGE: None on Hwy 521
COMMENTS: This is a long, narrow site to be used for residential. This
site is just west of subject. This is another good example of
the differential between price/unit for Hwy 521 frontage and
"off" Hwy 521 price.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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LAND SALE #5
LOCATION: Off Marvin Road
DEED REFERENCE: Deed Book H-14, Page 94
TAX PARCEL #: 8-34.02
BUYER: Marvin Development Group II
DATE OF SALE: 09/20/96
SIZE: 66.87 Acres
ZONING: GDM
UTILITIES: Same as Subject
SALE PRICE: $401,220
COST/UNIT: $6,000/Acre
FRONTAGE: None on Hwy 521
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<PAGE>
LAND SALES SUMMARY & ADJUSTMENT GRID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Comparison # Subject No. 1 No. 2 No. 3 No.4 No. 5
Address US Hwy 521 US Hwy 521 US Hwy 521 ERR E Rebound Rd Marvin/Hood
Lancaster Lancaster Lancaster Lancaster Lancaster Lancaster
SC SC SC SC SC SC
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SITE DATA
Size (SF) 1,913,155 572,335 1,721,491 2,186,146 706,674 2,912,857
Size (Acres) 43.92 13.14 39.52 50.19 16.22 66.87
Frontage/Visability 500/good 1069/good 30/good none/fair none/poor none/poor
Zoning None GDM GDM GDM GDM GDM
Topography Level Rough Level Level Level Level
Utilities H20, Elec,Gas H20, Elec,Gas H20, Elec,Gas H20, Elec,Gas H20, Elec,Gas H20, Elec,Gas
SALE DATA
Reported Sale Price $120,000 $593,400 $225,000 $41,500 $401,220
Sale Price / SF $0.00 $0.21 $0.34 $0.10 $0.06 $0.14
Sale Price / Acre $0 $9,133 $15,015 $4,483 $2,558 $6,000
Transaction Type ---- Closed 30 Closed Closed Closed
Rights Conveyed ---- Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple
Financing Terms ---- Cash Cash Cash Cash Cash
adjustment ---- ---- ---- ---- ---- ----
Condition of Sale ---- Arm's Arm's Arm's Arm's Arm's
Length Length Length Length Length
---- ---- ---- ---- ----
Recorded Sale Date ---- 1/95 1/97 11/96 1/95 9/96
adjustment ---- ---- ---- ---- ---- ----
Location ---- Similar Superior Similar Inferior Comparable
adjustment ---- ---- -50% ---- -50% ----
Size ---- Smaller Similar Similar Smaller Similar
adjustment ---- -20% ---- ---- -10% ----
Zoning ---- Similar Similar Similar Similar Similar
adjustment ---- ---- ---- ---- ---- ----
Topography ---- Inferior Similar Similar Similar Similar
adjustment ---- 5% ---- ---- ---- ----
Frontage/Visability ---- Superior Inferior Inferior Similar Similar
adjustment ---- -40% 10% 10% ---- ----
Utilities ---- Similar Similar Similar Similar Similar
adjustment ---- ---- ---- ---- ---- ----
Adjstd Price / Sq Ft $0.11 $0.19 $0.11 $0.08 $0.14
Avg Price / Sq Ft $0.13
Adjstd Price / Acre $4,603 $8,258 $4,932 $3,453 $6,000
Avg Price / Acre $5,449
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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Reconciliation of Comparable Sales
The comparables have already been adjusted to the subject in respect to
location, size, zoning, topography, comer influence, and utilities. The
unadjusted sales prices range from $2,558 to $15,015 per acre. After the
adjustments, the comparables form a tighter range of $3,453 to $8,258 per acre.
The average adjusted price per acre was $5,449. Typically, the comparables which
have the least adjustments are most representative of the subject. Accordingly,
it is our opinion that the subject 43.92 acres site has a market value of
$240,000 or $5,464 per acre.
<TABLE>
<S> <C>
SITE VALUE $240,000
--------
--------
</TABLE>
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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Building Costs
This appraisal firm compiles construction cost data on new and proposed
facilities throughout the United States. The hard construction costs vary
considerable depending upon geographical location and quality of improvements.
To estimate the Replacement Cost of The Crenshaw Creek Rehabilitation Center,
the appraiser utilized the Segregated Cost Method of cost estimating. This
method is designed to give separate consideration to all the major construction
components of a building. Many parts of a building, such as floor, ceiling and
lighting, increase in cost directly as the floor area of the building increases.
Other building costs vary with relation to parameters other than the floor area.
However, most costs can be related to floor area, wall area, roof area, or
sometimes an individual count of unit installations.
To facilitate the application of these individualized costs, they are grouped so
that all costs related to floor area can be added together and applied to the
total floor area, all wall area costs can be added together and applied to the
wall area, and all roof costs can be applied to the ground floor or roof area.
The appraiser utilized the Marshall and Swift Valuation Service, which is the
most widely recognized cost estimating manual in the world. This manual
separates each type of building by occupancy, type of construction, and quality.
It also makes adjustments for current cost factors on a monthly update basis.
Using the Marshall and Swift Valuation Service, the appraiser selected the
particular construction characteristics of The Crenshaw Creek Rehabilitation
Center building improvements and selected the appropriate quantity cost factors
and adjustments.
Using the computer program, a Replacement Cost New of subject's building
improvements as well as individual estimates of depreciation for each component
item were developed. The computer calculations included all Direct Costs. The
Marshall and Swift Valuation Service includes
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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architectural fees, loan interest and some other minor Indirect Costs. It
specifically excludes some of the costs of doing business, or Indirect Costs,
which we have estimated as follows:
<TABLE>
<S> <C>
Taxes 0.4%
Marketing 0.4%
Loan Points and Fees 2.0%
Legal 0.5%
Accounting 0.2%
----
Total Indirect Costs 3.5%
</TABLE>
Our estimate of Indirect Costs were based on a percentage of Total Cost-New
(depreciated at the same rate as the building improvements). The Total Cost-New
includes not only Direct Cost of construction, as developed by the Marshall and
Swift Valuation Service, but also the cost of land.
Our on-site inspection of The Crenshaw Creek Rehabilitation Center did not
reveal any obvious Physical Deterioration-Curable (deferred maintenance).
Overall, the property appeared to be well maintained and only normal maintenance
situations were observed. The subject building improvements undoubtedly contain
some functional and/or external obsolescence. The buildings contain, to some
extent, Special Purpose improvements. Medical buildings generally contain an
excess of electrical and plumbing not found in general purpose buildings. A
potential user may not be able or willing to work with the specific office
layouts or the room configuration in the residential buildings. Therefore, a
potential buyer would probably make some discount in price to reflect the
inefficiency of the room layout and excess finish work found in the subject
buildings. Additionally, there is probably not a strong demand for medical type
users in this specific location. The subject property lies outside the community
of Lancaster and at least an hour's drive outside the medical area of Charlotte,
North Carolina. The most probable user of this facility would be someone
desiring general office/light industrial utilization. How much the typical buyer
would discount the property would depend upon his specific situation. Therefore,
there is no way to accurately measure functional and/or external obsolescence of
this specific property in this specific location. After reviewing the experience
of other sellers of Special Purpose Properties in our Sales Comparison
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
Approach, we have made a judgement that the combination of functional
obsolescence and external obsolescence in the subject property is approximately
75%. It is our opinion that the probability of obtaining a purchaser/user of the
subject property who will allocate considerable value to the building shell
without making substantial discount for functional and/or external obsolescence
is considered to be only fair to poor.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
SECTION 1:
OCCUPANCY: OFFICE BUILDING
CLASS: D Frame COST RANK: 3.5 Above Average/High
EFFECTIVE AGE: 9 YEARS CONDITION: 3.5 Good
NUMBER OF STORIES: 1.0 AVERAGE STORY HEIGHT: 10.0
FLOOR AREA: 18,500 Sq. Ft. COST AS OF: 3/97
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------- REPLACEMENT COST
COMPONENT UNITS COST NEW DEPR
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOUNDATION:
Concrete, Bearing walls ............... 18,500 1.85 34,225 8,556
FRAME:
Wood, Mill Type ....................... 18,500 4.09 75,665 18,916
FLOOR STRUCTURE:
Concrete on Ground .................... 18,500 3.08 56,980 14,245
FLOOR COVER:
Carpet and Pad ........................ 7,400 4.00 29,600 7,400
Tile, Ceramic ......................... 925 9.20 8,510 2,127
Vinyl Composition Tile ................ 10,175 1.66 16,890 4,222
SUBTOTAL.................................. 55,000 13,749
CEILING:
Gypsum Board, Taped & Paint ........... 18,500 1.28 23,680 5,920
Ceiling Insulation .................... 18,500 0.64 11,840 2,960
SUBTOTAL.................................. 35,520 8,880
INTERIOR CONSTRUCTION:
Interior Construction, Framed.......... 18,500 18.12 335,220 83,805
PLUMBING:
Plumbing .............................. 18,500 5.93 109,705 27,426
HEATING AND COOLING:
Heat Pump ............................. 16,650 8.06 134,199 33,550
ELECTRICAL:
Electrical ............................ 18,500 10.13 187,405 46,851
Standby Generator,Diesel .............. 100 326 32,600 8,150
SUBTOTAL.................................. 220,005 55,001
EXTERIOR WALL:
Face Brick Veneer ..................... 12,950 16.59 214,840 53,710
Insulation ............................ 12,950 0.54 6,993 1,748
SUBTOTAL.................................. 221,833 55,458
ROOF STRUCTURE:
Wood Joists, Composition Deck............. 18,500 4.53 83,805 20,951
ROOF COVER:
Composition Shingle ...................... 18,500 1.51 27,935 6,984
- ----------------------------------------------------------------------------------------------
TOTAL .................................... 1,390,092 347,521
ARCHITECT'S FEES ......................... 6.7% 93,831 23,458
- ----------------------------------------------------------------------------------------------
REPLACEMENT COST NEW ..................... 18,500 80.21 1,483,923
DEPRECIATION ............................. (75.0%) (1,112,944)
DEPRECIATED COST ......................... 370,979
- ----------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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SECTION 2:
OCCUPANCY: APARTMENT
CLASS: D Frame COST RANK: 3.5 Above Average/High
EFFECTIVE AGE: 9 YEARS CONDITION: 3.5 Good
NUMBER OF STORIES: 1.0 AVERAGE STORY HEIGHT: 10.0
FLOOR AREA: 18,500 Sq. Ft. COST AS OF: 3/97
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------- REPLACEMENT COST
COMPONENT UNITS COST NEW DEPR
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EXCAVATION & SITE PREPARATION:
Site Preparation ...................... 18,750 0.21 3,937 984
FRAME:
Wood, Mill Type ....................... 18,750 3.71 69,562 17,390
FLOOR STRUCTURE:
Concrete on Ground .................... 18,750 2.92 54,750 13,687
FLOOR COVER:
Carpet and Pad ........................ 9,375 3.39 31,781 7,945
Tile, Ceramic ......................... 937 8.57 8,034 2,008
Vinyl Composition ..................... 8,437 1.57 13,247 3,312
SUBTOTAL ................................. 53,062 13,265
CEILING:
Gypsum Board, Taped & Paint ........... 18,750 1.24 23,250 5,812
Ceiling Insulation .................... 18,750 0.70 13,125 3,281
SUBTOTAL.................................. 36,375 9,093
INTERIOR CONSTRUCTION:
Interior Construction, Framed.......... 18,750 13.15 246,562 61,640
PLUMBING:
Plumbing .............................. 18,750 5.99 112,312 28,078
FIRE PROTECTION:
Sprinklers ............................ 14,000 2.28 31,920 7,980
HEATING AND COOLING:
Heat Pump ............................. 7,500 5.93 44,475 11,119
Window Heat Pump ...................... 11 1,366 15,026 3,756
SUBTOTAL.................................. 59,501 14,875
ELECTRICAL:
Electrical ............................ 18,750 4.92 92,250 23,062
EXTERIOR WALL:
Face Brick Veneer ..................... 13,125 15.43 202,519 50,630
Insulation ............................ 13,125 0.51 6,694 1,673
SUBTOTAL.................................. 209,213 52,303
ROOF STRUCTURE:
Wood Joists, Composition Deck. ........ 18,750 4.22 79,125 19,781
ROOF COVER:
Composition Shingle ................... 18,750 1.39 26,062 6,515
SUBTOTAL SUPERSTRUCTURE .................. 18,750 57.31 1,074,631 268,653
</TABLE>
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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<TABLE>
<S> <C> <C> <C> <C>
YARD IMPROVEMENTS:
Paving, Asphalt........................ 120,000 2.02 242,400 60,600
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
TOTAL .................................... 1,317,031 329,253
ARCHITECT'S FEES ......................... 6.9% 90,656 22,664
- -----------------------------------------------------------------------------------------------
REPLACEMENT COST NEW...................... 18,750 75.08 1,407,687
DEPRECIATION ............................. (75. 0%) (1,055,770)
DEPRECIATED COST.......................... 351,917
</TABLE>
<TABLE>
<CAPTION>
SUMMARY TOTAL COST NEW DEPR
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
1: OFFICE BUILDING 1,483,923 370,979
2: APARTMENT 1,407,687 351,917
TOTAL COST................................ 2,891,610 722,896
- -----------------------------------------------------------------------------------------------
ROUNDED TO NEAREST $100 2,891,600 722,900
Cost Data by MARSHALL & SWIFT
</TABLE>
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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SUMMARY OF COST APPROACH
<TABLE>
<S> <C> <C>
Bldg.Improvements-Replacement Cost $2,891,600
Indirect Costs $109,606
----------
Total Costs: $3,001,206
Less Depreciation (@75%): $2,250.905
----------
Depreciated Value $750,302
Land Value $240,000
----------
Market Value--Real Estate $990,302
Add Furniture, Fixtures, Equipment $0
Less Depreciation 0
----------
Depreciated Value of FF&E $ 0
----------
MARKET VALUE OF REAL & PERSONAL
PROPERTY By Cost Approach -- "As Is" $990,302
(R) $990,000
----------
</TABLE>
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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INCOME CAPITALIZATION APPROACH TO VALUE
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
INCOME CAPITALIZATION APPROACH TO VALUE
To estimate the Market Value of The Crenshaw Creek Rehabilitation Center through
the Income Capitalization Approach, the appraiser attempted to project the
income the subject might generate by a lease to other healthcare and
non-healthcare users.
A major underlying premise of the Income Capitalization Approach holds that the
subject property can be rented. This premise assumes a viable rental market
sufficient to develop rates of: (1) rental, (2) occupancy, (3) expenses and (4)
capitalization. We were unable to develop sufficient data to process a
convincing Income Approach to Value. The absence of sufficient data to develop
an Income Approach suggests the buyers for this type property are users rather
than investors seeking an income stream. This tends to invalidate the use of the
Income Approach for this appraisal. Both the lack of market rental data and the
available sales data on this type property suggest that the most likely
purchaser will be an owner/occupant not an investor buying for income. It was
not deemed helpful to develop and analyze rental data in great detail. However
as a check against the other two approaches to value, an overview of rental
possibilities and alternatives was considered to see what return and capitalized
value might be expected if in fact an investor/purchaser could be found. In
attempting an Income Capitalization Analysis, this appraiser considered the
leasability of subject property to:
- Similar Residential Healthcare Tenants
- Alternative Medical Non-residential User/Lessees
- Alternative Non-medical Institutional Users
- General Office/Retail Users
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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Alternatives by type included:
1. Similar Healthcare Residential Use:
a. Nursing Home
b. Rest Home
c. Assisted Living Facility
d. Head Trauma
e. Drug/Chemical Rehab
f. Group Home
2. Alternative Health Care, Non-residential Use
a. Kidney Dialysis
b. Outpatient Services
c. Adult Care
d. Medical Office
e. Mental Health
3. Alternative Non-Medical Institutional Use
a. Correctional Facility
b. Corporate Retreat
4. General Real Property Use
a. Office
b. Retail
The subject property has limited leasability as a nursing home, assisted living
facility, or rest home for several reasons. It is configured in several
buildings which makes a nursing home operation quite inefficient. The square
feet per bed in a nursing home is also much lower (avg nursing home = 300 SF Per
Bed) than in the subject (approximately 1000 SF Per Bed). Furthermore the rental
paid per bed or per square foot for a nursing home is determined mostly from the
economics of the nursing home operation, making each facility unique and
distorting any comparison.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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The possibility of leasing the subject to another operator of head trauma rehab
facilities is probably impractical. We did not consult other operators in the
interest of confidentiality. However, the present lessee is one of the best
operators of this type. One must assume that if they cannot make the head trauma
rehab business work in this facility, any other operator would have similar
problems. The problems in the head trauma industry and the rehab industry
generally evolve from tightening up of HMO's and other managed care operations.
These same problems are also a concern for drug/chemical rehab operations and
all other rehab operators. Therefore, most operators of this type are not
seeking to expand and certainly not into marginal markets or locations where
other medical operators have had difficulty. When they do, the rent is dictated
by the business potential of the specific operation in that specific location.
Comparisons of other special use rehab buildings in other locations were of
little assistance in establishing fair market rental for the subject in.
There is some potential for leasing the subject to some type of group home
operator, i.e., homes for troubled teens, halfway houses, mentally retarded,
etc. This is an expanding market. However, the rentals paid by this type
operation are dictated by politics, altruism, and the construction cost of the
facility, rather than by market competition. Therefore, analysis of this type
rental is of limited use in attempting to establish a fair market rental for the
subject in Lancaster.
In looking at alternative healthcare in non-residential settings, we did find
that there has been considerable expansion of this type service. Those uses most
often encountered include kidney dialysis, outpatient services, adult care,
medical offices and mental health services. However, as in residential
healthcare operations, we found that rentals were not determined by market
competitive factors. Most often they were a function of the cost of the special
use property and the rent necessary to service the debt.
There is some market for the subject for rental to an alternative non-medical
institutional user such as a correctional facility. The privatization of the
penal system is a slowly evolving phenomena but certainly a trend. However, the
instances are scarce and riddled with politics making comparison of rentals
useless. The other non medical use would be for a corporate retreat. While there
are buyers for this type use, they generally require an even more remote site
than subject's and are bought by
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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owner/occupants not for investment. We do feel there is some potential for
selling the subject as an owner/occupant corporate retreat -- but not much as a
rental corporate retreat.
Some properties like subject have been purchased for conversion to general
office or retail use. The rentals here are usually dictated by market forces as
there are other alternatives available.
The subject probably has very poor potential for acquisition by an investor
intending to rent out for retail use. Its location is too far outside of the
commercial area. The subject probably has only fair potential for rental for
office use. Its location on a major thoroughfare has excellent visibility and
access, however the location is simply too early in the development stage. It is
possible that a company from Charlotte could be convinced to move here, but it
would have to be for a very attractive rental. Office properties with poor
location within a 30 minute drive of the Charlotte City Limits are currently
bringing $2.00 to $3.00 per square foot on a net net net basis. The subject
might then be expected to have a theoretical potential to develop net income of
$93,125 (37,250 sf x $2.50). Utilizing a capitalization rate of 10% would
suggest a value by the Income Capitalization Approach of:
<TABLE>
<CAPTION>
CAPITALIZATION
NET INCOME DIVIDED BY RATE = VALUE
---------- -------------- -----
<S> <C> <C> <C> <C>
$93,125 DIVIDED BY 10% = $930,000
</TABLE>
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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SALES COMPARISON APPROACH TO VALUE
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SALES COMPARISON APPROACH TO VALUE
The sales comparison approach is defined as "a set of procedures in which an
appraiser derives a value indication by comparing the property being appraised
to similar properties that have been sold recently, applying appropriate units
of comparison, and making adjustments, based on the elements of comparison, to
the sales prices of the comparables. " (This information taken from The
Dictionary of Real Estate Appraisal, American Institute of Real Estate
Appraisers, second edition.)
In this approach, the market value of the subject is estimated by comparing it
to similar properties that have sold recently. This approach is predicated on
the direct relationship between subject property's market value and the sale
prices of comparable properties.
The accurate application of this approach is based, in part, on the choice of an
appropriate unit of comparison, as shown on the summary grid. The income
multiplier was not considered appropriate as the potential buyers for this type
property come from several dissimilar industries with different income
characteristics. The physical indicators included sales price per
revenue-generating unit (beds) and sales price per square foot of building area.
Both the sales price per bed and per square foot were considered appropriate
with the price per square foot viewed as having the highest correlation to
market value. The appraiser researched sales of Special Purpose medical use
buildings that have re-sold for a different use. The following section presents
information on the sales analysis of comparables for an indicated value of the
subject property.
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IMPROVED SALE #95077 (continued)
SALE DATA
Date of Sale: DEC 92
Grantor: City of Peabody
Grantee: Lahey Clinic
Sale price: $2800000
Financing: Cash to seller.
INDICATIONS
Price/Unit (Apt/Bed) $47458
EGIM: 0.19
Overall Rate: -1.1670
Comments: Inc/Exp adjusted YE 1991; Purchased for conversion to rehab hospital.
<PAGE>
IMPROVED SALE #95077 (continued)
[picture]
PROPERTY DATA
Name/Location: Josiah B. Thomas Hospital
15 King Street
Peabody, MA
Level of Care: HOSP
Number of Units: 59
Occupancy: 0.76
Effective Gross Income: $15016254
Expenses: $18283314
Net Income: -$3267060
<PAGE>
IMPROVED SALE #95076 (continued)
SALE DATA
Date of Sale: OCT 93
Grantor: Koala North Carolina, Inc.
Grantee: J. Chapman and F. Blackwell
Sale price: $640000
Financing: All cash.
INDICATIONS
Price/Unit (Apt/Bed) $15238
Price/S.F.: $28 s.f.
Comments: Opened in '86, closed in '92; Purchased for conversion to ALF;
Of the 9.17 acre site, 6.42 is considered undevelopable; all
equipment is included.
<PAGE>
IMPROVED SALE #95076
[picture]
PROPERTY DATA
Name/Location: Chaps Koala Center
5010 Alston Avenue
Durham, NC
Level of Care: REHAB
Improvements/Condition: 1-story, steel frame, vinyl
siding in good condition.
Age: 1986
Number of Units: 42
Gross Building Area: 22813 s.f.
S.F./Unit: 543 s.f.
<PAGE>
IMPROVED SALE #95075 (continued)
SALE DATA
Date of Sale: MAY 92
Grantor: Comprehensive Addiction Prog.
Grantee: Peter C. Kern
Sale price: $850000
Financing: Cash to seller; conventional financing.
INDICATIONS
Price/Unit (Apt/Bed) $14167
Price/S.F.: $19 s.f.
Comments: Purchased vacant w/ no license to renovate into an ALF; TX has
not required CON since 1985; all utilities and on- site septic.
<PAGE>
IMPROVED SALE #95075
[picture]
PROPERTY DATA
Name/Location: Melbourne Hotel & Conference Ctr.
4611 Bee Caves
Road Austin, TX
Level of Care: Hotel
Improvements/Condition: Class D, wood frame w/ masonry interior
walls in average condition.
Age: 1985
Number of Units: 60
Gross Building Area: 44000 s.f.
S.F./Unit: 733 s.f.
<PAGE>
IMPROVED SALE #95074 (continued)
SALE DATA
Date of Sale: OCT 91
Grantor: Comprehensive Addiction Prog.
Grantee: West Star Dev. Co.
Sale price: $900000
Financing: Cash; conventional loan
INDICATIONS
Price/Unit (Apt/Bed) $15000
Price/S.F.: $56 s.f.
Comments: 25 semi-pvt with F/B; State of FL does not require CON for
substance abuse facility; purchased vacant with intent to
renovate at cost of $600Kfor use as medical office bldg. W/lab,
X-ray and short procedure surgery.
<PAGE>
IMPROVED SALE #95074
[picture]
PROPERTY DATA
Name/Location: Capitol Medical Center
2711 Capitol Med. Ctr. Blvd.
Tallahassee, FL
Level of Care: REHAB
Improvements/Condition: Class D, metal frame, 1-story in
average condition.
Age: 1989
Number of Units: 60
Gross Building Area: 16000 s.f.
S.F./Unit: 267 s.f.
<PAGE>
IMPROVED SALE #1778 (continued)
SALE DATA
Date of Sale: SEP 94
Grantor: New Orleans Health Care
Grantee: Prestige Care, L.L.C.
Sale price: $6503473
Financing: $1,534,723 cash; Note for $,968,750
at 8.5%.
INDICATIONS
Price/Unit (Apt/Bed) $30390
Price/S.F.: $69 s.f.
Comments: Sale at RTC sealed bid auction; grantee proposed to partially
convert to adoles- cent psyc facility.
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IMPROVED SALE #1778
[picture]
PROPERTY DATA
Name/Location: Ferncrest Manor Nursing Home
14500 Hayne Blvd.
New Orleans, LA
Level of Care: NH
Improvements/Condition: 1-story, masonry in good condition.
Age: 1987
Number of Units: 214
Gross Building Area: 94840 s.f.
S.F./Unit: 443 s.f.
Occupancy: 0.61
<PAGE>
IMPROVED SALE #95078 (continued)
SALE DATA
Date of Sale: JUL 90
Grantor: Town of Danvers
Grantee: Beverly Hospital
Corp.
Sale price: $3000000
Financing: Cash.
INDICATIONS
Price/Unit (Apt/Bed) $25000
EGIM: $25 s.f.
Comments: Sold with all FF&E; After sale 50% was converted to outpatient,
day surgery, Phys. & Occ. Therapy and EMER room at cost of $322K.
Remainderconverted to SNF licensed for 60 beds; Conversion cost
was $950K with $200K for F&F; Plus $350K to repair roof, parking
and other maint.
<PAGE>
IMPROVED SALE #95078
[picture]
PROPERTY DATA
Name/Location: Hunt Hospital
75 Lindall Street
Danvers, MA
Level of Care: HOSP
Number of Units: 120
Gross Building Area: 120000 s.f.0
S.F./Unit: 1000 s.f.
<PAGE>
SALES COMPARISON SUMMARY GRID
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Comp # SUBJECT # 95074 # 95075 # 95076 # 95077 # 95078 #1778
Name Crenshaw Bowling Green Bowling Green Chaps Joseph B Hunt Ferncrest
Creek of Tallahassee of the Hills Koala Thomas Hsp Hospital Manor
City Lancaster Tallahassee Austin Durham Peabody Danvers New Orleans
State SC FL TX NC MA MA LA
- ----------------------------------------------------------------------------------------------------------------------------------
PROPERTY DATA
<S> <C> <C> <C> <C> <C> <C> <C>
Year Built 1988 1989 1985 1986 N/A N/A 1987
# Beds 36 50 60 42 59 120 214
GBA (sf) 37,250 16,000 44,000 22,812 40,474 120,000 94,840
SF Per Bed/Apt 1035 320 733 543 686 1000 443
SALE DATA
Date of Sale 10/91 5/92 10/93 12/92 7/90 9/94
Sale Price $900,000 $850,000 $640,000 $2,800,000 $3,000,000 $6,503,000
Price / Bed $18,000 $14,167 $15,238 $47,458 $25,000 $30,388
Price / SF $56.25 $19.32 $28.06 $69.18 $25.00 $68.57
CUMULATIVE ADJUSTMENTS
Rights Conveyed 0% 0% 0% 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238 $47,458 $25,000 $30,388
$56 $19 $28 $69 $25 $69
Financing Terms 0% 0% 0% 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238 $47,458 $25,000 $30,388
$56 $19 $28 $69 $25 $69
Conditions of Sale 0% 0% 0% 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238 $47,458 $25,000 $30,388
$56 $19 $28 $69 $25 $69
Market Conditions 17% 15% 11% 14% 21% 8%
Adjusted Price $20,970 $16,292 $16,838 $53,864 $30,250 $32,895
$66 $22 $31 $79 $30 $74
NON-CUMULATIVE ADJUSTMENTS
Physical Characteristics: 15% 15% 15% -25% 0% -35%
Location -25% -15% -15% -40% -40% -15%
Economic Factors 0% 0% 0% 0% 0% 0%
NON-CUMULATIVE ADJUSTMENTS -10% 0% 0% -65 -40% -50%
ADJUSTED VALUE INDICATORS
Sale Price/Bed $18,873 $16,292 $16,838 $18,853 $18,150 $16,447
Sale Price/SF $59 $22 $31 $27 $18 $37
Average Sale Price/Bed $17,575
Average Sale Price/SF $32
</TABLE>
<PAGE>
[graph]
<PAGE>
[graph]
<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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COMPARISON OF COMPARABLES TO SUBJECT
In our final and most detailed analysis and comparison to subject, the appraiser
selected comparable sales with the highest combination of important similar
characteristics. The sales selected were all special use medical facilities that
were sold for a different use than that of the previous tenant.
Explanation of Adjustments
All sales are of Special Purpose medical buildings. Each sale has been adjusted
for differences, both economic and physical, in relation to the subject.
Following is a discussion of each characteristic of the property with an
explanation of the adjustments made to each comparable sale.
Cumulative Adjustments
"Cumulative Adjustments" were applied to the sales prior to other adjustments in
order to reconcile the sales prices for intangible occurrences which could alter
the sales prices. Additional noncumulative adjustments for physical and
locational considerations are analyzed thereafter. Cumulative adjustments
considered included:
Property Rights Conveyed
This adjustment is for sales which had rights conveyed differently than
the subject's. Each sale involved the fee simple estate with no
adjustment required.
Financing
No adjustment is applied for financing, as all sales are reported to be
cash to seller or cash equivalent transactions. We are not aware of
atypical financing that would require an adjustment for cash
equivalency.
Conditions of Sale
No adjustments were considered necessary to reflect any special
conditions or terms of sale.
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Market Conditions (Date of Sale)
Adjustments for recorded sales date, or time, is reflective of
differences in the market at different times. An upward adjustment of
approximately 3% annually was made to the comparables sale prices.
Non-Cumulative Adjustments
Location
Locational adjustments reflect the difference in value attributed to a
property's specific location. The subject's remote rural location
required a downward adjustment to all comps.
Quality/Design
This adjustment reflects physical differences of specific properties
for varying qualities of building materials, layout, building finish,
etc.
Condition/Age
Many older facilities receive renovations and on going maintenance due
to market expectations. However, their appeal to the market is less
than newer facilities. In addition, newer facilities are generally more
efficient to operate, thus increasing profit.
Average Square Footage Per Bed
The comparables presented a range of 320 s.f. to 1,000 s.f. per bed.
The subject, at 1,035 s.f., is at the upper end of the range. The
area per bed is an indication of the existence, or at least the
potential, for better support areas which can positively affect
profitability.
Sales Price Per Bed
HealthCare Property Appraisers maintains a nationwide data bank on long term
health care facilities, which currently includes sales of over 1,200 facilities.
Facilities which are of good quality and functionally sound with a viable
economic use are selling on a nationwide basis for approximately $25,000 to
$50,000 per bed. The higher quality facilities with strong economics (or homes
which show unusual profit potential), are generally sold for $45,000 to $75,000
per bed. Facilities being sold for shell value can sometimes bring only $10,000
to $12,000 per bed.
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The comparables selected for close analysis were all properties sold for an
alternative use. They have an unadjusted sales price per bed range from $14,167
to $47,458 with an average of $25,042. The factors which affect the sales price
per bed include unit mix, number of residents per room, project amenities, and
average area per bed. Typically, a property which has a larger average area per
bed will sell at a higher unit price.
After adjusting the comparables to the subject using the net income differential
multiplier, the sales price per bed formed a range of $16,292 to $18,873 with an
average of $17,575. Giving further consideration to subject's average bed area
and other physical characteristics, the value range on a per bed basis is
estimated at $17,000 to $18,000. Applying this range to the subject's 36
indicates a value range of $612,000 to $648,000.
<TABLE>
<CAPTION>
BEDS X SALE PRICE PER BED = INDICATED VALUE
---- ------------------ ---------------
<S> <C> <C> <C> <C>
36 X $17,000 to $18,000 = $612,000 to $648,000
</TABLE>
Sales Price Per Square Foot
The unadjusted comparables formed a sales price range from $19 to $69 per square
foot with an average of $44. An inverse relationship usually exists between the
sales price per square foot and the average area per bed, assuming all amenities
and services are similar. A smaller unit usually generates more income on a per
square foot basis than a larger unit. This is reflective of the staffing costs
as, typically, the per resident day costs are not directly influenced by the
unit size. After adjustments, the comparables formed a sales price per square
foot range of $18 to $59 with an average of $32.
Considering the subject's functional utility, area per resident, quality and
condition, we believe a value range of $30 to $35 per square foot to be
indicated. Applying the unit values to the subject's 37,250 of gross building
area indicates a value range of $1,117,500 to $1,303,750.
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<TABLE>
<CAPTION>
BUILDING SIZE X SALE PRICE PER SF X INDICATED VALUE
------------- ----------------- ---------------
<S> <C> <C> <C> <C>
37,250 X $30 to $35 X $1,117,500 to $1,303,750
</TABLE>
Reconciliation of Sales Comparison Indicators
The value ranges developed by both of the physical indicators are summarized
below:
<TABLE>
<CAPTION>
INDICATORS OF VALUE VALUE RANGE
<S> <C>
SALES PRICE PER BED $612,000 to $648,000
SALES PRICE PER SQUARE FOOT $1,117,500 to $1,303,750
</TABLE>
The sales price per bed tends to be a good indicator if the comparables have
similar rates, per patient day occupancy, and self pay ratios. Due to the
uniqueness of each of the comparables, the price per bed is not considered to be
a strong indicator. The sales price per square foot is considered a stronger
indicator. The typical buyer for this building will most likely be analyzing it
from the standpoint of useful building area rather than the number of beds.
Giving consideration to current market conditions and the subject's physical
characteristics, the sales comparison approach suggests a narrower range of
$950,000 to $1,300,000.
The Sales Comparison Approach has been used to provide a value range.
Differences in location and many other variables make a precise comparison
between the comparable sales and the subject property extremely difficult.
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Summary
The validity of the Sales Comparison Approach depends upon whether a buyer can
be found who would be willing to pay some amount for the building improvements.
In our opinion, the chance of that happening are not very good for the immediate
future. The reconciled market value range indicated by the Sales Comparison
Approach:
$950,000 to $1,300,000
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RECONCILIATION AND FINAL VALUE ESTIMATE
<TABLE>
<CAPTION>
<S> <C>
INDICATED VALUE BY $990,000
COST APPROACH
INDICATED VALUE BY $930,000
INCOME APPROACH
INDICATED VALUE BY $950,000
SALES COMPARISON APPROACH to $1,300,000
</TABLE>
To estimate the final Market Value for The Crenshaw Creek Rehabilitation Center,
it is necessary to reconsider all three approaches, correlate the data, and
determine what emphasis to give each approach.
The Cost Approach was based upon a component cost breakdown prepared by a
computer utilizing the Marshall and Swift Valuation Service Cost Data Bank. This
nationally recognized building costs service prepared a very accurate estimate
of replacement costs for subject's improvements. From replacement costs (direct
and indirect) was deducted depreciation based upon observation and age of the
improvements and sales data as well as consideration of Functional and External
Obsolescence. Subject's 43.92 acres of land were valued at $5,464 per acre or
$240,000. This approach indicated a market value for the The Crenshaw Creek
Rehabilitation Center of $990,000.
The value indicated by the Cost Approach is an important consideration for a
potential buyer as it provides a starting point for estimating value in use.
However, most purchasers of a special use property will make a fairly
substantial deduction from cost new to reach their offering price. The amount of
that deduction is dependent upon a number of factors that vary from investor to
investor and property to property and cannot be predicted or quantified with any
high degree of accuracy. If a buyer can be found who can use the building
improvements it is my opinion that this deduction would be a minimum of 50% but
in many cases could be as much as 100%. We believe this
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depreciated value by our Cost Approach of $990,000 which assumes depreciation of
75% probably sets the upper limit of value for the subject property.
Under the Income Approach to value, the appraiser analyzed the subject property
from the standpoint of a potential investor who would be most interested in its
income stream. This approach was considered to be the weakest of the three as it
is based on the least data and has the weakest correlation to the actual thought
process of the typical buyer. Few buyers of this type property would be
acquiring it for its investment potential, but rather for its value in use in a
business. The projected N et Income to Real Estate of $93,125 was capitalized at
10%. Based upon a consideration of current financing, available alternatives,
and equity demands, the Market Value of The Crenshaw Creek Rehabilitation Center
was indicated by the Income Approach to be $930,000.
Under the Sales Comparison Approach, the appraiser reviewed a considerable
number of sales of former medical facilities that have been converted to other
uses. Analysis of this data after adjustments for property differences indicated
a Market Value for The Crenshaw Creek Rehabilitation Center of $950,000 to
$1,300,000, based on $17,000 to $18,000 per unit and $30 to $35 per square foot.
The preceding analysis assumes a buyer can be found who will be willing to pay
something for the subject's improvements. The limited market for the subject's
improvements and consideration of its location suggest that only a low price
will attract a buyer to these improvements.
Our three Approaches to Value when correlated together suggest a value of
$1,350,000 to $1,720,000. However, that conclusion is based upon:
- The assumption that a user for subject's improvements can be
found
- Analysis of sales of former medical buildings which were
resold (ignoring the fact that many never did sell)
- A large estimate of depreciation by the appraiser that cannot
be accurately proven.
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The reality of the matter is that there probably will be no buyer for the
improvements and the property will have to be sold for Land Value only.
Therefore, we believe the most likely sale price for the subject to be its Land
Value only.
Based on the enclosed data and analyses, I believe the Subject Property
described herein has the following estimated Final Market Value as of March 25,
1997:
FINAL MARKET VALUE OF SUBJECT PROPERTY: $240,000
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MARKETING PERIOD
Due to the weak market for Offices, The Crenshaw Creek Rehabilitation Center may
not be saleable to a health care user. The appraiser has reviewed sales of a
number of Offices that have taken place over the past five years. The average
sales time for those properties was approximately three years. If the subject
property were priced to include "some" value for the improvements and adequately
marketed, we believe it could be sold at our appraised value within
approximately three years. However, it must be recognized that there may be very
little demand for this property as improved and it may be necessary to sell it
for land value alone -- which could also take three years.
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SUMMARY OF VALUES
After considering the subject's functional utility, neighborhood and general
market conditions, we would estimate the probability of finding a buyer/user for
the existing improvements as only FAIR to POOR. The most realistic price for the
subject incudes no value for the improvements. Therefore, we estimate the Market
Value of the subject to be the value of the land only or:
Land $240,000
It should be noted that there is some upside potential for finding a buyer who
will pay something for the improvements. But due to the low probability of that
happening we do not believe a prudent buyer would pay more than land value.
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UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS
1. The Appraiser assumes no responsibility for legal matters nor renders
an opinion of title. Good title to The Crenshaw Creek Rehabilitation
Center is assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to
appear in court, commission, or in any other capacity without prior
arrangements and additional compensation.
This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc.. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report without the preparer's written consent is an
unintended user, and does so at his own risk.
3. The factual information in this report--furnished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
4. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the
Institute require each Member to control the use and distribution of
each appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared. However, selected portions
of this appraisal report shall not be given to third parties without
prior written consent of the signatories of this appraisal report.
Further, neither all nor any part of this appraisal report shall be
disseminated to the general public by use of advertising, public
relations, news, sales, or other media for public communication
without the prior written consent of the signatories of this
appraisal report.
5. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not
responsible for any adverse condition that may be found in these
matters.
6. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters
(including but not limited to termites, dry rot, wet rot, and other
wood-destroying organisms) are not present or have been detected and
properly corrected.
7. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations and mechanical, plumbing, electrical, heating,
ventilation, air conditioning, and roof systems are assumed to be
adequate, in good working order and capable of performing the function
for which they were designed. The appraiser has no expertise in this
area and cannot certify the
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condition or functional adequacy of these items. A qualified inspector
should be utilized for that purpose. The appraiser assumes no
responsibility for any hidden or unapparent conditions of the
property, soil, subsoil, or structures that would affect its value.
8. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
9. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
10. The appraiser has not researched the subject property for liens nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value. The property is therefore appraised as though it were free and
clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
11. The value estimate and estimated income and expenses assume responsible
ownership and typical, competent management.
12. The appraiser was not furnished with construction plans or physical
surveys and due to the confidential nature of this assignment, did not
measure the building improvements. Gross area of land and improvements
is estimated by methods and from sources considered reliable and the
data is believed to be accurate. However, no responsibility is assumed
for its accuracy and it is recommended that a licensed surveyor be
employed for that purpose. Any substantial difference in the subject's
actual land or improvement size would have some effect on its true
market value. Any statement by the appraiser contained herein as to
the size of land or building improvements is for descriptive purposes
and is a statement of the appraiser's opinion as to the property's
functional utility and not a statement of fact as to its physical
size.
13. The appraiser's projections of income and expenses are not predictions
of the future. They are our best estimates of current market thinking
about what future income and expenses might be. We make no warranty or
representations that these projections will materialize.
14. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
15. To the best of the Appraiser's knowledge, this report conforms to the
current requirements prescribed by the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of
the Appraisal Foundation as required by the Financial Institutions
Reform, Recovery and Enforcement Act (FIRREA) and the Appraisal
Institute.
16. The Americans with Disabilities Act "ADA" became effective January
26, 1992. We have 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 we have no direct evidence relating to this issue, I (we) did
not consider possible noncompliance with the requirements of ADA in
estimating the value of the property. Based on our personal
inspection, we are not aware of any irregular or apparent
non-compliant handicap items.
17. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- The statements of fact contained in this appraisal report are
true and correct.
- The reported appraisal 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 personal interest or bias
with respect to the parties involved.
- My compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of
the client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event.
- My analyses, opinions and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards
of Professional Appraisal Practice of the Appraisal Standards
Board of the Appraisal Foundation as required by the Financial
Institutions Reform, Recovery and Enforcement Act (FIRREA) and the
Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute.
- As of the date of this report, J. Michael Burroughs, MAI, SRA has
completed the requirements of the continuing education program 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.
- The subject property was inspected by Franklin M. Ramsey and was
not inspected by J. Michael Burroughs.
- Eve L. Burroughs and Bonny J. Sinclair provided valuable
assistance in compiling data for this report. No one else provided
significant professional assistance to the undersigned. The
appraiser gratefully acknowledges the contribution of data from
several sources.
- The appraiser has complied with the USPAP competency provision.
- The USPAP departure provision does not apply.
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<PAGE>
The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
- --------------------------------------------------------------------------------
- This appraisal assignment was not based on a requested minimum or
maximum valuation, a specific valuation, or the approval of a
loan.
I do not authorize the out-of-context quoting from or partial
reprinting of this appraisal report. Further, neither all nor any part of this
appraisal report shall be disseminated to the general public by the use of media
for public communication without the prior written consent of the appraiser(s)
signing this appraisal report.
/s/ J. MICHAEL BURROUGHS
------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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REFERENCES
The appraiser would like to acknowledge the following resources:
1. Laventhol & Horwath, Retirement Housing Industry 1989 (Laventhol &
Horwath, Philadelphia, PA 1990).
2. Laventhol & Horwath, Nursing Home Industry 1988 (Laventhol & Horwath,
Philadelphia, PA 1989).
3. Marshall and Swift Computerized Services,
Los Angeles, CA.
4. National Planning Data Corporation, Ithaca, NY.
5. SMG Marketing Group, Inc. -C-1993.
6. Ernst & Young and American Association of Homes for the Aging Study.
Continuing Care Retirement Communities: An Industry in Action, Analysis
and Developing Trends, 1989.
7. The Dictionary of Real Estate Appraisal, American Institute of Real
Estate Appraisers, second edition.
8. The Appraisal of Real Estate, ninth edition.
9. The Guide to the Nursing Home Industry, 1993. A joint publication of
Health Care Investment Analysts, Inc. and Arthur Andersen & Co.
10. U. S. Bureau of Census.
11. Marion MerrellDow Managed Care DigestLong Term Care Edition 1993.
Marion Merrell Dow, Inc.
12. An Overview of The Assisted Living Industry, October 1993, Coopers &
Lybrand and The Assisted Living Facilities Association of America.
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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QUALIFICATIONS OF APPRAISER
J. MICHAEL BURROUGHS, MAI & SRA
POST OFFICE BOX 2227
HWY 64 EAST, LAUREL TERRACE, 2ND FLOOR
CASHIERS, NORTH CAROLINA 28717
BUSINESS EXPERIENCE
J. Michael Burroughs has been engaged in the preparation of appraisals,
feasibility studies, economic analyses, and general consulting on all types of
properties for various clients. In the mid-1970s, Mr. Burroughs began
specializing in the appraisal of long-term health care facilities and housing
for the elderly. Since 1985, Mr. Burroughs has worked exclusively with long-term
health care and housing for the elderly in the areas of appraising, brokerage,
and finance.
Assignments have been in more than 44 of the 50 United States. Current
assignments include all types of healthcare and senior housing real estate:
Nursing Homes
Continuing Care Retirement Communities (Both Rental and Endowment)
Assisted Living Facilities
Acute Care Hospitals
Psychiatric Hospitals
Congregate Living Facilities
Properties appraised total approximately 3,000 in number and exceed $7 Billion
in appraised value. Mr. Burroughs has also been active as a general partner in
five successful apartment to condominium conversion projects and is actively
engaged in the buying and selling of investment real estate for his own account
and for clients. He is a nationally recognized convention speaker and published
author on healthcare appraising and financing.
EMPLOYMENT
HealthCare Property Appraisers of America, Inc. -- President
June, 1973 to Present
Atlantic Mortgage and Investment Company - First Vice President
January, 1972 to July, 1973, Winston-Salem, NC
Wachovia Mortgage Company - Asst. VP and Manager of the Charlotte Income
Property Loan Department May, 1970 to January, 1972, Charlotte, NC
Prudential Insurance Company - Real Estate and Mortgage Loan Department Regional
Appraiser December, 1964 to April, 1969, Montgomery, Alabama
May 1969 to May, 1970, Charlotte, N. C.
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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GENERAL EDUCATION
Mars Hill College-Associate of Arts --- 1962
University of North Carolina at Chapel Hill-B.S. in Business Administration
(Major: Banking and Finance) 1964
REAL ESTATE EDUCATION
American Institute of Real Estate Appraisers-Real Estate Valuation-Course
1-University of Mississippi, 1966.
American Institute of Real Estate Appraisers--Real Estate Valuation--Course
II-Tulane University, 1967.
Various Seminars in Tax Deferred Exchanging and Computer Applications for
Real Estate Analysis.
PROFESSIONAL CONTRIBUTIONS
Mr. Burroughs has authored articles for national industry periodicals and is a
nationally recognized speaker on the valuation of healthcare and senior living
properties.
MEMBERSHIPS AND PROFESSIONAL DESIGNATIONS
The Appraisal Institute-MAI, SRA
Licensed Real Estate Broker
The Academy of Real Estate Exchangers
State Certified General Appraiser
AREA OF SPECIALTY-LONG-TERM HEALTH CARE
Healthcare and Nursing Home Facilities
Facilities Appraised: 2500
Location: Located in 44 States
Type: Skilled, ICF, Personal Care, Head Trauma, Long-Term
Pediatric Care, Substance Abuse, Mentally Retarded
(MR), Rehabilitation, Alzheimer's, Acute, Sub-Acute,
Rehab, and Psychiatric Hospitals
Retirement Housing
Facilities Appraised: 60+
Location: Located in over 14 States
Type: Lease Rental, Condo Ownership, Retirement Apartments
with or without Nursing Home, Assisted Living, and
Luxurious Hotel-type for the well elderly. Housing
for the elderly requiring some personal care and
services.
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The Crenshaw Creek Rehabilitation Center, Lancaster, South Carolina
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TYPICAL NURSING HOME CLIENTS (Partial List)
Mortgage/Bond Lenders
Bank One, Indianapolis, IN
Bear Sterns Investment Bankers, New York, NY
Dominion Bank, Richmond, VA
First American National Bank, Nashville, TN
First National of Maryland, Baltimore, MD
Grove Capital, Atlanta, GA
Healthcare REIT, Toledo, OH
Hibernia National Bank, New Orleans, LA
J. C. Bradford, Nashville TN and Pensacola, FL
Maryland National Bank, Baltimore, MD
Society Bank, Dayton, Ohio
Southtrust Bank, N.A., Birmingham, AL
Van Kampen Merritt, Philadelphia, PA
Wachovia Bank & Trust, Raleigh, NC
Wright One Financial, Dayton, OH
Healthcare Management Companies
American Retirement Corporation, Nashville, TN
The Angell Group, Winston-Salem, NC
Asheville Psychiatric Hospital, Asheville, NC
Beverly Enterprises, Ft. Smith, AR
Brian Management Group, Hickory, NC
The Brunner Companies, Dayton, OH
Charlotte Memorial Hospital, Charlotte, NC
Convalescent Services, Atlanta, GA
Cumberland Health Systems, Nashville, TN
Denver Health Group, Denver, CO
Diversicare Corporation of America, Franklin, TN
Elmhurst Psychiatric Hospital, Portland, CT
Genesis Health, West Point, PA
Health Care Capital, Atlanta, GA
Health Care Concepts, Atlanta, GA
Health Prime, Atlanta, GA
Meridian Healthcare, Towson, MD
Multicare Management, Inc., Hackensack, NJ
National Health Corporation, Murfreesboro, TN
Nomura, New York, NY
Quest Rescue, Atlanta, GA
Quorum Health Services, Inc., Wellesley, MA
Regency Health Care, Ormond Beach, FL
Resource Housing of America, Atlanta, GA
Royal Care, Inc., Cleveland, TN
Southern Care Enterprises, Atlanta, GA
TheraTx, Baltimore, MD
Total Care Systems, Inc., West Point, PA
WellCare, Inc., Atlanta, GA
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<PAGE>
ADDENDA
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<PAGE>
[form]
- --------------------------------------------------------------------------------
FEDERAL EMERGENCY MANAGEMENT AGENCY
STANDARD FLOOD HAZARD DETERMINATION
See the Attached Instructions
O.M.B. No. 3887 0264
Expires April 30, 1998
Section I - LOAN INFORMATION
- -------------------------------------------------------------------------------
1. LENDER NAME AND ADDRESS
HEALTHCARE PROPERTY APPRAISERS
HWY 68 EAST BOX 2237
CASHIERS, NC 28717
2. COLLATERAL (Building/Mobile Home/Personal Property) PROPERTY ADDRESS
(Legal Description may be attached)
134 E REBOUND RD
LANCASTER, SC 20720-7712
3. LENDER ID. NO.
4. LOAN IDENTIFIER
4
5. AMOUNT OF FLOOD INSURANCE REQUIRED
$0
Section II
- ------------------------------------------------------------------------------
A. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) COMMUNITY JURISDICTION
NFIP Community Name
LANCASTER COUNTY
County(ies)
UNINCORPORATED AREAS
State
SC
NFIP Community Number
450170
B. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) DATA AFFECTING BUILDING/MOBILE HOME
NFIP Map Number or Community Panel Number (Community name, if not the same as
"A")
A501??????45B
NFIP Map Panel Effective/Revised Date
01/06/83
LOBAL/LOHR
- ----- ------------
Yes Date
Flood Zone
C
No. NFIP Map
C. FEDERAL FLOOD INSURANCE AVAILABILITY (Check all that apply)
X Federal Food Insurance is available (community participates in NFIP).
- --- X Regular Program Emergency Program of NFIP
--- ---
Federal Flood Insurance is not available because community is not
- --- participating in the NFIP
Building/Mobile Home is in a Coastal Barrier Resources Area (CBRA),
- --- Federal Flood Insurance may not be available. CBR designation date:
----------------
D. DETERMINATION
IS BUILDING/MOBILE HOME IN SPECIAL FLOOD HAZARD AREA (ZONES BEGINNING WITH
LETTERS "A" OR "V")? YES X NO
----- -----
If yes, flood insurance is required by the Flood Disaster Protection Act of
1973.
(If no, flood insurance is not required by the Flood Disaster Protection Act
of 1973.
E. COMMENTS (Optional):
Name:
Type: REGULAR
Property: REGULAR
Cert No: 1405438-0
Client ID: 7425
Requested By: EVE OR SONNY
Fac 1-(704) 743-1730
This determination is based on examining the NFIP map, any Federal Emergency
Management Agency revisions to it, and any other information needed to locate
the building/mobile home on the NFIP map.
F. PREPARER'S INFORMATION
NAME, ADDRESS, TELEPHONE NUMBER (if other than Lender)
BANKERS HAZARD DETERMINATION SERVICES - BHDS
P.O. BOX 33001
ST. PETERSBURG, FL 33733
PHONE: 1-800-723-6327
DATE OF DETERMINATION
03/19/97
FEMA Form 81-93 JUN 95
<PAGE>
The Cedarbrook Rebound Facility
1400 Nashville Pike
Gallatin, Tennessee
<PAGE>
APPRAISAL REPORT
ON
The Cedarbrook
Rebound Facility
1400 Nashville Pike
Gallatin, Tennessee
PREPARED BY:
HealthCare Property Appraisers of America, Inc.
Hwy 64 East, Laurel Terrace, 2nd Floor
Post Office Box 2227
Cashiers, North Carolina 28717
Copyright 1997, HealthCare Property Appraisers of America, Inc.
<PAGE>
SUBJECT
[PICTURE]
<PAGE>
HealthCare Property Appraisers J. MICHAEL BURROUGHS, MAI, SRA
OF AMERICA, INC. PRESIDENT
Post Office Box 2227
Hwy. 64 E., Laurel Terrace, 2nd Floor
Cashiers, North Carolina 28717
Phone: 704-743-5204
Fax: 704-743-1730
April 10, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
14160 Dallas Parkway
Dallas, TX 75240
Re: The Cedarbrook Rebound Facility
Gallatin, Tennessee
Dear Mr. Brickman:
HealthCare Property Appraisers of America, Inc. has inspected The Cedarbrook
Rebound Facility for the purpose of estimating the Market Value of its fee
simple estate. All factors which might influence the value of this property
were investigated and fully considered to the best of our ability. We have
performed a Complete Appraisal and report our findings here in the form of a
Self-Contained Appraisal Report, which describes the appraisal method and
contains the information necessary for forming realistic conclusions. The
supporting data analyses and conclusions are an integral part of this report.
The maps, sketches, and statistics are included to aid the reader in
visualizing the property. Your attention is directed to the section entitled:
"Underlying Assumptions and Limiting Conditions Section" which provides the
basis for all conclusions and the Final Value Estimate.
Based on the enclosed data and analyses, we believe the Subject Property
described herein had a Maximum Market Value, as of March 24, 1997 in its
present physical condition of:
$200,000
The above value includes no value for the building improvements and assumes a
buyer cannot be found who can use and will pay something for the building
improvements. We rate the probability of the subject's being able to attract
such a buyer who wold allocate any value to the building improvements as FAIR.
The value conclusions in this report assume that this property is not subject
to any existing leases or management contracts. We have assumed that any new
owner would be free to negotiate a new lease or management contract if they
so desired.
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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After studying the sales history of similar properties, the Appraiser
estimates a reasonable marketing period for the subject property to be
twelve months.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by the Uniform Standards of
Professional Appraisal Practice (USPAP).
I appreciate the opportunity to provide these appraisal services to you. If
you have any questions on this report or any other matters, please do not
hesitate to call.
Respectfully submitted,
HealthCare Property Appraisers of America, Inc.
/s/ J. MICHAEL BURROUGHS
- -----------------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
State Certified General Appraiser, #A218
President
JMB:ela
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HealthCare Property Appraisers of America, Inc. 3
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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SUMMARY OF IMPORTANT CONCLUSIONS
Self-Contained Report of a Complete Appraisal
<TABLE>
<S> <C>
Subject Property: The Cedarbrook
Rebound Facility
Property Location: 1400 Nashville Pike
Gallatin, Tennessee
Effective Date: March 24, 1997
Report Date: April 10, 1997
Purpose of Appraisal: Market Value
Area of Site: 6.95 acres (approx.)
Highest and Best Use: For Office Complex Use
Improvements:
Number of Beds: 40 Beds
Building Size: 42,350 sf (approx.)
Building Date: 1985
Market Value:
(Assumes No Building Value)
Land $200,000
Building Improvements 0
--------
Total Real Estate $200,000
</TABLE>
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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TABLE OF CONTENTS
<TABLE>
<S> <C>
TRANSMITTAL LETTER.....................................................2
SUMMARY OF IMPORTANT CONCLUSIONS.......................................4
TABLE OF CONTENTS......................................................5
GENERAL IDENTIFICATION OF PROPERTY.....................................6
PROPERTY RIGHTS APPRAISED .............................................6
SCOPE OF APPRAISAL ....................................................6
HISTORY OF PROPERTY....................................................7
THE PURPOSE OF THE APPRAISAL ..........................................8
METHOD OF APPRAISAL ..................................................11
REGIONAL ANALYSIS ....................................................13
MARKET AREA AND NEIGHBORHOOD..........................................35
SITE DATA.............................................................40
DESCRIPTION OF IMPROVEMENTS...........................................45
COST APPROACH TO VALUE ...............................................50
INCOME CAPITALIZATION APPROACH TO VALUE...............................67
SALES COMPARISON APPROACH TO VALUE....................................72
RECONCILIATION AND FINAL VALUE ESTIMATE ..............................92
SUMMARY OF VALUES ....................................................96
UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS........................97
APPRAISER'S CERTIFICATION ...........................................100
QUALIFICATIONS OF APPRAISER .........................................103
</TABLE>
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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GENERAL IDENTIFICATION OF PROPERTY
The subject property, known as The Cedarbrook Rebound Facility, is located at
1400 Nashville Pike, Gallatin, Tennessee. The subject site and improvements
are described further in subsequent sections of this report. The subject of
this analysis includes real property only.
PROPERTY RIGHTS APPRAISED
The appraiser, in completing this appraisal assignment, considered the subject
property to include all of those rights that may be lawfully owned and are
legally referred to as being held in "fee simple".
Definition of Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate; subject
only to the limitations of eminent domain, escheat, police power, and
taxation. (The Dictionary of Real Estate Appraisal, American Institute of
Real Estate Appraisers, Third Printing, October, 1987)
SCOPE OF APPRAISAL
In conducting this appraisal, our staff
- Inspected the subject property.
- Developed and analyzed significant data from primary and secondary
sources, confirming that data where possible.
- Analyzed sales, income and expense data and projected a reasonable cash
flow for the subject.
- Completed Income Capitalization, Cost and Sales Comparison Approaches
To Value and reached a Final Market Value conclusion as reported
herein.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by USPAP.
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HealthCare Property Appraisers of America, Inc. 6
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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HISTORY OF PROPERTY
To the best of the appraiser's knowledge, the subject property has not been
sold, listed or placed under contract within the past three years. The subject
property is listed at the county courthouse as being owned by Jacques Miller.
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HealthCare Property Appraisers of America, Inc. 7
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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THE PURPOSE OF THE APPRAISAL
The purpose of the Complete Appraisal contained in this Self-Contained Appraisal
Report is to estimate the Market Value of The Cedarbrook Rebound Facility. This
report is for the internal use of Capital Realty Group.
Definition of Market Value
The most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated.
(2) Both parties are well informed or well advised, and acting in what they
consider their own best interests.
(3) A reasonable time is allowed for exposure in the open market.
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto.
(5) The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.*
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HealthCare Property Appraisers of America, Inc. 8
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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COMPETENCY
The Office of the Comptroller of the Currency has issued the following Final
Rule, which requires lenders to evaluate appraiser competency for each specific
appraisal assignment:
"Not all appraisers are competent to perform every type of appraisal that
will be needed in connection with federally related transactions. For
instance, an appraiser who is experienced in appraising shopping centers may
not possess sufficient expertise to appraise a golf course. A financial
institution should look beyond an individual's title to determine if he or
she has the experience and training needed to perform the appraisal. This
provision is not intended to prohibit, in every circumstance, an individual
from appraising a type of property with which he or she is not familiar.
However in such instances, an appraiser may perform the appraisal only in
accordance with the Competency Provision in the USPAP."
HealthCare Property Appraisers of America, Inc. is a national appraisal firm
limiting its appraisal practice to Health Care and Senior Housing properties.
HealthCare Property Appraisers of America, Inc. has prepared over 3,000
appraisal reports in 42 states on a wide variety of health care-oriented
facilities and housing for the elderly. Property types encompass the complete
continuum of health care facilities including:
- General and Acute Care Hospitals
- Psychiatric Hospitals
- Substance Abuse Facilities
- Skilled Nursing Homes
- Assisted Living Homes
- Rest Homes, Personal Care and Homes for the Aged
- Facilities for the Developmentally Disabled
- Independent Living Apartments for Retirees
- Continuing Care Retirement Communities
Our office maintains a constant dialogue with public health departments,
medicaid reimbursement officials and healthcare licensing agencies in all 50
states. We constantly update our data bank in accordance with changes within the
various state health care programs. HealthCare Property Appraisers of America,
Inc. maintains an in-house database which currently contains in excess of 1,300
sales of health care-related and senior housing properties.
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HealthCare Property Appraisers of America, Inc. 9
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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Source of Definitions
- Title XI. Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 (FIRREA) [Pub. L. No. 101-73, 103 Stat. 183 (1989)], 12 U.S.C.
3310, 3331-3351, and section 5(b) of the Bank Holding Company Act, 12
U.S.C. 1844(b); Part 225, Subpart G: Appraisals Paragraph 225.62(f).
- Uniform Standards of Professional Appraisal Practice, Page 1-7.
- Federal Reserve System, 12 CFR Parts 208 and 225, Sec. 225.62.
- Office of the Comptroller of the Currency, 12 CFR part 34, Sec. 34.42.
- FDIC, 12 CFR Part 323, Sec. 323.2.
- Office of Thrift Supervision, 12 CFR Part 564, Sec. 564.2.
- NCUA, 12 CFR Part 722, Sec. 722.2.
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HealthCare Property Appraisers of America, Inc. 10
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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METHOD OF APPRAISAL
The Appraisal Profession generally recognizes three approaches to value:
1. Cost Approach to Value: The appraiser: (a) estimates the land value as
though the site were vacant and available for development and (b)
estimates the cost to replace subject's improvements (at their same
stage of depreciation). The depreciated Replacement Cost is usually
based upon consultation with local contractors and construction cost
data services.
2. Income Capitalization Approach to Value: The Appraiser compiles and
analyzes market data to estimate subject property's economic rental and
expenses. The net income thus derived is capitalized into a value
estimate. This indicates the property's value to an investor receiving
this income stream and develops the present value of perceived future
benefits and property reversion.
3. Sales Comparison Approach to Value (also known as the Comparative
Approach or Market Data Method): The Appraiser researches sales of
Office Complexs in this market area and develops units of comparison
which are adjusted and applied to the subject property.
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HealthCare Property Appraisers of America, Inc. 11
<PAGE>
REGIONAL ANALYSIS
- --------------------------------------------------------------------------------
<PAGE>
[Gallatin City Map]
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
REGIONAL ANALYSIS
OVERVIEW
The subject property is located in the city of Gallatin, Sumner County,
Tennessee. Located in the north central region of the state, the site is
approximately 20 miles northwest of Nashville and can be considered to be a
bedroom community of Nashville. There are eight incorporated cities in Sumner
County and Gallatin is the county seat.
Sumner County rests in the northwest section of the Nashville, Tennessee
Metropolitan Statistical Area (hereafter referred to as the Nashville MSA),
which is composed of the following counties: Cheatham, Davidson, Dickson,
Robertson, Rutherford, Sumner, Williamson and Wilson.
TERRAIN AND CLIMATE
The Sumner County area is primarily rolling to lowland hills with an average
elevation of 600 feet, typical of north central Tennessee. The Cumberland
River is just south of the Gallatin area. Average annual precipitation is 46
inches of rain from moderately frequent thunderstorms and 11 inches of snow.
A varied four-season climate, averaging a low temperature of 37 degrees in
January and a high of 82 degrees in July, has encouraged growth in the Sumner
County area.
POPULATION AND DEMOGRAPHICS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE PROJECTED CHANGE
1990-1996 1996-2001
----------------------------------------------------------
<S> <C> <C>
UNITED STATES 6.5% 4.9%
STATE 8.6% 6.5%
MSA 12.1% 9.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 13
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
The area enjoys a broadly diversified economic base including the manufacturing
of furniture and boats, automotive parts, aluminum products, tool and die,
medical service and printing industries, which contribute to the growth of the
area. According to Claritas, Inc., a demographics survey firm, the estimated
1996 population of the United States has increased 6.5% since 1990, and an
additional 4.9% increase can be expected by 2001.
According to the 1990 Census, Tennessee's population totaled 4,877,185
residents. Claritas estimates the current population at 5,294,786, representing
an increase of 8.6%. By 2001, the population is projected to reach 5,638,736
residents, an increase of 6.5%.
The 1990 Census indicates Nashville MSA's population totaled 985,026 residents.
Claritas estimates the current population at 1,104,698, representing an increase
of 12.1%. By 2001, the population is projected to reach 1,204,436 residents,
an increase of 9.0%.
DEMOGRAPHICS OF THE ELDERLY POPULATION
Percentage of Change - Elderly Population
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
1990-1996 1996-2001
--------- ---------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
----- ----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
U. S. 14.4% 21.0% 32.9% 11.3% 12.4% 19.0%
STATE 15.9% 23.3% 43.8% 13.7% 13.7% 22.2%
MSA 18.9% 22.0% 44.5% 17.3% 16.1% 22.5%
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The market segments of primary interest in this demographics study are the age
groups: (a) 75 to 79, (b) 80 to 84, and (c) 85 and over. Between 1990 and 1996,
the estimated increase nationally in the 75 to 79 year old age bracket was
14.4%. In the 80 to 84 age group the change was 21.0% and the change in the 85
and over age group was 32.9%. By 2001, the 75 to 79 age group is projected to
increase by an additional 11.3%, the 80 to 84 group by 12.4% and the age
group 85 and over by 19.0%.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 14
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
In the state of Tennessee, the 75 to 79 age group is currently estimated at
141,781 which is an increase of 15.9% since the last census. The age group 80 to
84 has shown an increase of 23.3% in that same time period and the 85 and over
age group has shown an increase of 43.8%. It is estimated that by 2001, there
will be 12.4, 8.6 and 8.1 residents in these age groups or a change of 13.7%,
13.7%, and 22.2% respectively.
In the Nashville MSA, the 75 to 79 age group is currently estimated at 24,223
which is an increase of 18.9% since the last census. The age group 80 to 84 has
shown an increase of 22.0% in the time period between 1990 and 1996 and the 85
and over age group has shown an increase of 44.5%. It is estimated that by 2001,
there will be 11.4, 7.8 and 7.4 residents in these age groups or a change of
17.3%, 16.1%, and 22.5% respectively.
Median Household Income - Ages 75+
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
1990-1996 1996-2001
--------- ---------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
----- ----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
U. S. +$3,462 +$3,355 +$3,233 +$3,344 +$3,359 +$3,357
STATE +$2,966 +$3,070 +$3,066 +$3,070 +$2,952 +$3,006
MSA +$4,161 +$3,960 +$3,797 +$4,240 +$4,353 +$4,413
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Nationally, the 75 to 79 age group median household income increased $3,462
between 1990 and 1996 and is projected to increase an additional $3,344 by 2001.
The 80 to 84 age group showed an increase nationally in median household income
of $3,355 between 1990 and 1996 and is projected to increase an additional
$3,359 by 2001. The age group 85 and over showed an increase between 1990 and
1996 of $3,233 and is projected increase an additional $3,357 by 2001.
In the state of Tennessee, the median household income for the 75-79 age group
increased $2,966 between 1990 and 1996, and is projected to reach $16,694 or
increase an additional $3,070 by 2001. The median household income for the 80 to
84 age group during the time
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 15
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
period 1990 to 1996 increased $3,070 and is expected to reach $16,420 or
increase an additional $2,952 by 2001. The age group 85 and over showed an
increase of $3,066 between 1990 and current estimates and is projected to reach
$16,471 or increase an additional $3,006 by 2001.
In the Nashville MSA, median household income for the 75-79 age group increased
$4,161 between 1990 and 1996, and is projected to reach $21,517 or increase an
additional $4,240 by 2001. The median household income for the 80 to 84 age
group during the 1990-1996 time period increased $3,960 and is expected to reach
$21,106 or increase an additional $4,353 by 2001. The age group 85 and over
showed an increase of $3,797 between 1990 and current estimates and is projected
to reach $20,918 or an additional increase of $4,413 by 2001.
Elderly Households With Income $35,000+
(As a % of Total Household Income For 55+ population)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1990 1996 2001
ESTIMATED PROJECTED
--------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES 42.4% 52.0% 58.3%
STATE 33.3% 45.6% 65.1%
MSA 42.1% 56.5% 65.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
One of the best indicators of the ability of the subject's residents to be self
supporting (rather than government funded) is their level of affluence. The
appraiser compared the subject's potential local market with that of Tennessee
and the USA as a whole. The comparison was based upon the percentage of
population aged 55 + with an annual household income exceeding $35,000.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 16
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
GOVERNMENT AND SERVICES
The Sumner County area includes eight communities. The subject property falls
within the jurisdiction of Gallatin which has a mayor/representative form of
government. Police protection is provided by the Gallatin Police Department with
46 officers. Fire protection is provided by the Gallatin Fire Department with 36
full-time personnel and 9 volunteers, carrying a fire insurance rating of 4.
UTILITIES
Water and sewer service are provided by the City of Gallatin. Electricity is
supplied by Tennessee Valley Authority and Gallatin Department of Electricity,
gas service is provided by East Tennessee Natural Gas Company through the City
of Gallatin, and telephone service by Bell South.
EDUCATION
The Gallatin City School System has 8 public schools and an enrollment of 5700.
There are two church affiliated schools with an enrollment of 300. There is one
private school with 235 pupils. Vocational-Technical training is available in
the area from Volunteer State Community College and some high school programs.
Among the area's facilities for higher education are Cumberland University in
Lebanon and Tennessee State, Vanderbilt and Fisk universities in Nashville.
TRANSPORTATION
The area's principal highways include Interstate 65 (N-S) along the western edge
of Sumner County, Interstate 40, 20 minutes south; U.S. Highway 31 (N-S) and
State Highways 25 (E-W) and 109 (N-S). Currently, there are no plans for road
expansion or construction in the area. Airports are located throughout the area,
with the major commercial airport being Nashville International, with 96 daily
flights. Airlines serving that airport include several major. Freight rail
service is provided by CSX Transportation. There are seven trucking companies
servicing the area with 2 terminals.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 17
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
HEALTHCARE
Sumner Regional Medical Center serves the Gallatin area with 155 beds. Medical
assistance is provided by 85 physicians and 16 dentists. Gallatin has two
nursing homes, Brandywood (100 beds) and Gallatin Health Care (200 beds) and
Sumner county has seven other nursing homes with a total of 413 beds, including
Hendersonville Nursing Home, Highland Manor, Royal Care and Wesley at
Millington.
ECONOMY
Financial institutions in the area include AMSouth Bank of Tennessee,
CommunityFirst Bank, First Union, NationsBank and Volunteer State Bank.
Approximately 96% of the county's labor force of 63,380 is employed. The two
largest employers are a printing company and medical facility.
According to the 1995 Survey of Buying Power by Sales & Marketing Management,
the per household retail sales for the Nashville MSA, ranking 67th in the
nation, was $26,866 (compared to the national average of $23,209). The median
household effective buying income, ranking 97th in the nation, was 38,512
($37,070). Household expenditures for health care ranked 50th in the nation with
$7.9 million. Figures for the Sumner County were $15,481 in per household retail
sales and $40,694 effective household buying income.
According to the Places Rated Almanac, the Nashville MSA ranks 40th of the
nation's 343 MSAs in the area of employment opportunity. The area is projected
to show a growth rate of 7.05% in new jobs, with an increase of 33,124 white
collar and 12,820 blue collar positions expected. Distribution by sector and
percentage of employees is as follows:
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HealthCare Property Appraisers of America, Inc. 18
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sector Percentage
- ------ ----------
<S> <C>
Services 32.6%
Manufacturing 17.3%
Wholesale/Retail Trade 22.4%
Construction 6.3%
Transportation/Communications/Utilities 7.5%
Finance/Insurance/Real Estate 7.6%
Government 4.7%
Agriculture/Forestry/Fishing 1.5%
Mining 0.1%
</TABLE>
The area's major employers are:
<TABLE>
<CAPTION>
Company Name # Employees Product/Service
- ------------ ----------- ----------------------------
<S> <C> <C>
Donnelley Printing Company 800 Printing
Sumner Regional Medical Center 606 Health Care
G.F. Furniture 400 Business Furniture
Fleetwood Homes 325 Mobile Homes
Cresent Manufacturing 255 Solid Wood Furniture
Gallatin Aluminum Products 240 Aluminum Doors & Windows
Allied Automotive Systems 200 Automotive Braking Products
Highlander Apparel 180 Wearing Apparel
Byron's, Inc. 165 Bar B Que Meat
ABC Technologies 152 Plastic Automotive Parts
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 19
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
United States/State/MSA Household Income
(General Population)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
% OF CHANGE
------------------------------------------------------
1990-1996 1996-2001
------------------------------------------------------
<S> <C> <C>
UNITED STATES 21.7% 15.4%
STATE 27.2% 21.2%
MSA 32.9% 23.3%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
An important indicator of economic health is growth in Median Household Income.
The national increase in Median Household Income between 1990 and 1996 was
21.7%. Claritas projects the National Median Household Income will reach $42,259
(i.e. increase by 15.4%)by 2001.
Median Household Income for Tennessee in 1996 is estimated at $31,616, or an
increase of 27.2% since 1989. It is projected that by 2001 the Median Household
Income will reach $38,326, or increase by 21.2%.
Median Household Income for the Nashville MSA in 1996 has increased to $40,221,
or 32.9%, since 1989. It is projected that by 2001 the Median Household Income
will reach $49,591, or increase 23.3%.
Number of Housing Units
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
% OF CHANGE
------------------------------------------------------
1990-1996 1996-2001
------------------------------------------------------
<S> <C> <C>
UNITED STATES 7.6% 5.5%
STATE 9.5% 7.5%
MSA 12.7% 9.6%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
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HealthCare Property Appraisers of America, Inc. 20
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
Growth in the number of housing units in a specified area is another good
indication of economic health. Housing units increased 7.6% nationally between
1990 and 1996. By 2001, it is projected that total housing units nationally will
have increased by an additional 5.5%.
The number of housing units in Tennessee is currently estimated at
2,218,116, which is an increase of 9.5% since the 1990 Census. It is estimated
that by 2001, this figure will reach 2,383,554, or increase by 7.5%.
The number of housing units in the Nashville MSA is currently estimated at
463,035, which is an increase of 12.7% since the 1990 Census. It is estimated
that by 2001, this figure will reach 507,686, or increase by 9.6%.
METROPOLITAN STATISTICAL AREA (MSA) DATA
The economy of Gallatin and Sumner County are strongly effected by the
Nashville, Tennessee Metropolitan Statistical Area.
The appraiser considered the cost of living in Gallatin, as this factor affects
Cedarbrook in two ways: (a) the likelihood of retirees remaining in the area or
being attracted to it and (b) payroll costs. The Places Rated Almanac Cost of
Living Index ranks the subject MSA 173rd of the 343 MSAs nationwide (with the
first place MSA having the lowest cost of living). Ranked against the national
average of 100, the Nashville MSA indexes are:
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HealthCare Property Appraisers of America, Inc. 21
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Housing:
<S> <C>
Median Price: 99
Utilities: 77
Property Taxes: 106
Miscellaneous Living Cost Indexes:
College Tuition: 75
Food: 98
Health Care: 86
Transportation: 97
</TABLE>
The Places Rated Almanac rates and ranks 343 metropolitan areas on ten factors
that greatly influence the quality of an area: costs of living, job outlook,
housing, transportation, education, health care, crime, the arts, recreation,
and climate. The Nashville MSA is ranked as follows:
<TABLE>
<S> <C>
Costs of Living 173
Job Outlook 40
Housing 236
Transportation 52
Education 70
Health Care 71
Crime 240
The Arts 75
Recreation 138
Climate 87
</TABLE>
Based on these factors, the Nashville MSA had an overall rank of 31st of the 343
Metropolitan Statistical Areas.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 22
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
TRENDS, FUTURE OUTLOOK, CONCLUSIONS
The Sumner County area has experienced a great deal of spillover during the past
fifteen years from the metropolitan Nashville area with businesses and
individuals seeking lower costs of living and overhead and small town closeness
with proximity to services. Gallatin has experienced a growth in industry and
population due to its location, 30 minutes northeast of Nashville, and
industrial incentives facilitated by the Gallatin Industrial Development Board.
The population growth in the Nashville area has continued to grow at almost
double the national rate and the elderly population's growth rate has exceeded
the national rate as well. Over the coming five-year period, figures indicate
both populations will continue to grow at rates above the national and state's
averages. Incomes in the area have traditionally increased at faster rates than
the country's average and will continue to do so to the year 2000, with over 60%
of the elderly households reaching $35,000+. Housing will mirror the population
trends indicating the Sumner County area will continue to grow and expand.
Due to the anticipated increases of population and income in the Gallatin area,
coupled with the predicted positive growth patterns in industry and the economy,
the Gallatin/Sumner County area is expected to provide a positive climate for
the senior health care industry.
- ----------
*All population and household income figures were taken from the most recent
U.S. Census (if actual numbers) or were provided to the appraiser by Claritas,
Inc. (if projected numbers) or by the local Chamber of Commerce.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 23
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
(MSA 5360) Nashville, TN (Weight: 100.0%)
<TABLE>
<CAPTION>
Household Trend Report
1980 1990 % Chg 1996 %Chg 2001 % Chg
Universe (Census) (Census) 80-90 (Est.) 90-96 (Proj.) 96-01
- ----------------------- --------- --------- -------- --------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Population............. 850503 985026 15.8 1104698 12.1 1204436 9.0
Households ............ 301947 375831 24.5 427771 13.8 469262 9.7
Families .............. 227100 264570 16.5 299414 13.2 326562 9.1
Housing Units.......... 319906 410968 28.5 463035 12.7 507686 9.6
Grp Qrt. Pop........... 26720 30065 12.5 29139 -3.1 29288 0.5
Household Size......... 2.73 2.54 -6.9 2.51 -1.0 2.50 -0.4
</TABLE>
<TABLE>
<CAPTION>
1979 1989 % Chg 1996 %Chg 2001 % Chg
Income (Census) (Census) 79-89 (Est.) 89-96 (Proj.) 96-01
- ----------------------- --------- --------- -------- --------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate($MM)......... 6148 14354 133.5 22534 57.0 32116 42.5
Per Capita............. 7229 14573 101.6 20399 40.0 26665 30.7
Avg. Household......... 20088 37867 88.5 52313 38.1 67830 29.7
Median Hhold........... 16770 30261 80.4 40221 32.9 49591 23.3
Avg. Family HH......... 22802 44152 93.6 60869 37.9 77618 27.5
Med. Family HH......... 19640 36313 84.9 47663 31.3 58236 22.2
Avg. HH Wealth......... 131628 156431 18.8
Med. HH Wealth......... 60828 75040 23.4
</TABLE>
<TABLE>
<CAPTION>
----------------------------- Households -------------------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
- -------------------------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Total 375831 427771 469262
Less than $5,000.......... 25117 6.7% 18854 4.4% 15267 3.3%
$5,000 to $9,999........... 29264 7.8% 27170 6.4% 25083 5.3%
$10,000 to $14,999.......... 30974 8.2% 25251 5.9% 23730 5.1%
$15,000 to $19,999.......... 33955 9.0% 26582 6.2% 21950 4.7%
$20,000 to $24,999.......... 34078 9.1% 30660 7.2% 24932 5.3%
$25,000 to $29,999.......... 32619 8.7% 28692 6.7% 26013 5.5%
$30,000 to $34,999.......... 31528 8.4% 28800 6.7% 26821 5.7%
$35,000 to $39,999.......... 26798 7.1% 26546 6.2% 23484 5.0%
$40,000 to $44,999.......... 24603 6.5% 27852 6.5% 25804 5.5%
$45,000 to $49,999.......... 20250 5.4% 24315 5.7% 23270 5.0%
$50,000 to $59,999.......... 29819 7.9% 45062 10.5% 48615 10.4%
$60,000 to $74,999.......... 26085 6.9% 45054 10.5% 58247 12.4%
$75,000 to $99,999......... 16650 4.4% 39535 9.2% 61234 13.0%
$100,000 to $124,999......... 5814 1.5% 15744 3.7% 31340 6.7%
$125,000 to $149,999......... 2436 0.6% 7636 1.8% 14058 3.0%
$150,000 to $249,999......... 3603 1.0% 6147 1.4% 13323 2.8%
$250,000 to $499,999......... 1598 0.4% 2619 0.6% 4079 0.9%
$500,000 or More............. 640 0.2% 1252 0.3% 2012 0.4%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
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HealthCare Property Appraisers of America, Inc. 24
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
(MSA 5360) Nashville, TN
(Weight: 100.0%)
Senior Life Report (Page 1 of 7)
<TABLE>
<CAPTION>
--------------------Population Age 55 Years and Over--------------------
Population by Age and Sex 1990 1996 Estimate 2001 Proj.
- --------------------------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Population Age 55+..................... 182879 100.0% 215099 100.0% 249412 100.0%
55 to 59 .......................... 40818 22.3% 48138 22.4% 59823 24.0%
60 to 64 .......................... 37652 20.6% 41073 19.1% 47956 19.2%
65 to 69 .......................... 33768 18.5% 37453 17.4% 40090 16.1%
70 to 74 .......................... 26137 14.3% 32290 15.0% 35117 14.1%
75 to 79 .......................... 20374 11.1% 24223 11.3% 28406 11.4%
80 to 84 .......................... 13664 7.5% 16801 7.8% 19501 7.8%
85 +............................... 10466 5.7% 15121 7.0% 18519 7.4%
Males Age 55 .......................... 76897 42.0% 91663 42.6% 107584 43.1%
55 to 59 .......................... 19332 10.6% 23032 10.7% 28656 11.5%
60 to 64 .......................... 17282 9.4% 19203 8.9% 22617 9.1%
65 to 69 .......................... 14846 8.1% 16951 7.9% 18291 7.3%
70 to 74 .......................... 10771 5.9% 13638 6.3% 15277 6.1%
75 to 79 .......................... 7408 4.1% 9304 4.3% 11156 4.5%
80 to 84 .......................... 4453 2.4% 5579 2.6% 6771 2.7%
85 +............................... 2805 1.5% 3956 1.8% 4816 1.9%
Female Age 55 +........................ 105982 58.0% 123436 57.4% 141828 56.9%
55 to 59 .......................... 21486 11.7% 25106 11.7% 31167 12.5%
60 to 64 .......................... 20370 11.1% 21870 10.2% 25339 10.2%
65 to 69 .......................... 18922 10.3% 20502 9.5% 21799 8.7%
70 to 74 .......................... 15366 8.4% 18652 8.7% 19840 8.0%
75 to 79 .......................... 12966 7.1% 14919 6.9% 17250 6.9%
80 to 84 .......................... 9211 5.0% 11222 5.2% 12730 5.1%
85 +............................... 7661 4.2% 11165 5.2% 13703 5.5%
</TABLE>
<TABLE>
<CAPTION>
------------------------------ Population------------------------------
Population by Age and Sex 1990 1996 Estimate 2001 Proj.
- ---------------------------------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Total Population: ..................... 985026 100.0% 1104698 100.0% 1204436 100.0%
White Population ................. 820172 83.3% 917526 83.1% 1000126 83.0%
Age 65 and Over ................. 90415 9.2% 110622 10.0% 125281 10.4%
Black Population ................. 152649 15.5% 171133 15.5% 184850 15.3%
Age 65 and Over ................. 13646 1.4% 14825 1.3% 15760 1.3%
Asian Population ................. 10055 1.0% 13708 1.2% 16989 1.4%
Age 65 and Over ................. 227 0.0% 307 0.0% 449 0.0%
Am. Indian Population............. 2150 0.2% 2331 0.2% 2471 0.2%
Age 65 and Over ................. 121 0.0% 134 0.0% 143 0.0%
Hispanic Population ................ 7664 0.8% 10454 0.9% 13235 1.1%
Age 65 and Over ................. 343 0.0% 381 0.0% 513 0.0%
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 25
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
(MSA 5360) Nashville, TN
(Weight: 100.0%)
Senior Life Report (Page 2 of 7)
<TABLE>
<CAPTION>
Household Income by ---------------Households with Householder Age 55 and Over-------------
Age of Householder 1990 1996 Estimate 2001 Proj.
- ---------------------------------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 55 to 64. 46593 100.0% 49263 100.0% 58381 100.0%
Under $5,000.................... 3046 6.5% 1962 4.0% 1709 2.9%
$5,000-$9,999.......................... 3342 7.2% 2656 5.4% 2692 4.6%
$10,000-$14,999......................... 3571 7.7% 2572 5.2% 2606 4.5%
$15,000-$24,999......................... 7976 17.1% 6063 12.3% 5432 9.3%
$25,000-$34,999......................... 7147 15.3% 5972 12.1% 6162 10.6%
$35,000-$49,999......................... 8673 18.6% 8464 17.2% 8437 14.5%
$50,000-$74,999......................... 7590 16.3% 10903 22.1% 13179 22.6%
$75,000-$99,999......................... 2714 5.8% 5409 11.0% 8199 14.0%
$100,000-$149,999....................... 1430 3.1% 3586 7.3% 6796 11.6%
$150,000-$249,999....................... 672 1.4% 995 2.0% 2107 3.6%
$250,000-$499,999....................... 289 0.6% 442 0.9% 684 1.2%
$500,000 or More........................ 143 0.3% 239 0.5% 378 0.6%
Median Income ......................... 32501 44581 54083
Householder Age 65 to 69. 20876 100.0% 22369 100.0% 21846 100.0%
Under $5,000 ................... 2033 9.7% 1490 6.7% 1062 4.9%
$5,000-$9,999 .......................... 3286 15.7% 2872 12.8% 2283 10.5%
$10,000-$14,999 ........................ 2695 12.9% 2236 10.0% 2053 9.4%
$15,000-$24,999 ........................ 4399 21.1% 3959 17.7% 3179 14.6%
$25,000-$34,999 ........................ 2986 14.3% 2954 13.2% 2911 13.3%
$35,000-$49,999 ........................ 2621 12.6% 3191 14.3% 3020 13.8%
$50,000-$74,999 ........................ 1656 7.9% 2971 13.3% 3475 15.9%
$75,000-$99,999 ........................ 580 2.8% 1318 5.9% 1796 8.2%
$100,000-$149,999 ...................... 367 1.8% 956 4.3% 1399 6.4%
$150,000-$249,999 ...................... 160 0.8% 272 1.2% 468 2.1%
$250,000-$499,999 ...................... 62 0.3% 98 0.4% 134 0.6%
$500,000 or More ....................... 31 0.1% 52 0.2% 66 0.3%
Median Income ......................... 20510 27124 33059
Householder Age 70 to 74............... 17825 100.0% 19904 100.0% 20378 100.0%
Under $5,000 ................... 1860 10.4% 1416 7.1% 1093 5.4%
$5,000-$9,999 .......................... 3030 17.0% 2769 13.9% 2311 11.3%
$10,000-$14,999 ........................ 2310 13.0% 2067 10.4% 1996 9.8%
$15,000-$24,999 ........................ 3682 20.7% 3499 17.6% 2969 14.6%
$25,000-$34,999 ........................ 2484 13.9% 2594 13.0% 2676 13.1%
$35,000-$49,999 ........................ 2190 12.3% 2796 14.0% 2764 13.6%
$50,000-$74,999 ........................ 1313 7.4% 2502 12.6% 3145 15.4%
$75,000-$99,999 ........................ 466 2.6% 1126 5.7% 1610 7.9%
$100,000-$149,999 ...................... 295 1.7% 792 4.0% 1220 6.0%
$150,000-$249,999 ...................... 120 0.7% 223 1.1% 412 2.0%
$250,000-$499,999 ...................... 56 0.3% 84 0.4% 126 0.6%
$500,000 or More ....................... 19 0.1% 36 0.2% 56 0.3%
Median Income ......................... 19651 25775 31801
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 26
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
(MSA 5360) Nashville, TN
(Weight: 100.0%)
Senior Life Report (Page 3 of 7)
<TABLE>
<CAPTION>
Household Income by ---------------Households with Householder Age 55 and Over-------------
Age of Householder 1990 1996 Estimate 2001 Proj.
- ---------------------------------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 75 to 79. 13276 100.0% 16619 100.0% 19342 100.0%
Under $5,000.................... 2241 16.9% 2056 12.4% 1791 9.3%
$5,000-$9,999.......................... 3104 23.4% 3335 20.1% 3251 16.8%
$10,000-$14,999......................... 2075 15.6% 2295 13.8% 2646 13.7%
$15,000-$24,999......................... 2324 17.5% 2738 16.5% 3043 15.7%
$25,000-$34,999......................... 1336 10.1% 1744 10.5% 2217 11.5%
$35,000-$49,999......................... 1052 7.9% 1656 10.0% 2002 10.4%
$50,000-$74,999......................... 707 5.3% 1526 9.2% 2141 11.1%
$75,000-$99,999......................... 183 1.4% 608 3.7% 1083 5.6%
$100,000-$149,999....................... 133 1.0% 426 2.6% 764 3.9%
$150,000-$249,999....................... 68 0.5% 132 0.8% 253 1.3%
$250,000-$499,999....................... 34 0.3% 63 0.4% 95 0.5%
$500,000 or More........................ 19 0.1% 40 0.2% 56 0.3%
Median Income ......................... 13116 17277 21517
Householder Age 80 to 84. 9009 100.0% 11989 100.0% 13692 100.0%
Under $5,000 ................... 1547 17.2% 1498 12.5% 1292 9.4%
$5,000-$9,999 .......................... 2175 24.1% 2487 20.7% 2350 17.2%
$10,000-$14,999 ........................ 1401 15.6% 1674 14.0% 1920 14.0%
$15,000-$24,999 ........................ 1499 16.6% 1914 16.0% 2103 15.4%
$25,000-$34,999 ........................ 896 9.9% 1237 10.3% 1522 11.1%
$35,000-$49,999 ........................ 721 8.0% 1198 10.0% 1393 10.2%
$50,000-$74,999 ........................ 466 5.2% 1066 8.9% 1522 11.1%
$75,000-$99,999 ........................ 133 1.5% 429 3.6% 754 5.5%
$100,000-$149,999 ...................... 97 1.1% 332 2.8% 559 4.1%
$150,000-$249,999 ...................... 46 0.5% 88 0.7% 187 1.4%
$250,000-$499,999 ...................... 17 0.2% 42 0.4% 57 0.4%
$500,000 or More ....................... 11 0.1% 24 0.2% 33 0.2%
Median Income ......................... 12793 16753 21106
Householder Age 85+.................... 5916 100.0% 7948 100.0% 9894 100.0%
Under $5,000 ................... 1031 17.4% 1005 12.6% 936 9.5%
$5,000-$9,999 .......................... 1438 24.3% 1670 21.0% 1722 17.4%
$10,000-$14,999 ........................ 903 15.3% 1105 13.9% 1374 13.9%
$15,000-$24,999 ........................ 1006 17.0% 1289 16.2% 1546 15.6%
$25,000-$34,999 ........................ 577 9.8% 820 10.3% 1128 11.4%
$35,000-$49,999 ........................ 466 7.9% 785 9.9% 986 10.0%
$50,000-$74,999 ........................ 302 5.1% 686 8.6% 1084 11.0%
$75,000-$99,999 ........................ 85 1.4% 291 3.7% 533 5.4%
$100,000-$149,999 ...................... 59 1.0% 196 2.5% 393 4.0%
$150,000-$249,999 ...................... 30 0.5% 67 0.8% 123 1.2%
$250,000-$499,999 ...................... 15 0.3% 26 0.3% 50 0.5%
$500,000 or More ....................... 4 0.1% 8 0.1% 19 0.2%
Median Income ......................... 12708 16505 20918
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 27
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
(MSA 5360) Nashville, TN
(Weight: 100.0%)
Senior Life Report (Page 4 of 7)
<TABLE>
<CAPTION>
--------------------------Total Households-----------------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
- ---------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Total.................................. 375831 100.0% 427771 100.0% 469262 100.0%
Under $5,000.................... 25117 6.7% 18854 4.4% 15267 3.3%
$5,000-$9,999.......................... 29264 7.8% 27170 6.4% 25083 5.3%
$10,000-$14,999......................... 30974 8.2% 25251 5.9% 23730 5.1%
$15,000-$24,999......................... 68033 18.1% 57242 13.4% 46882 10.0%
$25,000-$34,999......................... 64147 17.1% 57492 13.4% 52834 11.3%
$35,000-$49,999......................... 71651 19.1% 78713 18.4% 72558 15.5%
$50,000-$74,999......................... 55904 14.9% 90116 21.1% 106862 22.8%
$75,000-$99,999......................... 16650 4.4% 39535 9.2% 61234 13.0%
$100,000-$124,999....................... 5814 1.5% 15744 3.7% 31340 6.7%
$125,000-$149,999....................... 2436 0.6% 7636 1.8% 14058 3.0%
$150,000-$249,999....................... 3603 1.0% 6147 1.4% 13323 2.8%
$250,000-$499,999....................... 1598 0.4% 2619 0.6% 4079 0.9%
$500,000 or More........................ 640 0.2% 1252 0.3% 2012 0.4%
Median Household Income ............... 30261 40221 49591
</TABLE>
<TABLE>
<CAPTION>
---------------Total Specified Owner-Occupied Housing Units--------------
Housing Value 1990 Census 1996 Estimate 2001 Proj.
- ---------------------------------------- ---------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Total Units............................. 186820 215305 237974
Less than $15,000................... 1926 1.0% 1842 0.9% 1768 0.7%
$15,000 to $19,999................. 1283 0.7% 863 0.4% 712 0.3%
$20,000 to $24,999................. 1922 1.0% 1387 0.6% 1010 0.4%
$25,000 to $29,999................. 2414 1.3% 1878 0.9% 1433 0.6%
$30,000 to $34,999................. 3696 2.0% 2322 1.1% 1851 0.8%
$35,000 to $39,999................. 4939 2.6% 3349 1.6% 2261 1.0%
$40,000 to $44,999................. 7076 3.8% 4320 2.0% 3136 1.3%
$45,000 to $49,999................. 8567 4.6% 5706 2.7% 3888 1.6%
$50,000 to $59,999................. 21455 11.5% 15524 7.2% 11031 4.6%
$60,000 to $74,999................. 38362 20.5% 31281 14.5% 24379 10.2%
$75,000 to $99,999................. 42454 22.7% 51510 23.9% 47911 20.1%
$100,000 to $124,999................. 18011 9.6% 35715 16.6% 42746 18.0%
$125,000 to $149,999................. 12133 6.5% 17544 8.1% 30946 13.0%
$150,000 to $174,999 ............... 7636 4.1% 12702 5.9% 16869 7.1%
$175,000 to $199,999................. 4385 2.3% 8859 4.1% 12792 5.4%
$200,000 to $249,999................. 4583 2.5% 9238 4.3% 15265 6.4%
$250,000 to $299,999 ............... 2325 1.2% 4356 2.0% 8152 3.4%
$300,000 to $399,999 ............... 1892 1.0% 3614 1.7% 5980 2.5%
$400,000 to $499,999 ............... 755 0.4% 1571 0.7% 2836 1.2%
$500,000 and over.................... 1006 0.5% 1724 0.8% 3008 1.3%
Median Housing Value.................... 76042 94016 111467
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 28
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
(MSA 5360) Nashville, TN
(Weight: 100.0%)
Senior Life Report (Page 5 of 7)
<TABLE>
<CAPTION>
Household Household
Type and Relationship Population 65+ Type and Relationship Population 65+.
- --------------------------------- ----------------- ------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Total............................ 104608 100.0%
In Family Households.......... 66605 63.7% In Nonfamily Hhlds ............ 31939 30.5%
Householder.................. 36070 34.5% Male Householder............ 5819 5.6%
Spouse....................... 22163 21.2% Living Alone............... 5450 5.2%
Other Relative............... 7966 7.6% Not Living Alone........... 369 0.4%
Nonrelative.................. 406 0.4% Female Householder.......... 25521 24.4%
Living Alone............... 24910 23.8%
In Group Quarters............. 6064 5.8% Not Living Alone .......... 611 0.6%
Institutionalized............ 5451 5.2% Nonrelative................. 599 0.6%
Other........................ 613 0.6%
</TABLE>
<TABLE>
<CAPTION>
------------------Spec. Owner-Occ Units-----------------
Monthly Owner Costs as a By Age of Householder
Percent of 1989 HH Inc. Total Units 65 Yrs+
- --------------------------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Total............................ 188249 100.0% 39300 100.0%
Less than 20%................. 103130 54.8% 25062 63.8%
20 - 24%...................... 29059 15.4% 3406 8.7%
25 - 29%...................... 19892 10.6% 2664 6.8%
30 - 34%...................... 11487 6.1% 1680 4.3%
35% or More................... 23409 12.4% 6057 15.4%
Not computed.................. 1272 0.7% 431 1.1%
</TABLE>
<TABLE>
<CAPTION>
------------------Spec. Renter-Occ Units-----------------
Gross Rent as Percent By Age of Householder
of 1989 HH Income Total Units 65 Yrs+
- --------------------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
Total............................ 134923 100.0% 16436 100.0%
Less than 20%................. 41842 31.0% 2691 16.4%
20 - 24%...................... 21136 15.7% 2100 12.8%
25 - 29%...................... 17343 12.9% 2721 16.6%
30 - 34%...................... 11520 8.5% 1867 11.4%
35% or More................... 35906 26.6% 5676 34.5%
Not computed.................. 7176 5.3% 1381 8.4%
</TABLE>
<TABLE>
<CAPTION>
------------------Occupied Housing Units-----------------
Attribute Total Hhldr 65+
- --------------------------------- ------------------------- --------------------
<S> <C> <C> <C> <C>
Owner Occupied Units............. 237606 63.2% 51855 75.4%
Rnter Occupied Units............. 138225 36.8% 16884 24.6%
Complete Plumbing Facil.......... 373485 99.4% 67774 98.6%
Lacking Plumbing Facil........... 2346 0.6% 965 1.4%
With Telephone................... 357309 95.1% 67163 97.7%
No Telephone..................... 18522 4.9% 1576 2.3%
One or More Vehicles............. 344788 91.7% 54477 79.3%
No Vehicles Available............ 31043 8.3% 14262 20.7%
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 29
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- --------------------------------------------------------------------------------
(MSA 5360) Nashville, TN
(Weight: 100.0%)
Senior Life Report (Page 6 of 7)
<TABLE>
<CAPTION>
Poverty Status by -------------------- 1990 Households by Age of Householder ------------------
Household Type Total Age 65-74 Age 75+
- --------------------------------------- ------------------------ ---------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Total ................................. 375849 100.0% 39032 100.0% 28378 100.0%
Married Couple Family............. 211442 56.3% 19894 51.0% 8819 31.1%
Other Family ..................... 54766 14.6% 4182 10.7% 3175 11.2%
Male Householder ............. 10373 2.8% 711 1.8% 453 1.6%
Female Householder............ 44393 11.8% 3471 8.9% 2722 9.6%
Nonfamily......................... 109641 29.2% 14956 38.3% 16384 57.7%
HHer Living Alone............... 92017 24.5% 14408 36.9% 15952 56.2%
HHer Not Living Alone........... 17624 4.7% 548 1.4% 432 1.5%
Above Poverty....................... 330883 88.0% 32881 84.2% 21031 74.1%
Married Couple Family............. 202315 53.8% 18718 48.0% 7908 27.9%
Other Family ..................... 40940 10.9% 3564 9.1% 2787 9.8%
Male Householder ............. 9273 2.5% 642 1.6% 371 1.3%
Female Householder............ 31667 8.4% 2922 7.5% 2416 8.5%
Nonfamily......................... 87628 23.3% 10599 27.2% 10336 36.4%
HHer Living Alone............... 72920 19.4% 10173 26.1% 10018 35.3%
HHer Not Living Alone........... 14708 3.9% 426 1.1% 318 1.1%
Below Poverty....................... 44966 12.0% 6151 15.8% 7347 25.9%
Married Couple Family............. 9127 2.4% 1176 3.0% 911 3.2%
Other Family ..................... 13826 3.7% 618 1.6% 388 1.4%
Male Householder ............. 1100 0.3% 69 0.2% 82 0.3%
Female Householder............ 12726 3.4% 549 1.4% 306 1.1%
Nonfamily......................... 22013 5.9% 4357 11.2% 6048 21.3%
HHer Living Alone............... 19097 5.1% 4235 10.9% 5934 20.9%
HHer Not Living Alone........... 2916 0.8% 122 0.3% 114 0.4%
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 30
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
(MSA 5360) Nashville, TN
(Weight: 100.0%)
Senior Life Report (Page 7 of 7)
<TABLE>
<CAPTION>
Civilian Noninstitutionalized Persons Age 16+
Mobility and Disability Total Age 65+ Age 75+.
- ---------------------------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Persons ................................ 748843 100.0% 99157 100.0% 39699 100.0%
With Mblty or Care Lmts.............. 47331 6.3% 22238 22.4% 13593 34.2%
Mobility Limits Only............... 16387 2.2% 9252 9.3% 5915 14.9%
Self Care Limits Only.............. 15718 2.1% 3885 3.9% 1498 3.8%
Both Limits ....................... 15226 2.0% 9101 9.2% 6180 15.6%
No Mblty or Care Limits.............. 701512 93.7% 76919 77.6% 26106 65.8%
With a Work Disability............... 86575 11.6% 37841 38.2%
In Labor Force .................... 21958 2.9% 1958 2.0%
Employed ......................... 19677 2.6% 1861 1.9%
Unemployed ....................... 2281 0.3% 97 0.1%
Not in Labor Force ................ 64617 8.6% 35883 36.2%
Prevented from Working............ 56171 7.5% 31707 32.0%
Not Prevented from Wrk ........... 8446 1.1% 4176 4.2%
No Work Disability .................. 662268 88.4% 61316 61.8%
In Labor Force .................... 505403 67.5% 12494 12.6%
Employed ......................... 482142 64.4% 12113 12.2%
Unemployed ....................... 23261 3.1% 381 0.4%
Not in Labor Force ................ 156865 20.9% 48822 49.2%
</TABLE>
- --------------------------------------------------------------------------------
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 31
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
(MSA 5360) Nashville, TN
(Page 1 of 2)
(Weight: 100.0%)
1990 Demographic Overview Report
<TABLE>
<S> <C> <C> <C> <C> <C>
Population 985026 Housing Units 410968 Median Age 32.5
Households 375849 Group Quarters 29960 Median HH Inc 30223
Families 266208 Avg. HH Size 2.54 Median Value 75892
Vehicles 665090
</TABLE>
<TABLE>
<CAPTION>
Income in 1989 Household Family Non-Family
- ---------------------------------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Less than $5,000..................... 25183 6.7% 10867 4.1% 14963 13.6%
$5,000 to $9,999..................... 29311 7.8% 12364 4.6% 17408 15.9%
$10,000 to $12,499..................... 16230 4.3% 8964 3.4% 7694 7.0%
$12,500 to $14,999..................... 14803 3.9% 8564 3.2% 6534 6.0%
$15,000 to $17,499..................... 18210 4.8% 10758 4.0% 7730 7.1%
$17,500 to $19,999..................... 15779 4.2% 9504 3.6% 6344 5.8%
$20,000 to $22,499..................... 18657 5.0% 11565 4.3% 7107 6.5%
$22,500 to $24,999..................... 15449 4.1% 10222 3.8% 5155 4.7%
$25,000 to $27,499..................... 18033 4.8% 12090 4.5% 5984 5.5%
$27,500 to $29,999..................... 14640 3.9% 10964 4.1% 3752 3.4%
$30,000 to $32,499..................... 18238 4.9% 13109 4.9% 4959 4.5%
$32,500 to $34,999..................... 13275 3.5% 10448 3.9% 2590 2.4%
$35,000 to $37,499..................... 14804 3.9% 11556 4.3% 3188 2.9%
$37,500 to $39,999..................... 11929 3.2% 9934 3.7% 1871 1.7%
$40,000 to $42,499..................... 14126 3.8% 11488 4.3% 2479 2.3%
$42,500 to $44,999..................... 10451 2.8% 8972 3.4% 1370 1.2%
$45,000 to $47,499..................... 11342 3.0% 9660 3.6% 1545 1.4%
$47,500 to $49,999..................... 8895 2.4% 7839 2.9% 910 0.8%
$50,000 to $54,999..................... 17010 4.5% 14901 5.6% 1864 1.7%
$55,000 to $59,999..................... 12772 3.4% 11378 4.3% 1277 1.2%
$60,000 to $74,999..................... 26074 6.9% 23455 8.8% 2308 2.1%
$75,000 to $99,999..................... 16586 4.4% 15028 5.6% 1303 1.2%
$100,000 to $124,999.................... 5801 1.5% 5165 1.9% 538 0.5%
$125,000 to $149,999.................... 2432 0.6% 2189 0.8% 231 0.2%
$150,000 or More........................ 5819 1.5% 5224 2.0% 537 0.5%
Aggregate Income ($Mil)................. 14211 11593 2508
Median Income .......................... 30223 35797 17694
Average Income ......................... 37810 43550 22877
</TABLE>
<TABLE>
<CAPTION>
Persons Persons
Educational Attainment 25 Yrs & Over Employment Status 16 Yrs & Over
- ---------------------------------- ----------------- ------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Less than 9th Grade ............. 64329 10.2% In Labor Force................. 528644 69.2%
9th - 12th Grade No Dip.......... 99750 15.8% Civilian ..................... 527361 9.1%
High School Graduate............. 183518 29.0% Employed .................... 501819 65.7%
Some College, No Degree.......... 120111 19.0% Male ....................... 267461 35.0%
Associate Degree ................ 29280 4.6% Female ..................... 234358 30.7%
Bachelor's Degree ............... 90117 14.3% Unemployed .................. 25542 3.3%
Graduate/Prof. Degree............ 45095 7.1% Not in Labor Force............. 235028 30.8%
</TABLE>
- -------------------------------------------------------------------------------
Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 32
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
(Page 2 of 2)
(MSA 5360) Nashville, TN
(Weight: 100.0%)
<TABLE>
<CAPTION>
Employed Employed
Industry Persons 16+ Occupation Persons 16+
- --------------------------------- ---------------- ------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
Agriculture/Forest/Fish ......... 7734 1.5% Managerial/Prof. Spec.......... 134714 26.8%
Mining........................... 666 0.1% Exec/Admin/Managerial......... 65784 13.1%
Construction..................... 31559 6.3% Prof. Speciality ............. 68930 13.7%
Manufacture-Nondurable........... 37987 7.6% Tech./Sales/Admin. Sup......... 171039 34.1%
Manufacture-Durable.............. 48631 9.7% Technician and Related........ 18297 3.6%
Transportation................... 23922 4.8% Sales......................... 66813 13.3%
Communication/Pub. Util.......... 13637 2.7% Administration Support........ 85929 17.1%
Wholesales Trade................. 25666 5.1% Service Occupation............. 60485 12.1%
Retail Trade..................... 86972 17.3% Private Household............. 1918 0.4%
Finance/Ins/Real Estate......... 38022 7.6% Protective Service............ 7432 1.5%
Business & Repair Serv........... 23134 4.6% Other Service................. 51135 10.2%
Personal Services................ 18156 3.6% Farming/Forestry/Fish.......... 7376 1.5%
Entertain/Recreation............. 8584 1.7% Precision/Craft/Repair......... 53950 10.8%
Professional & Related........... 113673 22.7% Operator/Fab./Laborer.......... 74255 14.8%
Health Services................. 45900 9.1% Mach.Op/Assem./Inspect........ 33748 6.7%
Educational Services............ 36019 7.2% Trans. & Material Move........ 20797 4.1%
Other Professional.............. 31754 6.3% Laborers...................... 19710 3.9%
Public Administration............ 23476 4.7%
</TABLE>
<TABLE>
<CAPTION>
Transportation to Work Workers 16+ Travel Time to Work Workers 16+
- ---------------------------------- ----------------- ----------------------- ------------------
<S> <C> <C> <C> <C> <C>
Drive Alone...................... 392161 79.1% Less than 10 Minutes... 72062 14.5%
Carpooled........................ 68543 13.8% 10 to 19 Minutes ..... 157372 31.7%
Public Transportation............ 8597 1.7% 20 to 29 Minutes ..... 112212 22.6%
All Other........................ 26416 5.3% 30 Minutes or More ... 154071 31.1%
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Units In Structure Housing Units Year Structure Built Housing Units
- ---------------------------------- ----------------- ------------------------------ -----------------
<C> <C> <C> <C> <C> <C>
1-Detached....................... 233288 62.1% 1989 To March 1990. ......... 9832 2.6%
1-Attached....................... 16718 4.4% 1985 To 1988 ................ 59747 15.9%
2................................ 20570 5.5% 1980 To 1984................. 41673 11.1%
3 or 4........................... 11358 3.0% 1970 To 1979................. 90797 24.2%
5 to 9........................... 18950 5.0% 1960 To 1969................. 67443 17.9%
10 To 19......................... 26798 7.1% 1950 To 1959................. 49871 13.3%
20 to 49......................... 14964 4.0% 1940 To 1949................. 24108 6.4%
50 or More....................... 10624 2.8% 1939 or before............... 32360 8.6%
Other............................ 22561 6.0% Median Year Built............ 1972
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Year Hhlder Moved In Housing Units Vehicles Available: Housing Units
- ---------------------------------- ----------------- ------------------------ ------------------
<S> <C> <C> <C> <C> <C>
1989 To March 1990............... 93198 24.8% None................... 31043 8.3%
1985 To 1988..................... 118218 31.5% 1...................... 121005 32.2%
1980 To 1984..................... 46946 12.5% 2...................... 153180 40.8%
1970 To 1979..................... 59417 15.8% 3...................... 51671 13.7%
1960 To 1969..................... 32298 8.6% 4...................... 14247 3.8%
1959 or Before................... 25754 6.9% 5 or More.............. 4685 1.2%
</TABLE>
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Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
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HealthCare Property Appraisers of America, Inc. 33
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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MARKET AREA AND NEIGHBORHOOD
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HealthCare Property Appraisers of America, Inc. 34
<PAGE>
Neighborhood Map
[MAP]
<PAGE>
Neighborhood
[PICTURES]
<PAGE>
Neighborhood
[PICTURES]
<PAGE>
Neighborhood
[PICTURES]
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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MARKET AREA and NEIGHBORHOOD
NEIGHBORHOOD
In most communities, there is a tendency toward the grouping of consistent
land uses. Areas devoted to the various uses are termed "physical
neighborhoods." Neighborhood use in this context can be further defined as
follows:
"A portion of a larger community, or an entire community, in which there is a
homogeneous grouping of inhabitants, buildings, or business enterprises.
Inhabitants of a neighborhood usually have a more than casual community of
interests and a similarity of economic level or cultural background.
Neighborhood boundaries may consist of well defined natural, political or
man-made barriers, or they may be, more or less, defined by distinct changes
in land use or in the character of the inhabitants."
Frank Ramsey of HealthCare Property Appraisers, Inc. made an inspection of the
subject property and its neighborhood on March 24, 1997. All comments should be
considered to be relative to the date of inspection.
The subject neighborhood is located approximately three miles southwest from the
center of the Central Business District of Gallatin, Tennessee. All of the
neighborhood lies within the municipal limits of Gallatin, which is considered
to be a bedroom community of Nashville, Tennessee, 20 miles southwest. We
consider the subject neighborhood to include the area lying south of East Camp
Creek, north of St. Blaise Road, east and west of the Gallatin city limits.
The area is primarily undeveloped in nature. The various property types found in
this neighborhood are distributed approximately as follows:
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<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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<TABLE>
<S> <C>
Single-Family 5%
Multifamily 5%
Commercial/Retail 10%
Institutional 10%
and Undeveloped 70%
----
Total 100%
</TABLE>
The single-family residential structures, which constitute approximately 5%
of the neighborhood, appear to be 20 to 40 years in age. Typical homes range
in size from 3,000 square feet to 5,000 square feet. Predominant home values
are in the $500,000 to $3,000,000 price range. Homes are well maintained and
exhibit considerable pride of ownership. Typical residents are considered to
be in a high income bracket and mixed in age. Owner occupancy in the
neighborhood is considered to be 100%. Typical single-family homes in this
area were large, stately homes, many associated with large tracts of open
pasture land along Nashville Pike (U.S. 31E). All are attractive and very
well maintained.
The multifamily properties, which make-up approximately 5% of this
neighborhood, are characterized as approximately 12 to 15 years in age and
well maintained. They serve a part of the multifamily market best described
as medium income tenants. The only multifamily property in the neighborhood
was located one-quarter mile northeast from subject on Nashville Pike. This
was a small, two-story, frame complex of good quality and condition. Ample
multifamily housing is available in Gallatin.
Retail structures constitute approximately 10% of the neighborhood and
consist of freestanding retail. They are well maintained and occupancy
appears to be full. Typical properties/tenants include a drive-in theater, a
modem auto dealership, an auto/convenience store, and other light retail
along Nashville Pike (U.S. 31E). More extensive retail shopping would be
available in downtown Gallatin.
Institutional structures represent approximately 10% of the neighborhood. The
only institutional structure in the neighborhood was the Volunteer State
Community College, a large, modern, brick campus adjoining subject on the
south and west sides. This structure is approximately 25 years in age and
well maintained. Churches of several denominations are within a five minute
drive of
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HealthCare Property Appraisers of America, Inc. 36
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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subject. The nearest hospital is Sumner Regional Hospital, which is located in
Gallatin, approximately three miles from subject.
The subject property is joined by undeveloped, cleared and wooded property
extending to the Gallatin city limits on its north side; a drive-in theater
across Nashville Pike on its south side; the Volunteer State Community College
campus on its west side; and a small, frame, single-family home and outbuildings
on its east side.
Streets in the neighborhood are primarily paved and do not have curbs, gutters,
and storm drains. The area receives water and sewer service from Gallatin.
Electricity, gas and telephone services are provided by local utility companies.
The subject property is considered to be in general conformity with other
properties in the neighborhood. The reputation of this area generally is
considered to be good.
The neighborhood has good access to major traffic arteries. The major traffic
artery through the area is the Nashville Pike, a four-lane highway between
Gallatin and Nashville.
Property values in the area appear to be stable. We expect that trend to
continue over the next few years. Neighborhoods generally evolve through a
pattern of growth and development. They evolve from vacant, unimproved land
through slow growth, steady to rapid growth, reach a built-up or stagnant phase,
and then begin to decline with various plateaus and modernization periods along
the way. In that continuum of growth, development and aging, the subject
neighborhood is currently considered to be in a very slow transition from rural
to a commercial strip along Nashville Pike. No current development was observed.
The proximity of the Office Complex to sources of labor at various skill levels
is important. Proximity to an educated, middle-class population facilitates
employment of professional nursing staff. The subject neighborhood's proximity
to technical or high-skilled medical personnel is considered to be good, with no
problem obtaining staff.
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HealthCare Property Appraisers of America, Inc. 37
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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Proximity to blue collar and low-income areas facilitate employment of low
skilled, minimum wage workers who make up the majority of a Office Complex's
staff. The subject neighborhood's proximity to a labor pool of low skilled,
minimum wage workers is considered to be good, with no problem obtaining staff.
In summary, this neighborhood is considered to be primarily a developing
suburban area with considerable undeveloped land.
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HealthCare Property Appraisers of America, Inc. 38
<PAGE>
SITE DATA
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<PAGE>
LEGAL DESCRIPTION
Map 136, Parcel 6.01, City of Gallatin, Sumner County, Tennessee.
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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SITE DATA
LOCATION: The Cedarbrook Rebound Facility site is located at 1400 Nashville
Pike, approximately three miles southwest from the central business district of
Gallatin, Tennessee.
PHYSICAL CHARACTERISTICS: The subject is an interior lot. It has approximately
800 front feet along the north side of Nashville Pike, is triangular in shape,
and contains approximately 6.95 acres of gross area, based on public records.
ZONING: According to Mr. John Crowder of the Gallatin Zoning Commission, the
subject property is zoned R-6 High Density Residential. This zoning
classification generally permits multi-family and one and two family homes. The
subject's developers won a suit against the City of Gallatin at the time of
construction -enabling them to construct this facility. The subject improvements
are considered to be a legal non-conforming use.
TOPOGRAPHY: The subject site lies at street grade. General area topography is
slightly rolling and the subject site is basically level. This tract is cleared
and drainage appears adequate.
SOIL ANALYSIS: Mineral deposits, if any, were disregarded by the appraiser. No
soil analysis has been prepared as a part of this report. However, considering
the number and type of existing improvements on surrounding sites, it is assumed
the subject property has sufficient soil bearing qualities for any type building
or construction that might be contemplated thereon. Soil and subsoil appear to
be the red clay typically found in this part of Tennessee. It is assumed that
soils at the site are generally of medium plasticity, with shrink/swell
potential typical of the area. Soil conditions in this part of Gallatin have
apparently not had a limiting effect on land development.
EASEMENTS AND ENCROACHMENTS: Our site inspection of The Cedarbrook Rebound
Facility revealed no adverse easements or encroachments. This property is
subject to typical street and utility easements. However, we would defer to
competent legal counsel for verification of those and all other legal matters.
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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ACCESS: Access to the site is considered good. It has one access point from
Nashville Pike, a paved, four lane highway. Access is into extensive, paved
parking and service drives to all buildings. Traffic on Nashville Pike is not
heavy enough to impede access to subject.
VISIBILITY: The site's visibility is rated good from Nashville Pike, as the site
and subject building directly adjoin with no intervening obstructions.
DRAINAGE/FLOOD ZONE: According to the County Assessor's Office, the subject
property is not located within a designated HUD Flood Hazard zone.
TAXES According to Ms. Perry at the Trustee's Office, the subject property's
real estate is assessed at $271,840 which is 40% of the reported tax value. The
tax rate for the combined city and county is $4.29 per $100. This would indicate
a tax burden for the subject real estate of $1l,661.90 calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Real Estate Tax Assessment X Tax Rate = Annual Taxes
- -------------------------- -------- ------------
$271,840 X $0.0429 = $11,661.94
</TABLE>
UTILITIES: The site is served by all municipal utilities and services including
water, sewage, police, and fire protection. Gas, telephone and electricity are
provided by public utility firms.
TRAFFIC ARTERIES: The site has good proximity to major traffic arteries. It
fronts on Nashville Pike (U.S. 31E), a four lane traffic artery/highway between
Gallatin and Nashville, Tennessee.
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HealthCare Property Appraisers of America, Inc. 41
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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HIGHEST AND BEST USE
The Highest and Best Use of land is defined as being that use which may be
reasonably expected to produce the greatest net return to the land over a given
period of time. It is that legal use which will yield to the land the highest
present value which is economically feasible, legally permissible, and maximally
productive.
The appraiser considered several alternative uses for the land underlying The
Cedarbrook Rebound Facility. No alternative utilization other than for a Office
Complex was considered likely to give a higher return in the immediate future.
Therefore, the use contemplated by our study; i.e., Office Complex use, is
considered to be in conformity with the subject property's Highest and Best Use.
The Highest and Best Use analysis is the basis for the final conclusions drawn
in this report. Land is valued as though it were unimproved and available for
whatever use would produce the maximum return. Improved property is valued on
the basis of the extent to which the improvements are consistent with or in
conflict with the Highest and Best Use of the site as if unimproved. In cases
where a site has existing improvements, the Highest and Best Use of the total
property "as improved" is quite often determined to be different from the
Highest and Best Use of the land when considered as though unimproved and
available for development. In the majority of cases, the existing use will
continue until the land value under its Highest and Best Use exceeds the total
value of the property in its existing use. As long as the improvements
contribute to the land, it is the Highest and Best Use.
The definition of Highest and Best Use given above sets forth the steps taken by
the appraiser in developing the Highest and Best Use of the subject property:
identification of the various reasonable, probable and legal uses; testing of
the physical possibility of such uses; testing of the strength of appropriate
support in the market for such uses; and testing of the financial feasibility of
those uses which survive the prior tests to determine that use which will result
in the optimum return.
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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Highest and Best Use - Unimproved
Those legal uses for the subject land, if unimproved, would include: Apartments,
Retirement Apartments and Single-family Residential.
The physical characteristics of this site, i.e., size, shape, terrain, etc.
would permit the following uses: Apartments, Retirement Apartments, Offices,
Commercial Retail, Institutional, Motel, Nursing Home, Single-family
Residential, Condominiums, Agricultural, and Office Complex.
The appraiser next tested the existence of appropriate support in the market
place for all of the uses which met the two previous tests. Our market analysis
indicates there is sufficient demand in the general market place and in this
specific location for the following uses: Apartments, Institutional, Office,
Commercial Retail, and Office Complex.
Finally, the appraiser analyzed the financial feasibility of those uses passing
the previous tests and determined that the following were economically feasible:
Apartments, Commercial Retail, Office and Office Complex.
The most probable and reasonable uses for the subject property, if unimproved,
might include development of: Apartments, Commercial Retail, Corporate Office,
Institutional (College) and Office Complex.
When considering the subject site as an unimproved tract of land, and after
considering all alternative uses, it is the appraiser's opinion that Office
Complex use would be the Highest and Best Use (a) at this time, (b) after a time
period sufficient to allow completion of any necessary improvements, and (c) at
the time of estimated stabilized occupancy.
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HealthCare Property Appraisers of America, Inc. 43
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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DESCRIPTION OF IMPROVEMENTS
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HealthCare Property Appraisers of America, Inc. 44
<PAGE>
Floor Plan
[PICTURE]
<PAGE>
SUBJECT
[PICTURES]
<PAGE>
SUBJECT
[PICTURES]
<PAGE>
SUBJECT
[PICTURES]
<PAGE>
SUBJECT
[PICTURES]
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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DESCIPTION OF IMPROVEMENTS
Frank Ramsey of HealthCare Property Appraisers of America, Inc. made an
inspection of the subject property on March 24, 1997. The following description
of improvements the buildings as they appeared to our inspector on the date of
inspection.
SUBJECT IMPROVEMENTS
The subject site is improved with four one-story buildings formerly utilized as
The Cedarbrook Rebound Facility and presently vacant. The structure's initial
completion date is 1985. The appraiser considers the subject building structures
to contain a functional area of approximately 42,350 sf or 1059 sf per bed. The
buildings were formerly utilized as (1) an administration and therapy building,
(2) two connected apartment buildings, (3) a residents building, and (4) a
kitchen/dining building. All are of similar construction and architecture.
The administration/education building contains mostly office type space. There
is also an in ground heated swimming pool outside this building. The residential
buildings contain resident bedrooms and meeting rooms. The structures have a
total possible utilization of 40 beds but are configured for 40 beds.
The subject's physical structure appears to be of good quality construction and
amenities. No Physical Deterioration-Curable (deferred maintenance) was
observed. The structure contains some Functional Obsolescence in its special
purpose layout. There is also some External Obsolescence due to the remoteness
of this site from town.
The Effective Age of the structure is 12 years, and the Remaining Economic Life
is considered to be 38 years.
In all of our analysis, we have assumed and have described the subject
improvements as being Special Purpose buildings. That assumption is based upon
not only the building improvements
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<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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but also the surrounding area. In fact, the building improvements are not so
Special Purpose as to preclude alternative uses. Almost any type of medical
facility would find these buildings quite adaptable. Furthermore, a general
office user could also utilize this space with substantial rehab o the interior.
There is little or nothing about the interior of these structures to preclude
utilization by a commercial enterprise. However, the limited demand for this
type space in this location is a problem.
Following is a topical outline of the major improvements:
SITE PREPARATION: The building site was cleared, graded and prepared for
construction.
FOUNDATION: Foundation is concrete bearing walls.
FRAME: The frame is mill-type wood.
FLOOR STRUCTURE: The floor structure is concrete on ground.
FLOOR COVERING: Floor covering consists of carpet on pad and vinyl composition
tile.
CEILING: The ceiling is gypsum board, taped and painted with insulation.
INTERIOR CONSTRUCTION: Interior construction is framed.
PLUMBING: All patient bathrooms are two- or three-fixtured china/porcelain
fixtures including chrome hardware, grab bars and other invalid aids. Individual
bathtubs and showers feature non-slip surfaces, grab bars, shower hoses and
non-ambulatory lifts. The property's plumbing is adequate. Eleven rooms has a
rooms have a full private bath with a tub or shower.
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HealthCare Property Appraisers of America, Inc. 46
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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HEATING, COOLING, VENTILATION: The property is heated with a heat pump which
also provides air conditioning. Additionally, the residents' rooms are air
conditioned with thru-the-wall heat pump units with electrical resistance
heating coils.
ELECTRICAL: Fully wired and lighted with three-phase wiring, adequate to provide
lighting and power for all equipment operation including fluorescent and
incandescent lighting, reading lights over each bed, nurse call system, fire
alarm system, and intercom system.
EXTERIOR WALLS: Exterior walls are wood or steel stud walls with face brick
veneer and insulation.
ROOF STRUCTURE: The roof structure is wood joists with composition deck.
ROOF COVER: Roof cover is composition shingle.
PARKING: Parking and drives of 2" plant mix asphalt on a crushed stone base.
Marked parking areas.
DOORS & WINDOWS: Interior doors are solid core; windows are single-hung, slider
type in aluminum frame.
EQUIPMENT: Some specialized equipment was present but was not considered in
valuing the subject property. Included in this category are institutional
kitchen equipment, stainless steel sinks, food preparation counters, ovens,
stoves, dishwashers, walk-in coolers and freezers, exhaust fans and grease
traps. Laundry equipment includes two domestic brand washers and two domestic
dryers rated good in condition.
The main kitchen is in the resident building. Kitchen equipment includes one
Hobart dishwasher, one Hobart walk-in freezer, one Hobart walk-in cooler and one
Vulcan range/oven rated good in condition. There are also kitchens in each
apartment (4) and a rehabilitation
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HealthCare Property Appraisers of America, Inc. 47
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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training kitchen in the Administration/Therapy building. All are equipped with
residential type stoves, refrigerators and dishwashers.
ROOM FURNISHINGS: Include a bed, night stand, chair and retractable privacy
curtain.
WALKS & DRIVES: Walks are approximately 41" wide and constructed of 2 1/2"
concrete.
LANDSCAPING: Rated good. The lawn is well established. There is a 20' x 30'
concrete pool adjoining the Administration/Therapy building.
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HealthCare Property Appraisers of America, Inc. 48
<PAGE>
COST APPROACH TO VALUE
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<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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COST APPROACH TO VALUE
The Cost Approach is frequently a reliable indicator of a property's value. The
Principle of Substitution dictates that The Cedarbrook Rebound Facility will be
worth no more than the cost to reproduce improvements with equal utility on an
equally desirable site. Conversely, in an active building market, most
properties are usually worth at least as much as their cost to reproduce.
Otherwise, developers would not be building comparable buildings.
The initial step in the Cost Approach was the estimation of land value. The
appraiser next estimated the current construction costs to replace subject's
building improvements. The appraiser also considered the possible existence of
the three types of depreciation: Physical Deterioration, Functional
Obsolescence, and External Obsolescence.
To estimate the actual construction cost of the improvements, the appraiser
consulted with various contractors and architects familiar with this type
construction. We also have personal knowledge of comparable structures which
have been built and are familiar with their actual costs. Finally, we checked
with Marshall and Swift Valuation Service to ascertain the current cost factors
for this type construction in Gallatin.
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HealthCare Property Appraisers of America, Inc. 50
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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Site Valuation
There are several methods which appraisers may use to estimate vacant land
values. These methods include the direct sales comparison, allocation, land
residual technique, direct capitalization of ground rent, and the land
development method. The direct sales comparison method is based upon the
principle of substitution. This is the best method whenever adequate quantities
of verified comparable sales data is available. We have used both the direct
sales comparison and allocation methods. For Office Complex sites, the land
residual or land development methods are not a reliable indicator of value.
Direct Sales Comparison
The direct sales comparison technique is based on the economic principle of
substitution. This principle states the value of a property tends to be fixed by
the costs of acquiring an equally desirable substitute property with the same or
similar utility and physical characteristics. Comparisons are made between the
property appraised and the sales of similar properties which have occurred in
the marketplace. Typically, units of comparison are derived such as a sales
price per square foot, sales price per front foot, or sales price per building
unit. In the case of an apartment property, the economic indicator might be cost
per apartment, whereas in the case of a nursing home, the unit of value would be
cost per patient bed. The comparables are adjusted to reflect similarities and
dissimilarities of each to the subject for such characteristics as location,
time of sale, existing market conditions, and the physical characteristics of
the property. The adjusted sales prices of the comparables then become an
indication of value for the subject. In the case of the subject, we have looked
to properties with similar zoning and land use which have sold within the
Gallatin area.
The comparable sales utilized in this analysis are summarized in the land sales
summary and the adjustment grid which follow this section. A complete
description of the individual sales used is also included within this section.
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HealthCare Property Appraisers of America, Inc. 51
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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LAND SALE #1
<TABLE>
<S> <C>
LOCATION: Hancock Street
LEGAL DESCRIPTION: Map 126J B, Parcel 1 p/o
BUYER: D & F Properties
SELLER: Redman Products
CONFIRMATION: Deed Book 606, Page 634
DATE OF SALE: 07/01/96
SIZE: 13.35 Acres
SALE PRICE: $200,000
COST/UNIT: $14,981 Acre
COMMENTS: This property is southeast of the Subject property and is in the
process of being developed for office type use.
</TABLE>
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HealthCare Property Appraisers of America, Inc. 52
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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LAND SALE #2
<TABLE>
<S> <C>
LOCATION: Belvedere Dr. & Nashville Pike
LEGAL DESCRIPTION: Map 1261 A, Parcel 25
BUYER: WalMart
SELLER: Green and Little
CONFIRMATION: Deed Book 617, Page 285
DATE OF SALE: 08/09/96
SIZE: 22.25 Acres
ZONING: Commercial
SALE PRICE: $2,113,845
COST/UNIT: $95,000 Acre
COMMENTS: This property is located 1 1/2 miles northeast of Cedarbrook.
</TABLE>
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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LAND SALE #3
<TABLE>
<S> <C>
LOCATION: Red River Road
LEGAL DESCRIPTION: Map 113P, Parcel 17
BUYER: Chandler and Parker
SELLER: Billy Joe Spurlock
CONFIRMATION: Deed Book 646, Page 38
DATE OF SALE: 11/15/96
SIZE: 9 Acres
SALE PRICE: $250,000
COST/UNIT: $27,777.78 Acre
COMMENTS: Property is located northeast of subject and to be developed as
a trailer park site.
</TABLE>
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HealthCare Property Appraisers of America, Inc. 54
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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LAND SALE #4
<TABLE>
<S> <C>
LOCATION: Green Wave Drive
LEGAL DESCRIPTION: Map 126 J B, Parcel 10, 11, 12, 13, 15 p/o
BUYER: Summer Co. Board of Education
SELLER: Southwest Developers
CONFIRMATION: Deed Book 271, Page 40
DATE OF SALE: 08/07/92
SIZE: 30.885 Acres
ZONING: Commercial
SALE PRICE: $318,000
COST/UNIT: $10,296 Acre
COMMENTS: This property is three miles southeast of subject property near
the high school and several apartment complexes.
</TABLE>
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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LAND SALE #5
<TABLE>
<S> <C>
LOCATION: Nashville Pike
LEGAL DESCRIPTION: Plat Book 15, Page 259
BUYER: James D. Owen
SELLER: E. C. Branham, Jr.
CONFIRMATION: Deed Book 543, Page 571
DATE OF SALE: 10/19/95
SIZE: 1.89 Acres
SALE PRICE: $40,000
COST/UNIT: $21,164
COMMENTS: This is a small tract located three miles southwest of subject
property.
</TABLE>
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HealthCare Property Appraisers of America, Inc. 56
<PAGE>
LAND SALES SUMMARY & ADJUSTMENT GRID
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Comparison # Subject No. 1 No. 2 No. 3 No. 4 No. 5
Address Nashville PK Hancock St Belvedere & Red River Green Nashville PK
Nashville PK Wave Dr
Gallatin, TN Gallatin, TN Gallatin, TN Gallatin, TN Gallatin, TN Gallatin, TN
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SITE DATA:
Size (SF) 302,742 581,526 969,210 392,040 1,345,351 82,328
Size (Acres) 6.95 13.35 22.25 9.00 30.89 1.89
Topography Level Level Level Level Level Level
Utilities All All All All All All
SALE DATA:
Reported Sale Price $200,000 $2,113,845 $250,000 $318,000 $40,000
Sale Price / SF $0.00 $0.34 $2.18 $0.64 $0.24 $0.49
Sale Price / Acre $0 $14,981 $95,004 $27,778 $10,296 $21,164
Transaction Type ---- Closed Closed Closed Closed Closed
Rights Conveyed ---- Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple
Financing Terms ---- Cash Cash Cash Cash Cash
adjstmnt ---- ---- ---- ---- ---- ---
Condition of Sale ---- Arm's Arm's Arm's Arm's Arm's
Length Length Length Length Length
---- ---- ---- ---- ----
Recorded Sale Date 7/96 8/96 11/96 8/92 10/95
adjstmnt ---- ---- ---- ---- 10% ----
Location ---- Superior Inferior Superior Superior Superior
adjstmnt ---- 50% -65% 25% 100% 25%
Size ---- Similar Similar Similar Similar Similar
adjstmnt ---- ---- ---- ---- ---- ----
Zoning ---- Similar Similar Similar Similar Similar
adjstmnt ---- ---- ---- ---- ---- ----
Topography ---- Similar Similar Similar Similar Similar
adjstmnt ---- ---- ---- ---- ---- ----
Corner ---- Similar Similar Similar Similar Similar
adjstmnt ---- ---- ---- ---- ---- ----
Utilities ---- Similar Similar Similar Similar Similar
adjstmnt ---- ---- ---- ---- ---- ----
Adjstd Price/Sq Ft $0.52 $0.76 $0.80 $0.52 $0.61
Avg Price/Sq Ft $0.65
Adjstd Price/Acre $22,472 $33,251 $34,722 $22,652 $26,455
Avg Price/Acre $28,274
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</TABLE>
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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Reconciliation of Comparable Sales
The comparables have already been adjusted to the subject in respect to
location, size, zoning, topography, corner influence, and utilities. The
unadjusted sales prices range from $14,981 to $95,004 per acre. After the
adjustments, the comparables form a tighter range of $22,472 to $34,722 per
acre. The average adjusted price per acre was $28,274. Typically, the
comparables which have the least adjustments are most representative of the
subject. Accordingly, it is our opinion that the subject 6.95 acres site has a
market value of $200,000 or $28,777 per acre.
SITE VALUE $200,000
---------
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HealthCare Property Appraisers of America, Inc. 58
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
Building Costs
This appraisal firm compiles construction cost data on new and proposed
facilities throughout the United States. The hard construction costs vary
considerable depending upon geographical location and quality of improvements.
To estimate the Replacement Cost of The Cedarbrook Rebound Facility, the
appraiser utilized the Segregated Cost Method of cost estimating. This method is
designed to give separate consideration to all the major construction components
of a building. Many parts of a building, such as floor, ceiling and lighting,
increase in cost directly as the floor area of the building increases. Other
building costs vary with relation to parameters other than the floor area.
However, most costs can be related to floor area, wall area, roof area, or
sometimes an individual count of unit installations.
To facilitate the application of these individualized costs, they are grouped so
that all costs related to floor area can be added together and applied to the
total floor area, all wall area costs can be added together and applied to the
wall area, and all roof costs can be applied to the ground floor or roof area.
The appraiser utilized the Marshall and Swift Valuation Service, which is the
most widely recognized cost estimating manual in the world. This manual
separates each type of building by occupancy, type of construction, and quality.
It also makes adjustments for current cost factors on a monthly update basis.
Using the Marshall and Swift Valuation Service, the appraiser selected the
particular construction characteristics of The Cedarbrook Rebound Facility
building improvements and selected the appropriate quantity cost factors and
adjustments.
Using the computer program, a Replacement Cost New of subject's building
improvements as well as individual estimates of depreciation for each component
item were developed. The computer calculations included all Direct Costs. The
Marshall and Swift Valuation Service includes
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 59
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
architectural fees, loan interest and some other minor Indirect Costs. It
specifically excludes some of the costs of doing business, or Indirect Costs,
which we have estimated as follows:
<TABLE>
<S> <C>
Taxes 0.4%
Marketing 0.4%
Loan Points and Fees 2.0%
Legal 0.5%
Accounting 0.2%
----
Total Indirect Costs 3.5%
</TABLE>
Our estimate of Indirect Costs were based on a percentage of Total Cost-New
(depreciated at the same rate as the building improvements). The Total Cost-New
includes not only Direct Cost of construction, as developed by the Marshall and
Swift Valuation Service, but also the cost of land.
Our on-site inspection of The Cedarbrook Rebound Facility did not reveal any
obvious Physical Deterioration-Curable (deferred maintenance). Overall, the
property appeared to be well maintained and only normal maintenance situations
were observed. The subject building improvements undoubtedly contain some
functional and/or external obsolescence. The buildings contain, to some extent,
Special Purpose improvements. Medical buildings generally contain an excess of
electrical and plumbing not found in general purpose buildings. A potential user
may not be able or willing to work with the specific office layouts or the room
configuration in the residential buildings. Therefore, a potential buyer would
probably make some discount in price to reflect the inefficiency of the room
layout and excess finish work found in the subject buildings. Additionally,
there is probably not a strong demand for medical type users in this specific
location. The most likely user, the adjoining college or a general office
occupant moving from Nashville to the "suburbs" would undoubtedly apply a
discount to reflect the inherent inefficiencies and excesses created by the
subject's obsolescence.
How much the typical buyer would discount the property would depend upon his
specific situation. Therefore, there is no way to accurately measure functional
and/or external obsolescence of this
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 60
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
specific property in this specific location. After reviewing the experience of
other sellers of Special Purpose Properties in our Sales Comparison Approach, we
have made a judgement that the combination of functional obsolescence and
external obsolescence in the subject property is approximately 50%. [It is our
opinion that the probability of obtaining a purchaser/user of the subject
property who will allocate considerable value to the building shell without
making substantial discount for functional and/or external obsolescence is rated
good.]
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 61
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
SECTION 1:
OCCUPANCY: OFFICE BUILDING
CLASS: D Frame COST RANK: 3.5 Above Average/High
EFFECTIVE AGE: 12 YEARS CONDITION: 3.5 Good
NUMBER OF STORIES: 1.0 AVERAGE STORY HEIGHT: 10.0
FLOOR AREA: 21,175 Sq. Ft. COST AS OF: 3/97
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------REPLACEMENT
COMPONENT UNITS COST COST
NEW
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOUNDATION:
Concrete, Bearing walls .................... 21,175 1.89 40,021
FRAME:
Wood, Mill Type ............................ 21,175 4.18 88,511
FLOOR STRUCTURE:
Concrete on Ground ......................... 21,175 3.15 66,701
FLOOR COVER:
Carpet and Pad ............................. 8,470 4.08 34,558
Tile, Ceramic .............................. 1,059 9.40 9,952
Vinyl Composition Tile ..................... 11,646 1.70 19,799
SUBTOTAL 64,309
CEILING:
Gypsum Board, Taped & Paint ................ 21,175 1.31 27,739
Ceiling Insulation ......................... 21,175 0.65 13,764
SUBTOTAL 41,503
INTERIOR CONSTRUCTION:
Interior Construction, Framed.............. 21,175 18.52 392,161
PLUMBING:
Plumbing ................................... 21,175 6.06 128,320
HEATING AND COOLING:
Heat Pump .................................. 19,057 8.24 157,034
ELECTRICAL:
Electrical ................................. 21,175 10.35 219,161
Standby Generator,Diesel ................... 100 333 33,300
SUBTOTAL 252,461
EXTERIOR WALL:
Face Brick Veneer .......................... 14,822 16.95 251,241
Insulation ................................. 14,822 0.56 8,301
SUBTOTAL 259,542
ROOF STRUCTURE:
Wood Joists, Composition Deck.................. 21,175 4.63 98,040
ROOF COVER:
Composition Shingle 21,175 1.55 32,821
- -------------------------------------------------------------------------------------------------------
TOTAL ......................................... 1,621,424
ARCHITECT'S FEES............................... 6.7% 109,446
- -------------------------------------------------------------------------------------------------------
REPLACEMENT COST NEW........................... 21,175 81.74 1,730,870
- -------------------------------------------------------------------------------------------------------
</TABLE>
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HealthCare Property Appraisers of America, Inc. 62
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
SECTION 2:
OCCUPANCY: APARTMENT
CLASS: D Frame COST RANK: 3.5 Above Average/High
EFFECTIVE AGE: 12 YEARS CONDITION: 3.5 Good
NUMBER OF STORIES: 1.0 AVERAGE STORY HEIGHT: 10.0
FLOOR AREA: 21,175 Sq. Ft. COST AS OF: 3/97
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------REPLACEMENT
COMPONENT UNITS COST COST
NEW
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EXCAVATION & SITE PREPARATION:
Site Preparation............................ 21,175 0.21 4,447
FRAME:
Wood, Mill Type............................. 21,175 3.79 80,253
FLOOR STRUCTURE:
Concrete on Ground.......................... 21,175 2.98 63,101
FLOOR COVER:
Carpet and Pad.............................. 10,588 3.47 36,739
Tile, Ceramic............................... 1,059 8.76 9,275
Vinyl Composition Tile...................... 9,529 1.60 15,246
SUBTOTAL....................................... 61,260
CEILING:
Gypsum Board, Taped & Paint................. 21,175 1.26 26,680
Ceiling Insulation.......................... 21,175 0.72 15,246
SUBTOTAL....................................... 41,926
INTERIOR CONSTRUCTION:
Interior Construction, Framed............... 21,175 13.44 284,592
PLUMBING:
Plumbing.................................... 21,175 6.12 129,591
FIRE PROTECTION:
Sprinklers.................................. 14,000 2.33 32,620
HEATING AND COOLING:
Heat Pump................................... 7,500 6.06 45,450
Window Heat Pump............................ 11 1,396 15,356
SUBTOTAL....................................... 60,806
ELECTRICAL:
Electrical.................................. 21,175 5.03 106,510
EXTERIOR WALL:
Face Brick Veneer........................... 14,822 15.76 233,603
Insulation.................................. 14,822 0.52 7,708
SUBTOTAL....................................... 241,311
ROOF STRUCTURE:
Wood Joists, Composition Deck............... 21,175 4.31 91,264
ROOF COVER:
Composition Shingle......................... 21,175 1.42 30,068
SUBTOTAL SUPERSTRUCTURE........................ 21,175 57.98 1,227,749
</TABLE>
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HealthCare Property Appraisers of America, Inc. 63
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------REPLACEMENT
COST
COMPONENT UNITS COST NEW
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
YARD IMPROVEMENTS:
Paving, Asphalt............................. 120,000 2.06 247,200
- -------------------------------------------------------------------------------------------------------
TOTAL ......................................... 1,474,949
ARCHITECT'S FEES .............................. 6.9% 101,526
- -------------------------------------------------------------------------------------------------------
REPLACEMENT COST NEW........................... 21,175 74.45 1,576,475
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY TOTAL COST NEW
- ----------------------------------------------------------------------------------
<S> <C>
1: OFFICE BUILDING 1,730,870
2: APARTMENT 1,576,475
TOTAL COST..................................... 3,307,345
- ----------------------------------------------------------------------------------
ROUNDED TO NEAREST $100 3,307,300
Cost Data by MARSHALL & SWIFT
</TABLE>
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HealthCare Property Appraisers of America, Inc. 64
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
SUMMARY OF COST APPROACH
<TABLE>
<S> <C> <C>
Bldg.Improvements-Replacement Cost $3,307,300
Indirect Costs 122,756
-----------
Total Costs: $3,430,056
Less Depreciation:
Physical Deter.-Curable $0
Physical Deter.-Incurable-
Replacement Costs 0
Physical Deter.-Incurable-
Indirect Costs 0
Functional Obsolecentce & External
Obsolescence @ 50% 1,715,028
------------
Total Depreciation 1,715,028
-----------
Depreciated Value $1,715,028
Land Value $200,000
-----------
Market Value--Real Estate $1,915,028
Add Furniture, Fixtures, & Equipment $0
Less Depreciation 0
Depreciated Value of FF&E $0
MARKET VALUE OF REAL & PERSONAL
PROPERTY By Cost Approach -- "As Is" $1,915,028
(R) $1,920,000
-----------
-----------
</TABLE>
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HealthCare Property Appraisers of America, Inc. 65
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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INCOME CAPITALIZATION APPROACH TO VALUE
---------------------------------------------
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 66
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
INCOME CAPITALIZATION APPROACH TO VALUE
To estimate the Market Value of The Cedarbrook Rebound Facility through the
Income Capitalization Approach, the appraiser attempted to project the income
the subject might generate by a lease to other healthcare and non-healthcare
users.
A major underlying premise of the Income Capitalization Approach holds that
the subject property can be rented. This premise assumes a viable rental
market sufficient to develop rates of: (1) rental, (2) occupancy, (3) expenses
and (4) capitalization. We were unable to develop sufficient data to process
a convincing Income Approach to Value. The absence of sufficient data to
develop an Income Approach suggests the buyers for this type property are
users rather than investors seeking an income stream. This tends to
invalidate the use of the Income Approach for this appraisal. Both the lack
of market rental data and the available sales data on this type property
suggest that the most likely purchaser will be an owner/occupant not an
investor buying for income. It was not deemed helpful to develop and analyze
rental data in great detail. However as a check against the other two
approaches to value, an overview of rental possibilities and alternatives was
considered to see what return and capitalized value might be expected if in
fact an investor/purchaser could be found. In attempting an Income
Capitalization Analysis, this appraiser considered the leasability of subject
property to:
- Similar Residential Healthcare Tenants
- Alternative Medical Non-residential User/Lessees
- Alternative Non-medical Institutional Users
- General Office/Retail Users
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HealthCare Property Appraisers of America, Inc. 67
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
Alternatives by type included:
1. Similar Healthcare Residential Use:
a. Nursing Home
b. Rest Home
c. Assisted Living Facility
d. Head Trauma
e. Drug/Chemical Rehab
f. Group Home
2. Alternative Health Care, Non-residential Use
a. Kidney Dialysis
b. Outpatient Services
c. Adult Care
d. Medical Office
e. Mental Health
3. Alternative Non-Medical Institutional Use
a. Correctional Facility
b. Corporate Retreat
4. General Real Property Use
a. Office
b. Retail
The subject property has limited leasability as a nursing home, assisted living
facility, or rest home for several reasons. It is configured in several
buildings which makes a nursing home operation quite inefficient. The square
feet per bed in a nursing home is also much lower (avg nursing home = 300 SF Per
Bed) than in the subject (approximately 1000 SF Per Bed). Furthermore the rental
paid per bed or per square foot for a nursing home is determined mostly from the
economics of the nursing home operation, making each facility unique and
distorting any comparison.
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HealthCare Property Appraisers of America, Inc. 68
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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The possibility of leasing the subject to another operator of head trauma rehab
facilities is probably impractical. We did not consult other operators in the
interest of confidentiality. However, the present lessee is one of the best
operators of this type. One must assume that if they cannot make the head trauma
rehab business work in this facility, any other operator would have similar
problems. The problems in the head trauma industry and the rehab industry
generally evolve from tightening up of HMO's and other managed care operations.
These same problems are also a concern for drug/chemical rehab operations and
all other rehab operators. Therefore, most operators of this type are not
seeking to expand and certainly not into marginal markets or locations where
other medical operators have had difficulty. When they do, the rent is dictated
by the business potential of the specific operation in that specific location.
Comparisons of other special use rehab buildings in other locations were of
little assistance in establishing fair market rental for the subject in .
There is some potential for leasing the subject to some type of group home
operator, i.e., homes for troubled teens, halfway houses, mentally retarded,
etc. This is an expanding market. However, the rentals paid by this type
operation are dictated by politics, altruism, and the construction cost of the
facility, rather than by market competition. Therefore, analysis of this type
rental is of limited use in attempting to establish a fair market rental for the
subject in Gallatin.
In looking at alternative healthcare in non-residential settings, we did find
that there has been considerable expansion of this type service. Those uses most
often encountered include kidney dialysis, outpatient services, adult care,
medical offices and mental health services. However, as in residential
healthcare operations, we found that rentals were not determined by market
competitive factors. Most often they were a function of the cost of the special
use property and the rent necessary to service the debt.
There is some market for the subject for rental to an alternative non-medical
institutional user such as a correctional facility. The privatization of the
penal system is a slowly evolving phenomena but certainly a trend. However, the
instances are scarce and riddled with politics making comparison of rentals
useless. The other non medical use would be for a corporate retreat. While there
are buyers for this type use, they generally require an even more remote site
than subject's and are bought by
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 69
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
owner/occupants not for investment. We do feel there is some potential for
selling the subject as an owner/occupant corporate retreat -- but not much as a
rental corporate retreat.
Some properties like subject have been purchased for conversion to general
office or retail use. The rentals here are usually dictated by market forces as
there are other alternatives available.
The subject probably has average to good potential for acquisition by an
investor intending to rent out for retail use. Its location on a major
thoroughfare has good access and visibility. Local Realtors tell us that well
located retail space in the Gallatin area can generally be expected to bring
from $3.50 to $4.50 per square foot on a net net net basis. The subject probably
also has good potential for rental for office use. [Its location next to the
college and on Nashville Pike is very desirable] Office properties in the
Nashville outlying communities are currently bringing $4.50 to $6.00 per square
foot on a net net net basis. The subject might then be expected to have a
theoretical potential to develop net income of $211,750 (42,350 sf x $5.00).
Utilizing a capitalization rate of 10% would suggest a value by the Income
Capitalization Approach of:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CAPITALIZATION
NET INCOME DIVIDED BY RATE = VALUE
--------------- ---------- --------------- ---------- ------------
$211,750 DIVIDED BY 10% = $2,120,000
</TABLE>
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 70
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- -------------------------------------------------------------------------------
SALES COMPARISON APPROACH TO VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 71
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
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SALES COMPARISON APPROACH TO VALUE
The sales comparison approach is defined as "a set of procedures in which an
appraiser derives a value indication by comparing the property being appraised
to similar properties that have been sold recently, applying appropriate units
of comparison, and making adjustments, based on the elements of comparison, to
the sales prices of the comparables. " (This information taken from The
Dictionary of Real Estate Appraisal American Institute of Real Estate
Appraisers, second edition.)
In this approach, the market value of the subject is estimated by comparing it
to similar properties that have sold recently. This approach is predicated on
the direct relationship between subject property's market value and the sale
prices of comparable properties.
The accurate application of this approach is based, in part, on the choice of an
appropriate unit of comparison, as shown on the summary grid. The income
multiplier was not considered appropriate as the potential buyers for this type
property come from several dissimilar industries with different income
characteristics. The physical indicators included sales price per revenue
generating unit (beds) and sales price per square foot of building area. Both
the sales price per bed and per square foot were considered appropriate with the
price per square foot viewed as having the highest correlation to market value.
The appraiser researched sales of Special Purpose medical use buildings that
have re-sold for a different use. The following section presents information on
the sales analysis of comparables for an indicated value of the subject
property.
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 72
<PAGE>
IMPROVED SALE #1778
[PICTURE]
PROPERTY DATA
<TABLE>
<S> <C>
Name/Location: Ferncrest Maner Nursing Home
14500 Hayne Blvd.
New Orleans, LA
Level of Care: NH
Improvements/Condition: 1-story, masonary in good
condition
Age: 1987
Number of Units: 214
Gross Building Area: 94840 s.f.
S.F./Unit: 443 s.f.
Occupancy: 0.61
</TABLE>
<PAGE>
IMPROVED SALE #1778 (continued)
SALE DATA
<TABLE>
<S> <C>
Date of Sale: SEP 94
Grantor: New Orleans Health Care
Grantee: Prestige Care, L.L.C.
Sale Price: $6503473
Financing: $1,534,723 cash; Note for $968,750 at 8.5%
INDICATIONS
Price/Unit (Apt/Bed) $30390
Price/S.F.: $69 s.f.
</TABLE>
Comments: Sale at RTC sealed bill auction, grantee proposed to
partially convert to adolescent psyc facility.
<PAGE>
IMPROVED SALE #95078
[PICTURE]
PROPERTY DATA
<TABLE>
<S> <C>
Name/Location: Hunt Hospital
75 Lindall Street
Danvers, MA
Level of Care: HOSP
Number of Units: 120
Gross Building Area: 120000 s.f.
S.F./Unit: 1000 s.f.
</TABLE>
<PAGE>
IMPROVED SALE #95078 (continued)
SALE DATA
<TABLE>
<S> <C>
Date of Sale: JUL 90
Grantor: Town of Danvers
Grantee: Beverly Hospital Corp.
Sale Price: $3000000
Financing: Cash
</TABLE>
INDICATIONS
<TABLE>
<S> <C>
Price/Unit (Apt/Bed) $25000
Price/S.F.: $25 s.f.
</TABLE>
Comments: Sold with all FF&E; After sale 50% was converted to outpatient,
day surgery, Phys. & Occ. therapy and EMER. room at cost of
$322K. Remainder converted to SNF licensed for 60 beds;
Conversion cost was $950K with $200K for F&F; Plus $350K to repair
rook, parking and other maint.
<PAGE>
IMPROVED SALE #95077
[Picture]
PROPERTY DATA
<TABLE>
<S> <C>
Name/Location: Josiah B. Thomas Hospital
15 King Street
Peabody, MA
Level of Care: HOSP
Number of Units: 59
Occupancy: 0.76
Effective Gross Income: $15016254
Expenses: $18283314
Net Income: -$3267060
</TABLE>
<PAGE>
IMPROVED SALE #95077 (continued)
SALE DATA
<TABLE>
<S> <C>
Date of Sale: DEC 92
Grantor: City of Peabody
Grantee: Lahey Clinic
Sale Price: $2800000
Financing: Cash to seller
</TABLE>
INDICATIONS
<TABLE>
<S> <C>
Price/Unit (Apt/Bed) $47458
EGIM: 0.19
Overall Rate: -1.1670
</TABLE>
Comments: Inc/Exp adjusted YE 1991; Purchased for conversion to rehab
hospital.
<PAGE>
IMPROVED SALE #95076
[Picture]
PROPERTY DATA
<TABLE>
<S> <C>
Name/Location: Chaps Koala Center
5010 Alston Avenue
Durham, NC
Level of Care: REHAB
Improvements/Condition: 1-story, steel frame, vinyl
siding in good condition.
Age: 1986
Number of Units: 42
Gross Building Area: 22812 s.f.
S.F./Unit: 543 s.f.
</TABLE>
<PAGE>
IMPROVED SALE #95076 (continued)
SALE DATA
<TABLE>
<S> <C>
Date of Sale: OCT 93
Grantor: Koala North Carolina, Inc.
Grantee: J. Chapman and F. Blackwell
Sale Price: $640000
Financing: All cash
</TABLE>
INDICATIONS
<TABLE>
<S> <C>
Price/Unit (Apt/Bed) $15238
Price/S.F.: $28 s.f.
</TABLE>
Comments: Opened in '86, closed in '92; Purchased for conversion to ALF;
Of the 9.17 acre site, 6.42 is considered undevelopable; all
equipments included.
<PAGE>
IMPROVED SALE #95075
[PICTURE]
PROPERTY DATA
<TABLE>
<S> <C>
Name/Location: Melbourne Hotel & Conference Ctr.
4611 Bee Caves Road
Austin, TX
Level of Care: Hotel
Improvements/Condition: Class D, wood frame w/ masonary
interior walls in average
condition.
Age: 1985
Number of Units: 60
Gross Building Area: 44000 s.f.
S.F./Unit: 733 s.f.
</TABLE>
<PAGE>
IMPROVED SALE #95075 (continued)
SALE DATA
<TABLE>
<S> <C>
Date of Sale: MAY 92
Grantor: Comprehensive Addiction Prog.
Grantee: Peter C. Kern
Sale Price: $850000
Financing: Cash to seller; conventional
financing.
</TABLE>
INDICATIONS
<TABLE>
<S> <C>
Price/Unit (Apt/Bed) $14167
Price/S.F.: $19 s.f.
</TABLE>
Comments: Purchased vacant w/ no license to renovate into an ALF; TX has not
required CON since 1985; all utilities and on-site septic.
<PAGE>
IMPROVED SALE OF #95074
[PICTURE]
PROPERTY DATA
<TABLE>
<S> <C>
Name of Location: Capitol Medical Center
2711 Capitol Med. Ctr. Blvd
Tallahassee, FL
Level of Care: REHAB
Improvements/Condition: Class D, metal frame, 1-story in average condition
Age: 1989
Number of Units: 60
Gross Building Area: 16000 s.f.
S.F./Unit 267 s.f.
</TABLE>
<PAGE>
IMPROVED SALE #95074 (continued)
SALE DATA
<TABLE>
<S> <C>
Date of Sale: OCT 91
Grantor: Comprehensive Addiction Prog.
Grantee: West Star Dev. Co.
Sale Price: $900000
Financing: Cash; conventional loan.
INDICATIONS
Price/Unit(Apt/Bed) $15000
Price/S.F.: $56 s.f.
Comments: 25 semi-pvt with F/B; State of FL does not require CON for
substance abuse facility; purchased vacant with intent to renovate
at cost of $600K for use as a medical office bldg. w/lab, X-ray
and short procedure surgery.
</TABLE>
<PAGE>
SALES COMPARISON SUMMARY GRID
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Comp # SUBJECT # 95074 # 95075 # 95076 # 95077 # 95078 #1778
Name Cedarbrook Bowling Green Bowling Green Chaps Joseph B Hunt Ferncrest
Facility Of Tallahassee Of the Hills Koala Thomas Hsp Hospital Manor
City Gallatin Tallahassee Austin Durham Peabody Danvers New Orleans
State TN FL TX NC MA MA LA
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY DATA
Year Built 1985 1989 1985 1986 N/A N/A 1987
# Beds 40 50 60 42 59 120 214
GBA (sf) 42,350 16,000 44,000 22,812 40,474 120,000 94,840
SF Per Bed/Apt 1059 320 733 543 686 1000 443
SALE DATA
Date of Sale 10/91 5/92 10/93 12/92 7/90 9/94
Sale Price $900,000 $850,000 $640,000 $2,800,000 $3,000,000 $6,503,000
Price / Bed $18,000 $14,167 $15,238 $47,458 $25,000 $30,388
Price / SF $56.25 $19.32 $28.06 $69.18 $25.00 $68.57
CUMULATIVE ADJUSTMENTS
Rights Conveyed 0% 0% 0% 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238 $47,458 $25,000 $30,388
$56 $19 $28 $69 $25 $69
Financing Terms 0% 0% 0% 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238 $47,458 $25,000 $30,388
$56 $19 $28 $69 $25 $69
Conditions of Sale 0% 0% 0% 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238 $47,458 $25,000 $30,388
$56 $19 $28 $69 $25 $69
Market Conditions 17% 15% 11% 14% 21% 8%
Adjusted Price $20,970 $16,292 $16,838 $53,864 $30,250 $32,895
$66 $22 $31 $79 $30 $74
NON-CUMULATIVE ADJUSTMENTS
Physical Characteristics 15% 15% 15% -25% 0% -35%
Location 0% 10% 10% -15% -15% 10%
Economic Factors 0% 0% 0% 0% 0% 0%
Non-Cumulative Adjustments 15% 25% 25% -40% -15% -25%
ADJUSTED VALUE INDICATORS
Sale Price/Bed $24,116 $20,365 $21,048 $32,319 $25,713 $24,671
Sale Price/SF $75 $28 $39 $47 $26 $56
Average Sale Price/Bed $24,705
Average Sale Price/SF $45
</TABLE>
<PAGE>
[ADJUSTED SALES COMPARISONS GRAPH]
<PAGE>
The Cedarbrook Rebound Facility, Gallatin, Tennessee
- ------------------------------------------------------------------------------
COMPARISON OF COMPARABLES TO SUBJECT
In our final and most detailed analysis and comparison to subject, the
appraiser selected comparable sales with the highest combination of important
similar characteristics. The sales selected were all special use medical
facilities that were sold for a different use than that of the previous
tenant.
Explanation of Adjustments
All sales are of Special Purpose medical buildings. Each sale has been
adjusted for differences, both economic and physical, in relation to the
subject. Following is a discussion of each characteristic of the property
with an explanation of the adjustments made to each comparable sale.
Cumulative Adjustments
"Cumulative Adjustments" were applied to the sales prior to other adjustments in
order to reconcile the sales prices for intangible occurrences which could alter
the sales prices. Additional noncumulative adjustments for physical and economic
considerations are analyzed thereafter. Cumulative adjustments considered
included:
Property Rights Conveyed
This adjustment is for sales which had rights conveyed differently than the
subject's. In this appraisal, the Fee Simple Going Concern is being
appraised. All of the sales were also sold as Going Concerns, none of which
were leased facilities. As the appraiser, at this point in this analysis, is
seeking Fee Simple Value of Going Concern, no adjustment was made.
Financing
No adjustment is applied for financing, as all sales are reported to be cash
to seller or cash equivalent transactions. We are not aware of atypical
financing that would require an adjustment for cash equivalency.
Conditions of Sale
No adjustments were considered necessary to reflect any special conditions
or terms of sale.
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HealthCare Property Appraisers of America, Inc. 87
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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Market Conditions (Date of Sale)
Adjustments for recorded sales date, or time, is reflective of differences
in the market at different times. An upward adjustment of approximately 3%
annually was made to the comparables sale prices.
Non-Cumulative Adjustments
Location
Locational adjustments reflect the difference in value attributed to a
property's specific location. The subject's location in an outlying area
without any immediate surrounding medical use suggests the need for a
discount.
Quality/Design
This adjustment reflects physical differences of specific properties for
varying qualities of building materials, layout, building finish, etc.
Condition/Age
Many older facilities receive renovations and on going maintenance due to
State requirements and market expectations. However, their appeal to the
private pay market is less than newer facilities. In addition, newer
facilities are generally more efficient to operate, thus increasing profit.
Average Square Footage Per Bed
The comparables presented a range of 329 s.f. to 1,000 s.f. per bed. The
subject, at 1,059 s.f., is at the upper end of the range at. The area per
bed is an indication of the existence, or at least the potential, for better
support areas which can positively affect profitability.
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HealthCare Property Appraisers of America, Inc. 88
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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Sales Price Per Bed
HealthCare Property Appraisers maintains a nationwide data bank on long term
health care facilities, which currently includes sales of over 1,200 facilities.
Facilities being sold for shell value sometimes bring only $10,000 to $12,000
per bed. Facilities which are of good quality but predominantly medicaid funded
are selling on a nationwide basis for approximately $25,000 to $50,000 per bed.
The higher quality homes, which offer better care services, more amenities, and
therapy areas (or homes which show unusual profit potential), are generally sold
for $45,000 to $75,000 per bed.
The comparables selected for close analysis have an unadjusted sales price per
bed range from $14,167 to $47,458 with an average of $25,042. The factors which
affect the sales price per bed include unit mix, number of residents per room,
project amenities, and average area per bed. Typically, a property which has a
larger average area per bed will sell at a higher unit price.
After adjusting the comparables to the subject, the sales price per bed formed a
range of $20,365 to $32,319 with an average of $24,705. Giving further
consideration to subject's average bed area and other physical characteristics,
the value range on a per bed basis is estimated at $24,000 to $26,000. Applying
this range to the subject's 40 indicates a value range of $960,000 to
$1,040,000.
<TABLE>
<CAPTION>
# BEDS X SALE PRICE PER BED = INDICATED VALUE
------ ------------------ ---------------
<S> <C> <C> <C> <C>
40 X $24,000 to $26,000 = $960,000 to $1,040,000
</TABLE>
Sales Price Per Square Foot
The unadjusted comparables formed a sales price range from $19 to $69 per square
foot with an average of $44. An inverse relationship usually exists between the
sales price per square foot and the average area per bed, assuming all amenities
and services are similar. A smaller unit usually generates more income on a per
square foot basis than a larger unit. This is reflective of the staffing
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HealthCare Property Appraisers of America, Inc. 89
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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costs as, typically, the per resident day costs are not directly influenced by
the unit size. After economic adjustments, the comparables formed a sales price
per square foot range of $26 to $75 with an average of $45.
Considering the subject's functional utility, area per resident, quality and
condition, we believe a value range of $42.50 to $47.50 per square foot to be
indicated. Applying the unit values to the subject's 42,350 of gross building
area indicates a value range of $1,799,875 to $2,011,625.
<TABLE>
<CAPTION>
BUILDING SIZE X SALE PRICE PER SF = INDICATED VALUE
------------- ----------------- -------------------------
<S> <C> <C> <C> <C>
42,350 X $42.20 TO $47.50 = $1,799,875 TO $2,011,625
</TABLE>
Reconciliation of Sales Comparison Indicators
The value ranges developed by both of the physical indicators are summarized
below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
INDICATORS OF VALUE VALUE RANGE
- ------------------------------------------------------------------
- ------------------------------------------------------------------
<S> <C>
SALES PRICE PER BED $960,000 to $1,040,000
- ------------------------------------------------------------------
SALES PRICE PER SQUARE FOOT $1,799,875 to $2,011,625
- ------------------------------------------------------------------
- ------------------------------------------------------------------
</TABLE>
The sales price per bed tends to be a good indicator if the comparables have
similar rates, per patient day occupancy, and self pay ratios. Due to the
uniqueness of each of the comparables, the price per bed is not considered to be
a strong indicator. The sales price per square foot is considered a stronger
indicator. Giving consideration to current market conditions and the subject's
physical characteristics, the sales comparison approach suggests a narrower
range of $1,800,000 to $2,000,000.
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HealthCare Property Appraisers of America, Inc. 90
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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The Sales Comparison Approach has a limited use in providing a value range.
Differences in location and many other variables make a precise comparison
between the comparable sales and the subject property extremely difficult.
Summary
The validity of the Sales Comparison Approach depends upon whether a buyer can
be found who would be willing to pay some amount for the building improvements.
In our opinion, the chance of that happening are rated good. There should be
some market either to the adjoining college or to general office users from the
metropolitan Nashville market. The reconciled market value range is indicated by
the Sales Comparison Approach:
$1,800,000 to $2,000,000
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HealthCare Property Appraisers of America, Inc. 91
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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RECONCILIATION AND FINAL VALUE ESTIMATE
<TABLE>
- ----------------------------------------------------------
- ----------------------------------------------------------
<S> <C>
INDICATED VALUE BY $1,920,000
COST APPROACH
- ----------------------------------------------------------
- ----------------------------------------------------------
INDICATED VALUE BY $2,120,000
INCOME APPROACH
- ----------------------------------------------------------
- ----------------------------------------------------------
INDICATED VALUE BY $1,800,000
SALES COMPARISON APPROACH to $2,000,000
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
To estimate the final Market Value for The Cedarbrook Rebound Facility, it is
necessary to reconsider all three approaches, correlate the data, and determine
what emphasis to give each approach.
The Cost Approach was based upon a component cost breakdown prepared by a
computer utilizing the Marshall and Swift Valuation Service Cost Data Bank. This
nationally recognized building costs service prepared a very accurate estimate
of replacement costs for subject's improvements. From replacement costs (direct
and indirect) was deducted depreciation based upon observation and age of the
improvements and sales data as well as consideration of Functional and External
Obsolescence. Subject's 6.95 acres of land were valued at $28,777 per acre or
$200,000. This approach indicated a market value for The Cedarbrook Rebound
Facility of $1,920,000.
The value indicated by the Cost Approach is an important consideration for a
potential buyer as it provides a starting point for estimating value in use.
However, most purchasers of a special use property will make a fairly
substantial deduction from cost new to reach their offering price. The amount of
that deduction is dependent upon a number of factors that vary from investor to
investor and property to property and cannot be predicted or quantified with any
high degree of accuracy. If a buyer can be found who can use the building
improvements it is my opinion that this deduction would be a minimum of 50% but
in many cases could be as much as 100%. We believe this
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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depreciated value by our Cost Approach of $1,920,000, which assumes depreciation
of 50% probably sets the upper limit of value for the subject property.
Under the Income Approach to value, the appraiser analyzed the subject property
from the standpoint of a potential investor who would be most interested in its
income stream. This approach was considered to be the weakest of the three as it
is based on the least data and has the weakest correlation to the actual thought
process of the typical buyer. Few buyers of this type property would be
acquiring it for its investment potential, but rather for its value in use in a
business. The projected Net Income to Real Estate of $211,750 was capitalized at
10%. Based upon a consideration of current financing, available alternatives,
and equity demands, the Market Value of The Cedarbrook Rebound Facility was
indicated by the Income Approach to be $2,120,000.
Under the Sales Comparison Approach, the appraiser reviewed a considerable
number of sales of former medical facilities that have been converted to other
uses. Analysis of this data after adjustments for property differences indicated
a Market Value for The Cedarbrook Rebound Facility of $1,800,000 to $2,000,000,
based on $45 per square foot.
The preceding analysis assumes a buyer can be found who will be willing to pay
something for the subject's improvements. The limited market for the subject's
improvements and consideration of its location suggest that only a low price
will attract a buyer to these improvements.
Our three Approaches to Value when correlated together suggest a value of
$1,800,000 to $2,100,000. However, that conclusion is based upon:
- The assumption that a user for subject's improvements can be found
- Analysis of sales of former medical buildings which were resold
(ignoring the fact that many never did sell)
- A large estimate of depreciation by the appraiser that cannot be
accurately proven.
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HealthCare Property Appraisers of America, Inc. 93
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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The reality of the matter is that there probably will be no buyer for the
improvements and the property will have to be sold for Land Value only.
Therefore, we believe the most likely sale price for the subject to be its Land
Value only.
Based on the enclosed data and analyses, I believe the Subject Property
described herein has the following estimated Final Market Value as of March 24,
1997 at Stabilized Census, Occupancy and Rates:
FINAL MARKET VALUE OF SUBJECT PROPERTY: $200,000
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HealthCare Property Appraisers of America, Inc. 94
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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MARKETING PERIOD
Due to the weak market for Office Complexs, The Cedarbrook Rebound Facility may
not be saleable to a health care user. The appraiser has reviewed sales of a
number of Office Complexs that have taken place over the past five years. The
average sales time for those properties was approximately three years. If the
subject property were priced to include "some" value for the improvements and
adequately marketed, we believe it could be sold at our appraised value within
approximately three years. However, it must be recognized that there may be very
little demand for this property as improved and it may be necessary to sell it
for land value alone --which could also take three years.
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HealthCare Property Appraisers of America, Inc. 95
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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SUMMARY OF VALUES
After considering the subject's functional utility, neighborhood and general
market conditions, we would estimate the probability of finding a buyer/user
for the existing improvements as FAIR. The market for a "user" buyer is very
limited. The most realistic price for the subject includes no value for the
improvements. Therefore, we estimate the Market Value of the subject to be
for the value of the land only or:
Land $200,000
It should be noted that there is some upside potential for finding a buyer who
will pay something for the improvements. But due to the low probability of that
happening we do not believe a prudent buyer would do so. Therefore the most
likely sale price would pay more than land value.
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HealthCare Property Appraisers of America, Inc. 96
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UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS
1. The Appraiser assumes no responsibility for legal matters nor renders
an opinion of title. Good title to The Cedarbrook Rebound Facility is
assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to appear
in court, commission, or in any other capacity without prior
arrangements and additional compensation.
This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report without the preparer's written consent is an
unintended user, and does so at his own risk.
3. The factual information in this report--furnished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
4. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each
appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared. However, selected portions of
this appraisal report shall not be given to third parties without prior
written consent of the signatories of this appraisal report. Further,
neither all nor any part of this appraisal report shall be disseminated
to the general public by use of advertising, public relations, news,
sales, or other media for public communication without the prior
written consent of the signatories of this appraisal report.
5. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not responsible
for any adverse condition that may be found in these matters.
6. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters (including
but not limited to termites, dry rot, wet rot, and other
wood-destroying organisms) are not present or have been detected and
properly corrected.
7. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations and mechanical, plumbing, electrical, heating, ventilation,
air conditioning, and roof systems are assumed to be adequate, in good
working order and capable of performing the function for which they
were designed. The appraiser has no expertise in this area and cannot
certify the
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condition or functional adequacy of these items. A qualified inspector
should be utilized for that purpose. The appraiser assumes no
responsibility for any hidden or unapparent conditions of the property,
soil, subsoil, or structures that would affect its value.
8. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
9. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
10. The appraiser has not researched the subject property for liens nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value. The property is therefore appraised as though it were free and
clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
11. The value estimate and estimated income and expenses assume responsible
ownership and typical, competent management.
12. The appraiser was not furnished with construction plans or physical
surveys and due to the confidential nature of this assignment, did not
measure the building improvements. Gross area of land and improvements
is estimated by methods and from sources considered reliable and the
data is believed to be accurate. However, no responsibility is assumed
for its accuracy and it is recommended that a licensed surveyor be
employed for that purpose. Any substantial difference in the subject's
actual land or improvement size would have some effect on its true
market value. Any statement by the appraiser contained herein as to the
size of land or building improvements is for descriptive purposes and
is a statement of the appraiser's opinion as to the property's
functional utility and not a statement of fact as to its physical size.
13. The appraiser's projections of income and expenses are not predictions
of the future. They are our best estimates of current market thinking
about what future income and expenses might be. We make no warranty or
representations that these projections will materialize.
14. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale.
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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15. To the best of the Appraiser's knowledge, this report conforms to the
current requirements prescribed by the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation as required by the Financial Institutions Reform,
Recovery and Enforcement Act (FIRREA) and the Appraisal Institute.
16. The Americans with Disabilities Act "ADA" became effective January 26,
1992. We have 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
we have no direct evidence relating to this issue, I (we) did not
consider possible noncompliance with the requirements of ADA in
estimating the value of the property. Based on our personal inspection,
we are not aware of any irregular or apparent non-compliant handicap
items.
17. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
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HealthCare Property Appraisers of America, Inc. 99
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- The statements of fact contained in this appraisal report are true and
correct.
- The reported appraisal 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 personal interest or bias with respect to
the parties involved.
- My compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event.
- My analyses, opinions and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation as required by the Financial Institutions Reform,
Recovery and Enforcement Act (FIRREA) and the Code of Professional
Ethics and Standards of Professional Appraisal Practice of the
Appraisal Institute.
- As of the date of this report, J. Michael Burroughs, MAI, SRA has
completed the requirements of the continuing education program 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.
- The subject property was inspected by Franklin M. Ramsey and was not
inspected by J. Michael Burroughs.
- Eve L. Burroughs and Bonny J. Sinclair provided valuable assistance in
compiling data for this report. No one else provided significant
professional assistance to the undersigned. The appraiser gratefully
acknowledges the contribution of data from several sources.
- The appraiser has complied with the USPAP competency provision.
- The USPAP departure provision does not apply.
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HealthCare Property Appraisers of America, Inc. 100
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The Cedarbrook Rebound Facility, Gallatin, Tennessee
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- This appraisal assignment was not based on a requested minimum or
maximum valuation, a specific valuation, or the approval of a loan.
I do not authorize the out-of-context quoting from or partial reprinting of this
appraisal report. Further, neither all nor any part of this appraisal report
shall be disseminated to the general public by the use of media for public
communication without the prior written consent of the appraiser(s) signing this
appraisal report.
/s/ J. MICHAEL BURROUGHS
------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
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HealthCare Property Appraisers of America, Inc. 101
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REFERENCES
The appraiser would like to acknowledge the following resources:
1. Laventhol & Horwath, Retirement Housing Industry 1989 (Laventhol &
Horwath, Philadelphia, PA 1990).
2. Laventhol & Horwath, Nursing Home Industry 1988 (Laventhol & Horwath,
Philadelphia, PA 1989).
3. Marshall and Swift Computerized Services, Los Angeles, CA.
4. National Planning Data Corporation, Ithaca, NY.
5. SMG Marketing Group, Inc. -C-1993.
6. Ernst & Young and American Association of Homes for the Aging Study.
Continuing Care Retirement Communities: An Industry in Action, Analysis
and Developing Trends, 1989.
7. The Dictionary of Real Estate Appraisal, American Institute of Real
Estate Appraisers, second edition.
8. The Appraisal of Real Estate, ninth edition.
9. The Guide to the Nursing Home Industry, 1993. A joint publication of
Health Investment Analysts, Inc. and Arthur Andersen & Co.
10. U. S. Bureau of Census.
11. Marion MerrellDow Managed Care Digest Long Term Care Edition 1993.
Marion Merrell Dow, Inc.
12. An Overview of The Assisted Living Industry, October 1993, Coopers &
Lybrand and The Assisted Living Facilities Association of America.
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HealthCare Property Appraisers of America, Inc. 102
<PAGE>
QUALIFICATIONS OF APPRAISER
J. MICHAEL BURROUGHS, MAI & SRA
POST OFFICE BOX 2227
HWY 64 EAST, LAUREL TERRACE, 2ND FLOOR
CASHIERS, NORTH CAROLINA 28717
BUSINESS EXPERIENCE
J. Michael Burroughs has been engaged in the preparation of appraisals,
feasibility studies, economic analyses, and general consulting on all types
of properties for various clients. In the mid-1970s, Mr. Burroughs began
specializing in the appraisal of long-term health care facilities and housing
for the elderly. Since 1985, Mr. Burroughs has worked exclusively with
long-term health care and housing for the elderly in the areas of appraising,
brokerage, and finance.
Assignments have been in more than 44 of the 50 United States. Current
assignments include all types of healthcare and senior housing real estate:
Nursing Homes
Continuing Care Retirement Communities (Both Rental and Endowment)
Assisted Living Facilities
Acute Care Hospitals
Psychiatric Hospitals
Congregate Living Facilities
Properties appraised total approximately 3,000 in number and exceed $7 Billion
in appraised value. Mr. Burroughs has also been active as a general partner in
five successful apartment to condominium conversion projects and is actively
engaged in the buying and selling of investment real estate for his own account
and for clients. He is a nationally recognized convention speaker and published
author on healthcare appraising and financing.
EMPLOYMENT
HealthCare Property Appraisers of America, Inc. - President
June, 1973 to Present
Atlantic Mortgage and Investment Company - First Vice President
January, 1972 to July, 1973, Winston-Salem, NC
Wachovia Mortgage Company -- Asst. VP and Manager of the Charlotte Income
Property Loan Department
May, 1970 to January, 1972, Charlotte, NC
Prudential Insurance Company - Real Estate and Mortgage Loan Department
Regional Appraiser
December, 1964 to April, 1969, Montgomery, Alabama
May 1969 to May, 1970, Charlotte, N.C.
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GENERAL EDUCATION
Mars Hill College-Associate of Arts-1962
University of North Carolina at Chapel Hill-B.S. in Business Administration
(Major: Banking and Finance) 1964
REAL ESTATE EDUCATION
American Institute of Real Estate Appraisers-Real Estate Valuation-Course
I--University of Mississippi, 1966.
American Institute of Real Estate Appraisers-Real Estate Valuation--Course
II-Tulane University, 1967.
Various Seminars in Tax Deferred Exchanging and Computer Applications for
Real Estate Analysis.
PROFESSIONAL CONTRIBUTIONS
Mr. Burroughs has authored articles for national industry periodicals and is a
nationally recognized speaker on the valuation of healthcare and senior living
properties.
MEMBERSHIPS AND PROFESSIONAL DESIGNATIONS
The Appraisal Institute-MAI, SRA
Licensed Real Estate Broker
The Academy of Real Estate Exchangers
State Certified General Appraiser
AREA OF SPECIALTY-LONG-TERM HEALTH CARE
Healthcare and Nursing Home Facilities
Facilities Appraised: 2500
Location: Located in 44 States
Type: Skilled, ICF, Personal Care, Head Trauma, Long-Term
Pediatric Care, Substance Abuse, Mentally Retarded
(MR), Rehabilitation, Alzheimer's, Acute, Sub-Acute,
Rehab, and Psychiatric Hospitals
Retirement Housing
Facilities Appraised: 60+
Location: Located in over 14 States
Type: Lease Rental, Condo Ownership, Retirement Apartments
with or without Nursing Home, Assisted Living, and
Luxurious Hotel-type for the well elderly. Housing
for the elderly requiring some personal care and
services.
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TYPICAL NURSING HOME CLIENTS (Partial List)
Mortgage/Bond Lenders
Bank One, Indianapolis, IN
Bear Sterns Investment Bankers, New York, NY
Dominion Bank, Richmond, VA
First American National Bank, Nashville, TN
First National of Maryland, Baltimore, MD
Grove Capital, Atlanta, GA
Healthcare REIT, Toledo, OH
Hibernia National Bank, New Orleans, LA
J. C. Bradford, Nashville TN and Pensacola, FL
Maryland National Bank, Baltimore, MD
Society Bank, Dayton, Ohio
Southtrust Bank, N.A., Birmingham, AL
Van Kampen Merritt, Philadelphia, PA
Wachovia Bank & Trust, Raleigh, NC
Wright One Financial, Dayton, OH
Healthcare Management Companies
American Retirement Corporation, Nashville, TN
The Angell Group, Winston-Salem, NC
Asheville Psychiatric Hospital, Asheville, NC
Beverly Enterprises, Ft. Smith, AR
Brian Management Group, Hickory, NC
The Brunner Companies, Dayton, OH
Charlotte Memorial Hospital, Charlotte, NC
Convalescent Services, Atlanta, GA
Cumberland Health Systems, Nashville, TN
Denver Health Group, Denver, CO
Diversicare Corporation of America, Franklin, TN
Elmhurst Psychiatric Hospital, Portland, CT
Genesis Health, West Point, PA
Health Care Capital, Atlanta, GA
Health Care Concepts, Atlanta, GA
Health Prime, Atlanta, GA
Meridian Healthcare, Towson, MD
Multicare Management, Inc., Hackensack, NJ
National Health Corporation, Murfreesboro, TN
Nomura, New York, NY
Quest Rescue, Atlanta, GA
Quorum Health Services, Inc., Wellesley, MA
Regency Health Care, Ormond Beach, FL
Resource Housing of America, Atlanta, GA
Royal Care, Inc., Cleveland, TN
Southern Care Enterprises, Atlanta, GA
TheraTx, Baltimore, MD
Total Care Systems, Inc., West Point, PA
WellCare, Inc., Atlanta, GA
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HealthCare Property Appraisers of America, Inc. 105
<PAGE>
ADDENDA
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<PAGE>
SUMMARY APPRAISAL REPORT
ON
The Sandybrook Center
19650 U.S. Hwy East 441
Mt Dora, Florida
PREPARED BY:
HealthCare Property Appraisers of America, Inc.
Hwy 64 East, Laurel Terrace, 2nd Floor
Post Office Box 2227
Cashiers, North Carolina 28717
Copyright 1997, HealthCare Property Appraisers of America, Inc.
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SUBJECT
[PLACE PHOTOGRAPH HERE]
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HealthCare Property Appraisers J. MICHAEL BURROUGHS, MAI, SRA
Of America, Inc. PRESIDENT
Post Office Box 2227
Hwy. 64 E., Laurel Terrace, 2nd Floor
Cashiers, North Carolina 28717
Phone.: 828-743-5204
Fax: 828-743-1730
April 10, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
14160 Dallas Parkway
Dallas, TX 75240
Re: The Sandybrook Center
Mt Dora, Florida
Dear Mr. Brickman:
HealthCare Property Appraisers of America, Inc. has inspected The Sandybrook
Center for the purpose of estimating the Market Value of its fee simple estate.
All factors which might influence the value of this property were investigated
and fully considered to the best of our ability. We have performed a Complete
Appraisal and report our findings here in the form of a Summary Appraisal
Report, which describes the appraisal method and contains the information
necessary for forming realistic conclusions. The supporting data analyses and
conclusions are an integral part of this report. The maps, sketches, and
statistics are included to aid the reader in visualizing the property. Your
attention is directed to the section entitled: "Underlying Assumptions and
Limiting Conditions Section" which provides the basis for all conclusions and
the Final Value Estimate.
Based on the enclosed data and analyses, we believe the Subject Property
described herein had a Market Value, as of March 19, 1997 in its present
physical condition of:
$500,000
The above value includes no value for the building improvements and assumes a
buyer cannot be found who can use and will pay something for the building
improvements. We rate the probability of the subject's being able to attract
such a buyer who would allocate any value to the building improvements as only
POOR.
The value conclusions in this report assume that this-property is not subject to
any existing leases or management contracts. We have assumed that any new owner
would be free to negotiate a new lease or management contract if they so
desired.
After studying the sales history of similar properties, the Appraiser estimates
a reasonable marketing period for the subject property to be three years.
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The Sandybrook Center, Mt Dora, Florida
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This appraisal constitutes a Complete Appraisal and this report is a Summary
Appraisal Report as defined by the Uniform Standards of Professional Appraisal
Practice (USPAP).
I appreciate the opportunity to provide these appraisal services to you. If you
have any questions on this report or any other matters, please do not hesitate
to call.
Respectfully submitted,
HealthCare Property Appraisers of America, Inc.
/s/ J. MICHAEL BURROUGHS
- ----------------------------------
J. MICHAEL BURROUGHS, MAI, SRA [SEAL]
State Certified General Appraiser,
President
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HealthCare Property Appraisers of America, Inc. 3
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The Sandybrook Center, Mt Dora, Florida
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SUMMARY OF IMPORTANT CONCLUSIONS
Summary Report of a Complete Appraisal
<TABLE>
<S> <C>
Subject Property: The Sandybrook Center
Property Location: 19650 U.S. Hwy East 441
Mt Dora, Florida
Effective Date: March 19, 1997
Report Date: April 10, 1997
Purpose of Appraisal: Market Value
Area of Site: 19.63 acres (approx.)
Highest and Best Use: For Office Complex Use
Improvements:
Number of Beds: 36 Beds
Building Size: 36,270 sf (approx.)
Building Date: 1985
Market Value:
(Assumes No Building Value)
Land $500,000
Building Improvements 0
--------
Total Real Estate $500,000
</TABLE>
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HealthCare Property Appraisers of America, Inc. 4
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The Sandybrook Center, Mt Dora, Florida
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TABLE OF CONTENTS
<TABLE>
<S> <C>
TRANSMITTAL LETTER ....................................................... -2-
SUMMARY OF IMPORTANT CONCLUSIONS ......................................... 4
TABLE OF CONTENTS ....................................................... 5
GENERAL IDENTIFICATION OF PROPERTY ....................................... 6
PROPERTY RIGHTS APPRAISED ................................................ 6
SCOPE OF APPRAISAL ....................................................... 6
HISTORY OF PROPERTY ...................................................... 7
THE PURPOSE OF THE APPRAISAL ............................................. 8
METHOD OF APPRAISAL ...................................................... 11
REGIONAL ANALYSIS ........................................................ 13
MARKET AREA and NEIGHBORHOOD ............................................. 35
SITE DATA ................................................................ 39
DESCRIPTION OF IMPROVEMENTS .............................................. 44
COST APPROACH TO VALUE ................................................... 49
INCOME CAPITALIZATION APPROACH TO VALUE .................................. 66
SALES COMPARISON APPROACH TO VALUE ....................................... 71
RECONCILIATION AND FINAL VALUE ESTIMATE .................................. 92
SUMMARY OF VALUES ........................................................ 96
UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS ........................... 97
APPRAISER'S CERTIFICATION ................................................ 100
QUALIFICATIONS OF APPRAISER .............................................. 103
</TABLE>
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HealthCare Property Appraisers of America, Inc. 5
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The Sandybrook Center, Mt Dora, Florida
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GENERAL IDENTIFICATION OF PROPERTY
The subject property, known as The Sandybrook Center, is located at 19650 U.S.
Hwy East 441, Mt Dora, Florida. The-subject site and improvements are described
further in subsequent sections of this report. The subject of this analysis
includes real property only.
PROPERTY RIGHTS APPRAISED
The appraiser, in completing this appraisal assignment, considered the subject
property to include all of those rights that may be lawfully owned and are
legally referred to as being held in "fee simple".
Definition of Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate;
subject only to the limitations of eminent domain, escheat, police
power, and taxation. (The Dictionary of Real Estate Appraisal, American
Institute of Real Estate Appraisers, Third Printing, October, 1987)
SCOPE OF APPRAISAL
In conducting this appraisal, our staff
- Inspected the subject property.
- Developed and analyzed significant data from primary and
secondary sources, confirming that data where possible.
- Analyzed sales, income and expense data and projected a
reasonable cash flow for the subject.
- Completed Income Capitalization, Cost and Sales Comparison
Approaches To Value and reached a Final Market Value
conclusion as reported herein.
This appraisal constitutes a Complete Appraisal and this report is a Summary
Appraisal Report as defined by USPAP.
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The Sandybrook Center, Mt Dora, Florida
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HISTORY OF PROPERTY
To the best of the appraiser's knowledge, the subject property has not been
sold, listed or placed under contract within the past three years. The subject
property is listed at the county courthouse as being owned by Jacques Miller.
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HealthCare Property Appraisers of America, Inc. 7
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The Sandybrook Center, Mt Dora, Florida
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THE PURPOSE OF THE APPRAISAL
The purpose of the Complete Appraisal contained in this Summary Appraisal Report
is to estimate the Market Value of The Sandybrook Center. This report is for the
internal use of Capital Realty Group.
Definition of Market Value
The most probable price which a property should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and seller each
acting prudently and knowledgeably, and assuming the price is not affected by
undue stimulus. Implicit in this definition is the consummation of a sale as of
a specified date and the passing of title from seller to buyer under conditions
whereby:
(1) Buyer and seller are typically motivated.
(2) Both parties are well informed or well advised, and acting in what they
consider their own best interests.
(3) A reasonable time is allowed for exposure in the open market.
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto.
(5) The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.*
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The Sandybrook Center, Mt Dora, Florida
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COMPETENCY
The Office of the Comptroller of the Currency has issued the following Final
Rule, which requires lenders to evaluate appraiser competency for each specific
appraisal assignment:
"Not all appraisers are competent to perform every type of appraisal
that will be needed in connection with federally related transactions.
For instance, an appraiser who is experienced in appraising shopping
centers may not possess sufficient expertise to appraise a golf course.
A financial institution should look beyond an individual's title to
determine if he or she has the experience and training needed to perform
the appraisal. This provision is not intended to prohibit, in every
circumstance, an individual from appraising a type of property with
which he or she is not familiar. However in such instances, an appraiser
may perform the appraisal only in accordance with the Competency
Provision in the USPAP. "
HealthCare Property Appraisers of America, Inc. is a national appraisal firm
limiting its appraisal practice to Health Care and Senior Housing properties.
HealthCare Property Appraisers of America, Inc. has prepared over 3,000
appraisal reports in 42 states on a wide variety of health care-oriented
facilities and housing for the elderly. Property types encompass the complete
continuum of health care facilities including:
- General and Acute Care Hospitals
- Psychiatric Hospitals
- Substance Abuse Facilities
- Skilled Nursing Homes
- Assisted Living Homes
- Rest Homes, Personal Care and Homes for the Aged
- Facilities for the Developmentally Disabled
- Independent Living Apartments for Retirees
- Continuing Care Retirement Communities
Our office maintains a constant dialogue with public health departments,
medicaid reimbursement officials and healthcare licensing agencies in all 50
states. We constantly update our data bank in accordance with changes within the
various state health care programs. HealthCare Property Appraisers of America,
Inc. maintains an in-house database which currently contains in excess of 1,300
sales of health care-related and senior housing properties.
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HealthCare Property Appraisers of America, Inc. 9
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The Sandybrook Center, Mt Dora, Florida
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Source of Definitions
* Title XI, Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA), [Pub. L. No. 101-73, 103
Stat; 183 (1989)], 12 U.S.C. 3310, 3331-3351, and section
5(b) of the Bank Holding Company Act, 12 U.S.C. 1844(b); Part
225, Subpart G: Appraisals Paragraph 225.62(f).
* Uniform Standards of Professional Appraisal Practice, Page
I-7.
* Federal Reserve System, 12 CFR Parts 208 and 225, Sec. 225.62.
* Office of the Comptroller of the Currency, 12 CFR part 34,
Sec. 34.42.
* FDIC, 12 CFR Part 323, Sec. 323.2.
* Office of Thrift Supervision, 12 CFR Part 564, Sec. 564.2.
* NCUA, 12 CFR Part 722, Sec. 722.2.
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HealthCare Property Appraisers of America, Inc. 10
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The Sandybrook Center, Mt Dora, Florida
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METHOD OF APPRAISAL
The Appraisal Profession generally recognizes three approaches to value:
1. Cost Approach to Value: The appraiser: (a) estimates the land value as
though the site were vacant and available for development and (b)
estimates the cost to replace subject's improvements (at their same
stage of depreciation). The depreciated Replacement Cost is usually
based upon consultation with local contractors and construction cost
data services.
2. Income Capitalization Approach to Value: The Appraiser compiles and
analyzes market data to estimate subject property's economic rental and
expenses. The net income thus derived is capitalized into a value
estimate. This indicates the property's value to an investor receiving
this income stream and develops the present value of perceived future
benefits and property reversion.
3. Sales Comparison Approach to Value (also known as the Comparative
Approach or Market Data Method): The Appraiser researches sales of
Office Complexes (Medical and General Occupancy) in this market area
and develops units of comparison which are adjusted and applied to the
subject property.
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HealthCare Property Appraisers of America, Inc. 11
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REGIONAL ANALYSIS
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<PAGE>
[INSERT MAP]
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[INSERT MAP]
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The Sandybrook Center, Mt Dora, Florida
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REGIONAL ANALYSIS
OVERVIEW
The subject property is located in Mt Dora, Lake County, Florida. Located in the
central region of the state, the site is approximately 13 miles northwest of
Orlando and 50 miles from the east coast of Florida. Of the five incorporated
municipalities in Lake County, Tavares is the county seat. Mt Dora is considered
a bedroom community of Orlando. Lake County rests in the northwestern section of
the Orlando, Florida Metropolitan Statistical Area (MSA), which is composed of
the following counties: Lake, Orange, Osceola and Seminole.
TERRAIN AND CLIMATE
The Lake County area is primarily flat, typical of central Florida. This area
has several lakes that enhance the subtropical climate. Humidity is a constant
factor reaching 90% during summer evenings and 50% during midday and almost
daily thunderstorms during the summer season contribute to the 51 inches of rain
received annually. Averaging low temperatures of 50 degrees in January and a
highs of 92 degrees in July, with rare occurrences of snow, sleet or freezing
temperatures, have encouraged growth in the Lake county area.
POPULATION AND DEMOGRAPHICS
<TABLE>
<CAPTION>
CHANGE PROJECTED CHANGE
1990-1996 1996-2001
--------- ----------------
<S> <C> <C>
UNITED STATES 6.5% 4.9%
STATE 10.8% 7.7%
ORLANDO MSA 15.2% 10.3%
</TABLE>
The area enjoys a broadly diversified economic base, including the citrus
products, metal fabrication, recreation/leisure service, wood products and
printing industries, which contribute to the growth of the area. According to
Claritas, Inc., (Claritas) a demographics survey firm,
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The Sandybrook Center, Mt Dora, Florida
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the estimated 1996 population of the United States has increased 6.5% since
1900, and an additional 4.9% increase can be expected by 2001.
According to the 1990 Census, Florida's population totaled 12,937,926
residents. Claritas estimates the current population at 14,333,813, representing
an increase of 10.8%. By 2001, the population is projected to reach 15,435,605
residents, an increase of 7.7%.
The 1990 Census indicates the Orlando MSA population totaled 1,224,852
residents. Claritas estimates the current population at 1,410,552, representing
an increase of 15.2%. By 2001, the population is projected to reach 1,555,293
residents, an increase of 10.3%.
DEMOGRAPHICS OF THE ELDERLY POPULATION
Percentage of Change - Elderly Population
<TABLE>
<CAPTION>
1990-1996 1996-2001
--------- ---------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
----- ----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES 14.4% 21.0% 32.9% 11.3% 12.4% 19.0%
STATE 17.2% 21.4% 31.5% 12.5% 13.8% 19.9%
ORLANDO MSA 31.8% 33.9% 44.6% 18.5% 23.8% 27.4%
</TABLE>
The market segments of primary interest in this demographics study are the age
groups: (a) 75 to 79, (b) 80 to 84, and (c) 85 and over. Between 1990 and 1996,
the estimated increase nationally in the 75 to 79 year old age bracket was
14.4%. In the 80 to 84 age group the change was 21.0% and the change in the 85
and over age group was 32.9%. By 2001, the 75 to 79 age group is projected to
increase by an additional 11.3%, the 80 to 84 group by 12.4% and the age group
85 and over by 19.0%.
In the state of Florida, the 75 to 79 age group is currently estimated at
483,173 which is an increase of 17.2% since the last census. The age group 80 to
84 has shown an increase of
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HealthCare Property Appraisers of America, Inc. 14
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The Sandybrook Center, Mt Dora, Florida
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21.4% in that same time period and the 85 and over age group has shown an
increase of 31.5%. It is estimated that by 2001, there will be 636,807, 417,379
and 330,097 residents in these age groups or a change of 12.5%, 13.8%, and
19.9%.
In the Orlando MSA, the 75 to 79 age group is currently estimated at 39,327
which is an increase of 31.8% since the last census. The age group 80 to 84 has
shown an increase of 33.9% in the time period between 1990 and 1996 and the 85
and over age group has shown an increase of 44.6%. It is estimated that by
2001, there will be 46,600, 30,930 and 25,582 residents in these age groups or a
change of 18.5%, 23.8%, and 27.4%.
Median Household Income - Ages 75+
<TABLE>
<CAPTION>
1990-1996 1996-2001
--------- ---------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
----- ----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
U. S. +$3,462 +$3,355 +$3,233 +$3,344 +$3,359 +$3,357
STATE +$3,056 +$3,113 +$3,210 +$2,619 +$2,605 +$2,551
MSA +$3,001 +$3,026 +$2,996 +$2,618 +$2,644 +$2,714
</TABLE>
Nationally, the 75 to 79 age group median household income increased $3,462
between 1990 and 1996 and is projected to increase an additional $3,344 by 2001.
The 80 to 84 age group showed an increase nationally in median household income
of $3,355 between 1990 and 1996 and is projected to increase an additional
$3,359 by 2001. The age group 85 and over showed an increase between 1990 and
1996 of $3,233 and is projected increase an additional $3,357 by 2001.
In the state of Florida, the median household income for the 75-79 age group
increased $3,056 between 1990 and 1996, and is projected to reach $22,232 or
increase an additional $2,619 by 2001. The median household income for the 80 to
84 age group during the time period 1990 to 1996 increased $3,112 and is
expected to reach $21,746 or increase an additional $2,605 by
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HealthCare Property Appraisers of America, Inc. 15
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The Sandybrook Center, Mt Dora, Florida
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2001. The age group 85 and over showed an increase of $3,210 between 1990 and
current estimates and is projected to reach $21,218 or increase an additional
$2,551 by 2001.
In the Orlando MSA, the median household income for the 75-79 age group
increased $3,001 between 1990 and 1996, and is projected to reach $20,801 or
increase an additional $2,618 by 2001. The median household income for the 80
to 84 age group during the 1990-1996 time period increased $3,026 and is
expected to reach $20,620 or increase an additional $2,644 by 2001. The age
group 85 and over showed an increase of $2,996 between 1990 and current
estimates and is projected to reach $20,229 or an additional increase of
$2,714 by 2001.
Elderly Households With Income $35,000+
(As a % of Total Household Income For 55+ population)
<TABLE>
<CAPTION>
1996 2001
1990 ESTIMATED PROJECTED
---- --------- ---------
<S> <C> <C> <C>
UNITED STATES 42.4% 52.0% 58.3%
STATE 38.0% 45.9% 51.1%
ORLANDO MSA 41.6% 50.4% 55.9%
</TABLE>
One of the best indicators of the ability of the subject's residents to be self
supporting (rather than government funded) is their level of affluence. The
appraiser compared the subject's potential local market with that of Florida and
the USA as a whole. The comparison was based upon the percentage of population
aged 55+ with an annual household income exceeding $35,000.
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The Sandybrook Center, Mt Dora, Florida
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GOVERNMENT AND SERVICES
Lake County consists of 5 incorporated communities. The subject property falls
within the jurisdiction of Mt. Dora which has a council/manager with mayor form
of government. Police and fire protection as well as emergency rescue service
are provided by the city of Mt. Dora and Lake County.
UTILITIES
Water and sewer service are provided by the city of Mt. Dora. Electricity is
supplied by Florida Power through city-owned utilities gas service is provided
by Peoples Gas. LP Gas and Fuel Oil are also available and telephone service is
provided by Sprint/United Telephone of Florida.
EDUCATION
The Mt. Dora school district has one each of elementary, middle, high and
private schools. Vocational-Technical institutions in the area include Lake
County Voc-Tech, Orlando Voc-Tech and Winter Park Voc-Tech. Among the area's
facilities for higher education are Lake-Sumter and Valencia Community Colleges
and campuses of the Universities of Central Florida, Florida and Stetson
University.
TRANSPORTATION
The area's principal highways include U. S. Highways 441 (west and south to
Orlando) and 19 (north and west). Florida Highways 44 and 46 (both E-W) offer
access to Interstates 75, to the west, and Interstate 4, to the east, both
approximately 27 miles away.
Local commercial airports include Leesburg Municipal (paved) and Mid-Florida at
Eustis (grass), with the major commercial airport being the Orlando
International, with 14 airlines and approximately 1,700 daily flights. Freight
rail service by Central Florida Railroad and two trucking companies serve the
area and bus service is also available.
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The Sandybrook Center, Mt Dora, Florida
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HEALTH CARE
There are two hospitals serving the Lake County area; Leesburg Regional Medical
Center (294 beds), 15 miles to the west, and Florida Hospital Waterman (182
beds) six miles north. Medical assistance is provided by approximately 219
physicians and 71 dentists. The Lake County area has 7 other nursing homes
with more than 700 beds, including: Lake Eustis, Oakwood, Mt. Dora, Lake Port
and Leesburg.
ECONOMY
There are more than 6 banking and savings and loan institutions in the area,
including Barnett Bank of Lake County, First Union Bank, Citizens National Bank,
Sun Bank and United Southern Bank, with assets exceeding $2 billion.
According to the Places Rated Almanac, the Orlando MSA ranks 2nd of the nation's
343 MSAs in the area of employment opportunity. The area is projected to show a
growth rate of 15.27% in new jobs, with an increase of 97,521 white collar and
21,815 blue collar positions expected.
The 1995 Survey of Buying Power by Sales and Marketing Management, indicates the
per household effective buying income for the Orlando MSA is $35,703, for Lake
County it is $26,463 and the national median is $37,070. Per household retail
sales for the Orlando MSA is $27,122, Lake County households spent an average of
$16,915 and the national median is $23,209. The Orlando MSA was rated in the
top 50 for household expenditures for health care with over $9.9 million.
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The Sandybrook Center, Mt Dora, Florida
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Distribution by sector and percentage of employees is as follows:
<TABLE>
<CAPTION>
Sector Percentage
- ------ ----------
<S> <C>
Services 36.2%
Manufacturing 10.2%
Wholesale/Retail Trade 24.2%
Construction 7.9%
Transportation/Communications/Utilities 7.5%
Finance/Insurance/Real Estate 7.5%
Government 3.7%
Agriculture/Forestry/Fishing 2.6%
Mining 0.1%
</TABLE>
The area's major employers are:
<TABLE>
<CAPTION>
Number
Company Name Employees Product/Service
- ------------ --------- ---------------
<S> <C> <C>
Florida Crushed Stone Company 915 Mining
Golden Gems Growers 700 Citrus
Sprint/United Telephone 580 Telecommunications
Coca Cola Foods 350 Citrus
Mission Inn Golf/Tennis Resort 250 Leisure Resort
Sundor Brands 210 Citrus
Growers Container Co-Op, Inc. 190 Citrus
Silver Springs Citrus 158 Citrus
White Aluminum Products, Inc. 155 Metal Fabricators
Clermont Builders Supply 95 Construction
Royal Aluminum, Inc. 73 Aluminum Bldg. Products
</TABLE>
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The Sandybrook Center, Mt Dora, Florida
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United States/State/MSA Household Income
(General Population)
<TABLE>
<CAPTION>
% OF CHANGE
-----------
1990-1996 1996-2001
--------- ---------
<S> <C> <C>
UNITED STATES 21.7% 15.4%
STATE 16.2% 11.8%
ORLANDO MSA 16.7% 11.8%
</TABLE>
An important indicator of economic health is growth in Median Household Income.
The national increase in Median Household Income between 1990 and 1996 was
21.7%. Claritas projects the National Median Household Income will reach $42,259
(i.e. increase by 15.4%) by 2001.
Median Household Income for Florida in 1996 is estimated at $31,981, or an
increase of 16.2% since 1989. It is projected that by 2001 the Median Household
Income will reach $35,763, or increase by 11.8%.
Median Household Income for the Orlando MSA in 1996 has increased to $35,293, or
16.7%, since 1989. It is projected that by 2001 the Median Household Income will
reach $39,458, or increase by 11.8%.
Number of Housing Units
<TABLE>
<CAPTION>
% OF CHANGE
-----------
1990-1996 1996-2001
--------- ---------
<S> <C> <C>
UNITED STATES 7.6% 5.7%
STATE 13.5% 8.2%
ORLANDO MSA 18.1% 10.9%
</TABLE>
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The Sandybrook Center, Mt Dora, Florida
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Growth in the number of housing units in a specified area is another good
indication of economic health. Housing units increased 7.6% nationally between
1990 and 1996. By 2001, it is projected that total housing units nationally will
have increased by an additional 5.5%.
The number of housing units in Florida is currently 6,922,017, which is an
increase of 13.5% since the 1990 Census. It is estimated that by 2001, this
figure will reach 7,490,865, or increase by 8.2%.
The number of housing units in the Orlando MSA is currently 619,148, which is an
increase of 18.1% since the 1990 Census. It is estimated that by 2001, this
figure will reach 686,533, or increase by 10.9%.
METROPOLITAN STATISTICAL AREA (MSA) DATA
The economy of Mt Dora and Lake County are strongly effected by the Orlando,
Florida Metropolitan Statistical Area. The appraiser considered the cost of
living in Mt Dora, as this factor affects The Sandybrook Center in two ways: (a)
the likelihood of retirees remaining in the area or being attracted to it and
(b) payroll costs. The Places Rated Almanac Cost of Living Index ranks the
subject MSA 215th of the 343 MSAs nationwide (with the first place MSA having
the lowest cost of living). Ranked against the national average of 100, the
Orlando MSA indexes are:
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The Sandybrook Center, Mt Dora, Florida
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<TABLE>
<S> <C>
Housing:
Median Price: 105
Utilities: 77
Property Taxes: 168
Miscellaneous Living Cost Indexes:
College Tuition: 74
Food: 95
Health Care: 116
Transportation: 101
</TABLE>
The Places Rated Almanac rates and ranks 343 metropolitan areas on ten factors
that greatly influence the quality of an area: costs of living, job outlook,
housing, transportation, education, health care, crime, the arts, recreation,
and climate. The Orlando MSA ranked as follows:
<TABLE>
<S> <C>
Costs of Living 215
Job Outlook 2
Housing 251
Transportation 103
Education 80
Health Care 233
Crime 317
The Arts 57
Recreation 20
Climate 269
</TABLE>
Based on these factors, the Orlando MSA had an overall rank of 121st of the 343
Metropolitan Statistical Areas.
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The Sandybrook Center, Mt Dora, Florida
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TRENDS, FUTURE OUTLOOK, CONCLUSIONS
The Mt. Dora/Lake County area has become an attractive retirement area over the
past five years. Furthermore, it is now attracting the younger, middle class
moving out of Orlando to the "suburbs". Drawing strength from the metropolitan
area of Orlando, 15 miles south, the local population continues to increase at
almost double the national average. Income growth rates of the area, although
slightly below the national average, continue to keep pace with the state.
Housing growth rates for the area will continue to double the national average.
The elderly population of the metropolitan area has grown faster than the state
or national averages in the recent past and, although dropping somewhat, will
continue to grow at rates above the state and national averages. Incomes for the
elderly show signs of steady increases over the state's average with more than
50% of the 75+ population having incomes greater than $35,000 by the year 2001.
The developing nature of this area suggests that there will be increasing need
for more office and commercial enterprises. The subject's zoning, location on
the same highway as the new hospital, suggest office/commercial development in
the future. However, for the foreseeable future, this outlying location will
probably not attract too many buyer/users of office properties as this type user
will probably go to the downtown or hospital area first.
*All population and household income figures were taken from the most recent
U.S. Census (if actual numbers) or were provided to the appraiser by Claritas,
Inc. (if projected numbers) or by the local Chamber of Commerce.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 23
<PAGE>
(MSA 5960) Orlando, FL- (Weight: 100.0%)
Household Trend Report
<TABLE>
<CAPTION>
1980 1990 % Chg 1996 %Chg 2001 % Chg
Universe Census Census 80-90 (Est.) 90-96 (Proj.) 96-01
- -------- ------ ------ ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Population 804927 1224852 52.2 1410552 15.2 1555293 10.3
Households 294269 465275 58.1 541013 16.3 599613 10.8
Families 216479 323858 49.6 372240 14.9 408470 9.7
Housing Units. 327239 524197 60.2 619148 18.1 686533 10.9
Grp Qrt. Pop 19540 32463 66.1 32299 -0.5 32463 0.5
Household Size 2.67 2.56 -4.0 2.55 -0.6 2.54 -0.3
</TABLE>
<TABLE>
<CAPTION>
1979 1989 % Chg 1996 % Chg 2001 % Chg
Income (Census) (Census) 79-89 (Est.) 89-96 (Proj.) 96-01
- ------ -------- -------- ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate($MM) 5645 17797 215.2 25117 41.1 32339 28.8
Per Capita.... 7014 14530 107.2 17807 22.6 20793 16.8
Avg. Household 18852 37751 100.2 45830 21.4 53183 16.0
Median Hhold... 15268 30239 98.1 35293 16.7 39458 11.8
Avg. Family HH 21236 43333 104.1 52482 21.1 60284 14.9
Med. Family HH 17568 35221 100.5 41343 17.4 46081 11.5
Avg. HH Wealth 125586 139006 10.7
Med. HH Wealth 60843 69138 13.6
</TABLE>
<TABLE>
<CAPTION>
Households
Household Income 1990 Census 1996 Estimate 2001 Proj.
- ---------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Total............................ 465275 541013 599613
Less than $5,000............ 20084 4.3% 17247 3.2% 155513 2.6%
$5,000 to $9 999............ 33183 7.1% 35019 6.5% 36829 6.1%
$10,000 to $14,999........... 41490 8.9% 38296 7.1% 36164 6.0%
$15,000 to $19,999........... 45418 9.8% 41535 7.7% 39387 6.6%
$20,000 to $24,999........... 47401 10.2% 47399 8.8% 46100 7.7%
$25,000 to $29,999........... 42778 9.2% 45614 8.4% 45437 7.6%
$30,000 to $34,999........... 41242 8.9% 43117 8.0% 44898 7.5%
$35,000 to $39,999........... 34571 7.4% 38662 7.1% 39234 6.5%
$40,000 to $44,999........... 29408 6.3% 35228 6.6% 36578 6.1%
$45,000 to $49,999........... 24293 5.2% 30636 5.7% 35966 6.0%
$50,000 to $59,999........... 36369 7.8% 51501 9.5% 60155 10.0%
$60,000 to $74,999........... 32129 6.9% 48057 8.9% 61054 10.2%
$75,000 to $99,999........... 20463 4.4% 38373 7.1% 53525 8.9%
$100,000 to $124,999.......... 7323 1.6% 16350 3.0% 27369 4.6%
$125,000 to $149,999.......... 3279 0.7% 5492 1.0% 11167 1.9%
$150,000 to $249,999.......... 3676 0.8% 5064 0.9% 6321 1.1%
$250,000 to $499,999.......... 1555 0.3% 2164 0.4% 2669 0.4%
$500,000 or More.............. 613 0.1% 959 0.2% 1247 0.2%
</TABLE>
- --------------------------
NOTE: When the median household wealth for an area is less than $25,000 it
will be listed on this report as $24,999.
Data on income are expressed in "current" dollars for each year. Decennial
Census data reflects prior year income. 1996 estimates and 2001 projections
produced by Claritas Inc. Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 24
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
(MSA 5960) Orlando, FL
(Weight: 100.0%)
Senior Life Report (Page 1 of 7)
<TABLE>
<CAPTION>
Population Age 55 Years and Over
--------------------------------
Population by Age and Sex 1990 1996 Estimate 2001 Proj.
- ------------------------- ------------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
Population Age 55 +............... 263270 100.0% 314462 100.0% 361506 100.0%
55 to 59....................... 51540 19.6% 60480 19.2% 74735 20.7%
60 to 64....................... 53923 20.5% 57736 18.4% 65920 18.2%
65 to 69....................... 53734 20.4% 58975 18.8% 61400 17.0%
70 to 74....................... 41674 15.8% 52871 16.8% 56339 15.6%
75 to 79....................... 29844 11.3% 39327 12.5% 46600 12.9%
80 to 84....................... 18664 7.1% 24990 7.9% 30930 8.6%
85 + .......................... 13891 5.3% 20083 6.4% 25582 7.1%
Males Age 55 + ................... 116341 44.2% 138544 44.1% 159652 44.2%
55 to 59....................... 24694 9.4% 28676 9.1% 35641 9.9%
60 to 64....................... 24977 9.5% 27208 8.7% 30971 8.6%
65 to 69....................... 24475 9.3% 27258 8.7% 28584 7.9%
70 to 74....................... 18695 7.1% 23487 7.5% 25584 7.1%
75 to 79....................... 12292 4.7% 16456 5.2% 19231 5.3%
80 to 84....................... 7037 2.7% 9481 3.0% 12030 3.3%
85 + .......................... 4171 1.6% 5978 1.9% 7611 2.1%
Female Age 55 +................... 146929 55.8% 175918 55.9% 201854 55.8%
55 to 59....................... 26846 10.2% 31804 10.1% 39094 10.8%
60 to 64....................... 28946 11.0% 30528 9.7% 34949 9.7%
65 to 69....................... 29259 11.1% 31717 10.1% 32816 9.1%
70 to 74....................... 22979 8.7% 29384 9.3% 30755 8.5%
75 to 79....................... 17552 6.7% 22871 7.3% 27369 7.6%
80 to 84....................... 11627 4.4% 15509 4.9% 18900 5.2%
85 + .......................... 9720 3.7% 14105 4.5% 17971 5.0%
</TABLE>
<TABLE>
<CAPTION>
Population
----------
Population by Age and Sex 1990 1996 Estimate 2001 Proj.
- ------------------------- ------------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
Total Population............... 1224852 100.0% 1410552 100.0% 1555293 100.0%
White Population........... 1050807 85.8% 1199203 85.0% 1313059 84.4%
Age 65 and Over.......... 146181 11.9% 181933 12.9% 203543 13.1%
Black Population........... 148999 12.2% 177398 12.6% 200249 12.9%
Age 65 and Over.......... 10717 0.9% 12694 0.9% 14624 0.9%
Asian Population........... 21369 1.7% 29860 2.1% 37538 2.4%
Age 65 and Over.......... 746 0.1% 1330 0.1% 2297 0.1%
Am. Indian Population...... 3677 0.3% 4091 0.3% 4447 0.3%
Age 65 and Over.......... 163 0.0% 289 0.0% 387 0.0%
Hispanic Population........ 100722 8.2% 149751 10.6% 198096 12.7%
Age 65 and Over.......... 6257 0.5% 10320 0.7% 15602 1.0%
</TABLE>
1996 estimates and 20001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 25
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
(MSA 5960) Orlando, FL
(Weight: 100.0%)
Senior Life Report (Page 2 of 7)
<TABLE>
<CAPTION>
Household Income by Households with Householder Age 55 Years and Over
Age of Householder 1990 1996 Estimate 2001 Proj.
- ------------------ --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 55 to 64.......... 60637 100.0% 65623 100.0% 78330 100.0%
Under $5,000................. 2540 4.2% 2008 3.1% 1988 2.5%
$5,000 - $9,999.............. 3886 6.4% 3764 5.7% 4420 5.6%
$10,000 - $14,999............. 5138 8.5% 4352 6.6% 4472 5.7%
$15,000 - $24,999............. 11567 19.1% 10475 16.0% 11168 14.3%
$25,000 - $34,999............. 10513 17.3% 10483 16.0% 11833 15.1%
$35,000 - $49,999............. 11173 18.4% 12348 18.8% 14448 18.4%
$50,000 - $74,999............. 9409 15.5% 12236 18.6% 15638 20.0%
$75,000 - $99,999............. 3495 5.8% 5198 7.9% 7037 9.0%
$100,000 - $149,999............ 1921 3.2% 3459 5.3% 5645 7.2%
$150,000 - $149,999............ 615 1.0% 813 1.2% 1045 1.3%
$250,000 - $499,999............ 267 0.4% 329 0.5% 436 0.6%
$500,000 - or More............. 113 0.2% 158 0.2% 200 0.3%
Median Income..................... 31836 37100 40485
Householder Age 65 to 69.......... 31455 100.0% 34953 100.0% 35189 100.0%
Under $5,000................. 1578 5.0% 1292 3.7% 1018 2.9%
$5,000 - $9,999.............. 3784 12.0% 3679 10.5% 3310 9.4%
$10,000 - $14,999............. 4327 13.8% 3966 11.3% 3399 9.7%
$15,000 - $24,999............. 7919 25.2% 7847 22.5% 7128 20.3%
$25,000 - $34,999............. 5277 16.8% 6045 17.3% 6338 18.0%
$35,000 - $49,999............. 4215 13.4% 5365 15.3% 5915 16.8%
$50,000 - $74,999............. 2841 9.0% 4181 12.0% 4824 13.7%
$75,000 - $99,999............. 773 2.5% 1418 4.1% 1801 5.1%
$100,000 - $149,999............ 463 1.5% 811 2.3% 1135 3.2%
$150,000 - $149,999............ 164 0.5% 209 0.6% 186 0.5%
$250,000 - $499,999............ 80 0.3% 90 0.3% 88 0.3%
$500,000 - or More............. 34 0.1% 50 0.1% 47 0.1%
Median Income..................... 22625 26146 29322
Householder Age 70 to 74.......... 26829 100.0% 30870 100.0% 32441 100.0%
Under $5,000................. 1362 5.1% 1144 3.7% 938 2.9%
$5,000 - $9,999.............. 3330 12.4% 3354 10.9% 3145 9.7%
$10,000 - $14,999............. 3828 14.3% 3639 11.8% 3225 9.9%
$15,000 - $24,999............. 6779 25.3% 6941 22.5% 6644 20.5%
$25,000 - $34,999............. 4445 16.6% 5297 17.2% 5834 18.0%
$35,000 - $49,999............. 3558 13.3% 4731 15.3% 5418 16.7%
$50,000 - $74,999............. 2293 8.5% 3585 11.6% 4377 13.5%
$75,000 - $99,999............. 607 2.3% 1184 3.8% 1587 4.9%
$100,000 - $149,999............ 389 1.4% 678 2.2% 977 3.0%
$150,000 - $149,999............ 139 0.5% 187 0.6% 170 0.5%
$250,000 - $499,999............ 73 0.3% 87 0.3% 83 0.3%
$500,000 - or More............. 26 0.1% 43 0.1% 43 0.1%
Median Income..................... 22220 25674 28888
</TABLE>
1996 estimates and 20001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 26
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
(MSA 5960) Orlando, FL
(Weight: 100.0%)
Senior Life Report (Page 3 of 7)
<TABLE>
<CAPTION>
Household Income by Households with Householder Age 55 Years and Over
Age of Householder 1990 1996 Estimate 2001 Proj.
- ------------------ --------------------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 75 to 79.......... 18809 100.0% 24308 100.0% 28615 100.0%
Under $5,000................. 1749 9.3% 1685 6.9% 1485 5.2%
$5,000 - $9,999.............. 4290 22.8% 4930 20.3% 4877 17.0%
$10,000 - $14,999............. 3290 17.5% 3886 16.0% 4353 15.2%
$15,000 - $24,999............. 4159 22.1% 5194 21.4% 6193 21.6%
$25,000 - $34,999............. 2234 11.9% 3246 13.4% 4389 15.3%
$35,000 - $49,999............. 1571 8.4% 2546 10.5% 3450 12.1%
$50,000 - $74,999............. 953 5.1% 1732 7.1% 2397 8.4%
$75,000 - $99,999............. 272 1.4% 585 2.4% 788 2.8%
$100,000 - $149,999............ 182 1.0% 345 1.4% 530 1.9%
$150,000 - $149,999............ 72 0.4% 99 0.4% 83 0.3%
$250,000 - $499,999............ 28 0.1% 44 0.2% 48 0.2%
$500,000 - or More............. 9 0.0% 16 0.1% 22 0.1%
Median Income..................... 15182 18183 20801
Householder Age 80 to 84.......... 12094 100.0% 16520 100.0% 19208 100.0%
Under $5,000................. 1182 9.8% 1201 7.3% 1031 5.4%
$5,000 - $9,999.............. 2776 23.0% 3363 20.4% 3331 17.3%
$10,000 - $14,999............. 2110 17.4% 2649 16.0% 2916 15.2%
$15,000 - $24,999............. 2642 21.8% 3518 21.3% 4139 21.5%
$25,000 - $34,999............. 1383 11.4% 2160 13.1% 2942 15.3%
$35,000 - $49,999............. 1001 8.3% 1702 10.3% 2251 11.7%
$50,000 - $74,999............. 625 5.2% 1184 7.2% 1594 8.3%
$75,000 - $99,999............. 174 1.4% 394 2.4% 551 2.9%
$100,000 - $149,999............ 112 0.9% 233 1.4% 348 1.8%
$150,000 - $149,999............ 58 0.5% 63 0.4% 55 0.3%
$250,000 - $499,999............ 21 0.2% 36 0.2% 33 0.2%
$500,000 - or More............. 10 0.1% 17 0.1% 17 0.1%
Median Income..................... 14950 17976 20620
Householder Age 85 +.............. 7865 100.0% 10889 100.0% 13678 100.0%
Under $5,000................. 792 10.1% 802 7.4% 748 5.5%
$5,000 - $9,999.............. 1896 24.1% 2301 21.1% 2465 18.0%
$10,000 - $14,999............. 1377 17.5% 1766 16.2% 2097 15.3%
$15,000 - $24,999............. 1650 21.0% 2288 21.0% 2924 21.4%
$25,000 - $34,999............. 859 10.9% 1387 12.7% 2028 14.8%
$35,000 - $49,999............. 638 8.1% 1089 10.0% 1552 11.3%
$50,000 - $74,999............. 395 5.0% 758 7.0% 1125 8.2%
$75,000 - $99,999............. 118 1.5% 240 2.2% 399 2.9%
$100,000 - $149,999............ 85 1.1% 168 1.5% 255 1.9%
$150,000 - $249,999............ 33 0.4% 54 0.5% 47 0.3%
$250,000 - $499,999............ 16 0.2% 25 0.2% 25 0.2%
$500,000 - or More............. 6 0.1% 11 0.1% 13 0.1%
Median Income..................... 14519 17515 20229
</TABLE>
1996 estimates and 20001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 27
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
(MSA 2800) Fort Worth et al. TX
(Weight: 100.0%)
(Page 4 of 7)
Senior Life Report
<TABLE>
<CAPTION>
Total Households
Household Income 1990 Census 1996 Estimate 2001 Proj.
- ---------------- ------------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Total............................ 465275 100.0% 541013 100.0% 599613 100.0%
Under $5,000.................. 20084 4.3% 17247 3.2% 15513 2.6%
$5,000 - $9,999............... 33183 7.1% 35019 6.5% 36829 6.1%
$10,000 - $14,999............. 41490 8.9% 38296 7.1% 36164 6.0%
$15,000 - $24,999............. 92819 19.9% 88934 16.4% 85487 14.3%
$25,000 - $34,999............. 84020 18.1% 88731 16.4% 90335 15.1%
$35,000 - $49,999............. 88272 19.0% 104826 19.4% 111778 18.6%
$50,000 - $74,999............. 68498 14.7% 99558 18.4% 121209 20.2%
$75,000 - $99,999............. 20463 4.4% 38373 7.1% 53525 8.9%
$100,000 - $124,999........... 7323 1.6% 16350 3.0% 27369 4.6%
$125,000 - $149,999........... 3279 0.7% 5492 1.0% 11167 1.9%
$150,000 - $249,999........... 3676 0.8% 5064 0.9% 6321 1.1%
$250,000 - $499,999........... 1555 0.3% 2164 0.4% 2669 0.4%
$500,000 or More.............. 613 0.1% 959 0.2% 1247 0.2%
Median Household Income.......... 30239 35293 39458
</TABLE>
<TABLE>
<CAPTION>
Total Specified Owner-Occupied Housing Units
Housing Value 1990 Census 1996 Estimate 2001 Proj.
- ------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total Units...................... 229638 267802 297170
Less than $15,000........... 1099 0.5% 1077 0.4% 1058 0.4%
$15,000 to $19 999........... 792 0.3% 622 0.2% 561 0.2%
$20,000 to $24,999........... 1369 0.6% 1052 0.4% 893 0.3%
$25,000 to $29,999........... 2265 1.0% 1740 0.6% 1402 0.5%
$30,000 to $34,999........... 2885 1.3% 2406 0.9% 2000 0.7%
$35,000 to $39,999........... 4310 1.9% 3207 1.2% 2708 0.9%
$40,000 to $44,999........... 6536 2.8% 4508 1.7% 3522 1.2%
$45,000 to $49,999........... 8527 3.7% 6545 2.4% 4870 1.6%
$50,000 to $59,999........... 23831 10.4% 19397 7.2% 16134 5.4%
$60,000 to $74,999........... 44722 19.5% 40672 15.2% 35624 12.0%
$75,000 to $99,999........... 61745 26.9% 68122 25.4% 67213 22.6%
$100,000 to $124,999.......... 25841 11.3% 46518 17.4% 55093 18.5%
$125,000 to $149,999.......... 15767 6.9% 23827 8.9% 36548 12.3%
$150,000 to $174,999.......... 9462 4.1% 15217 5.7% 21201 7.1%
$175,000 to $199,999.......... 5661 2.5% 9465 3.5% 14056 4.7%
$200,000 to $249,999.......... 6156 2.7% 9458 3.5% 13801 4.6%
$250,000 to $299,999.......... 3390 1.5% 5361 2.0% 7631 2.6%
$300,000 to $399,999.......... 2671 1.2% 4330 1.6% 6357 2.1%
$400,000 to $499,999.......... 1049 0.5% 1886 0.7% 2885 1.0%
$500,000 or More.............. 1560 0.7% 2392 0.9% 3613 1.2%
Median Housing Value............. 82484 94331 105718
</TABLE>
1996 Estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 28
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
(MSA 640) Austin et al, TX (Weight: 100.0%)
Senior Life Report (Page 5 of 7)
<TABLE>
<CAPTION>
Household
Type and Relationship Population 65+
- --------------------- -------------------
<S> <C> <C>
Total ............................. 158618 100.0%
In Family Households............... 110298 69.5%
Householder....................... 57887 36.5%
Spouse............................ 40454 25.5%
0ther Relative.................... 11372 7.2%
Nonrelative....................... 585 0.4%
In Group Quarters.................. 7181 4.5%
Institutionalized................. 6178 3.9%
Other............................. 1003 0.6%
</TABLE>
<TABLE>
<CAPTION>
Household
Type and Relationship Population 65+
- --------------------- --------------
<S> <C> <C>
In Nonfamily Hhlds ... 41139 25.9%
Male Householder..... 8804 5.6%
Living Alone........ 8017 5.1%
Not Living Alone.... 787 0.5%
Female Householder... 30930 19.5%
Living Alone........ 30016 18.9%
Not Living Alone.... 914 0.6%
Nonrelative .......... 1405 0.9%
</TABLE>
<TABLE>
<CAPTION>
Spec. Owner-Occ Units
Monthly Owner Costs as a by Age of Householder
Percent of 1989 HH Inc. Total Units 65 Yrs +
- ----------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Total................................ 232331 100.0% 53627 100.0%
Less than 20%....................... 119340 51.4% 35108 65.5%
20 - 24% ........................... 35298 15.2% 4699 8.8%
25 - 29% .......................... 25144 10.8% 3276 6.1%
30 - 34% .......................... 15213 6.5% 2115 3.9%
35% or More ....................... 35914 15.5% 7902 14.7%
Not computed ...................... 1422 0.6 527 1.0%
</TABLE>
<TABLE>
<CAPTION>
Spec. Renter-Occ Units
Gross Rent as Percent by Age of Householder
of 1989 HH Income Total Units 65 Yrs +
- ----------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Total. ............................. 165462 100.0% 18466 100.0%
Less than 20%...................... 43929 26.5% 2959 16.0%
20 - 24%........................... 27026 16.3% 1968 10.7%
25 - 29%........................... 21490 13.0% 2061 11.2%
30 - 34%........................... 15421 9.3% 1585 8.6%
35% or More........................ 51375 31.0% 8489 46.0%
Not computed....................... 6221 3.8% 1404 7.6%
</TABLE>
<TABLE>
<CAPTION>
Occupied Housing Units
Attribute Total Units Hhldr 65 Yrs +
- --------- ----------------- -----------------
<S> <C> <C> <C> <C>
Owner Occupied Units .............. 298797 64.2% 81555 81.4%
Renter Occupied Units .............. 166478 35.8% 18591 18.6%
Complete Plumbing Facil............. 463897 99.7% 99786 99.6%
Lacking Plumbing Facil ............ 1378 0.3% 360 0.4%
With Telephone .................... 442741 95.2% 97916 97.8%
No Telephone ...................... 22534 4.8% 2230 2.2%
One or More Vehicles ............... 434282 93.3% 85617 85.5%
No Vehicles Available ............. 30993 6.7% 14529 14.5%
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 29
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
(MSA 5960) Orlando, FL
(Weight: 100.0%)
(Page 6 of 7)
Senior Life Report
<TABLE>
<CAPTION>
1990 Households by Age of Householder
Poverty Status by Household Type Total Age 65-74 Age 75+
- -------------------------------- -------------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Total............................ 466069 100.0% 59321 100.0% 38300 100.0%
Married Couple Family......... 264219 56.7% 34993 59.0% 15324 40.0%
Other Family.................. 62475 13.4% 4688 7.9% 2882 7.5%
Male Householder............ 14715 3.2% 853 1.4% 597 1.6%
Female Householder.......... 47760 10.2% 3835 6.5% 2285 6.0%
Nonfamily..................... 139375 29.9% 19640 33.1% 20094 52.5%
HHer Living Alone........... 105275 22.6% 18580 31.3% 19453 50.8%
HHer Not Living Alone....... 34100 7.3% 1060 1.8% 641 1.7%
Above Poverty................. 421733 90.5% 53424 90.1% 32017 83.6%
Married Couple Family....... 253549 54.4% 33607 56.7% 14383 37.6%
Other Family................ 49819 10.7% 4183 7.1% 2504 6.5%
Male Householder.......... 13089 2.8% 745 1.3% 555 1.4%
Female Householder........ 36730 7.9% 3438 5.8% 1949 5.1%
Nonfamily..................... 118365 25.4% 15634 26.4% 15130 39.5%
HHer Living Alone........... 89412 19.2% 14838 25.0% 14654 38.3%
HHer Not Living Alone....... 28953 6.2% 796 1.3% 476 1.2%
Below Poverty................. 44336 9.5% 5897 9.9% 6283 16.4%
Married Couple Family....... 10670 2.3% 1386 2.3% 941 2.5%
Other Family................ 12656 2.7% 505 0.9% 378 1.0%
Male Householder.......... 1626 0.3% 108 0.2% 42 0.1%
Female Householder........ 11030 2.4% 397 0.7% 336 0.9%
Nonfamily..................... 21010 4.5% 4006 6.8% 4964 13.0%
HHer Living Alone........... 15863 3.4% 3742 6.3% 4799 12.5%
HHer Not Living Alone....... 5147 1.1% 264 0.4% 165 0.4%
</TABLE>
1996 Estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
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HealthCare Property Appraisers of America, Inc. 30
<PAGE>
The Sandybrook Center, Mt Dora, Florida
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(MSA 5960) Orlando, FL
(Weight: 100.0%)
(Page 7 of 7)
Senior Life Report
<TABLE>
<CAPTION>
Civilian Noninstitutionalized Persons Age 16+
Mobility and Disability Total Age 65+ Age 75+
- ----------------------- ------------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Persons.......................... 938554 100.0% 152432 100.0% 56616 100.0%
With Mblty or Care Lmts....... 58824 6.3% 26792 17.6% 15734 27.8%
Mobility Limits Only........ 19866 2.1% 11328 7.4% 6981 12.3%
Self Care Limits Only....... 22479 2.4% 5836 3.8% 2552 4.5%
Both Limits................. 16479 1.8% 9628 6.3% 6201 11.0%
No Mblty or Care Limits....... 879730 93.7% 125640 82.4% 40882 72.2%
With a Work Disability........ 107470 11.5% 46678 30.6%
In Labor Force.............. 29524 3.1% 2405 1.6%
Employed.................. 26020 2.8% 2244 1.5%
Unemployed................ 3504 0.4% 161 0.1%
Not in Labor Force.......... 77946 8.3% 44273 29.0%
Prevented from Working..... 65887 7.0% 37819 24.8%
Not Prevented from Wrk..... 12059 1.3% 6454 4.2%
No Work Disability............ 831084 88.5% 105754 69.4%
In Labor Force.............. 614395 65.5% 16933 11.1%
Employed.................. 586730 62.5% 16228 10.6%
Unemployed................ 27665 2.9% 705 0.5%
Not in Labor Force.......... 216689 23.1% 88821 58.3%
</TABLE>
1996 Estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
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The Sandybrook Center, Mt Dora, Florida
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(MSA 640) Austin et al, TX (Page 1 of 2)
1990 Demographic Overview Report (Weight: 100.0%)
<TABLE>
<S> <C>
Population 1224852
Households 466069
Families 326694
Vehicles 790524
Housing Units 524197
Group Quarters 31747
Avg. HH Size 2.56
Median Age 33.3
Median HH Inc 30212
Median Value 81992
</TABLE>
<TABLE>
<CAPTION>
Income in 1989 Household Family Non-Family
- -------------- ------------------ ----------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Less than $5,000 .................. 20120 4.3% 8984 2.7% 12172 8.7%
$5,000 to $9,999 .................. 33263 7.1% 13714 4.2% 20606 14.8%
$10,000 to $12,499 ................ 22601 4.8% 12168 3.7% 11308 8.1%
$12,500 to $14,999 ................ 19006 4.1% 11200 3.4% 8116 5.9%
$15,000 to $17,499 ................. 23652 5.1% 14039 4.3% 10106 7.3%
$17,500 to $19,999 ................ 21841 4.7% 14319 4.4% 7777 5.6%
$20,000 to $22,499 ................. 26590 5.7% 16896 5.2% 9972 7.2%
$22,500 to $24,999 ................. 21005 4.5% 14479 4.4% 6672 4.8%
$25,000 to $27,499 ................ 23772 5.1% 16246 5.0% 7530 5.4%
$27,500 to $29,999 ................ 19153 4.1% 14226 4.4% 4804 3.4%
$30,000 to $32,499 ................. 23952 5.1% 17020 5.2% 6837 4.9%
$32,500 to $34,999 ................. 17337 3.7% 13307 4.1% 3746 2.7%
$35,000 to $37,499 ................ 19936 4.3% 15048 4.6% 4751 3.4%
$37,500 to $39,999 ................. 14581 3.1% 11407 3.5% 2863 2.1%
$40,000 to $42,499 ................ 17332 3.7% 13802 4.2% 3472 2.5%
$42,500 to $44,999 ................ 12059 2.6% 9964 3.0% 1862 1.3%
$45,000 to $47,499 ................ 13373 2.9% 10998 3.4% 2172 1.6%
$47,500 to $49,999 ................. 10944 2.3% 8947 2.7% 1648 1.2%
$50,000 to $54,999 ................ 20668 4.4% 17246 5.3% 2967 2.1%
$55,000 to $59,999 ................. 15742 3.4% 13130 4.0% 2170 1.6%
$60,000 to $74,999 ................. 32166 6.9% 27349 8.4% 3829 2.7%
$75,000 to $99,999 ................ 20448 4.4% 17616 5.4% 2297 1.6%
$100,000 to $124,999 ............... 7346 1.6% 6448 2.0% 728 0.5%
$125,000 to $149,999 .............. 3303 0.7% 2964 0.9% 287 0.2%
$150,000 or More .................. 5879 1.3% 5177 1.6% 633 0.5%
Aggregate Income ($Mil)............. 17595 13901 3468
Median Income....................... 30212 34389 19856
Average Income...................... 37753 42551 24887
</TABLE>
<TABLE>
<CAPTION>
Persons Persons
Educational Attainment 25 Yrs & Over Employment Status 16 Yrs & Over
- ---------------------- ---------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
Less than 9th Grade 56581 7.1% In Labor Force 657310 68.1%
9th - 12th Grade, No Dip 115286 14.4% Civilian 643919 66.7%
High School Graduate 240613 30.0% Employed 612750 63.5%
Some College, No Degree 168936 21.1% Male 332024 34.4%
Associate Degree 57568 7.2% Female 280726 29.1%
Bachelor's Degree 114726 14.3% Unemployed 31169 3.2%
Graduate/Prof. Degree 48600 6.1% Not in Labor Force 307441 31.9%
</TABLE>
Source: 1990 Census of the Population and Housing Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
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HealthCare Property Appraisers of America, Inc. 32
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The Sandybrook Center, Mt Dora, Florida
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(MSA 5960) Orlando, FL (Page 2 of 2)
(Weight: 100.0%)
<TABLE>
<CAPTION>
Employed
Industry Persons 16+
- -------- -----------------
<S> <C> <C>
Agriculture/Forest/Fish ........... 16083 2.6%
Mining ............. ............. 455 0.1%
Construction....................... 48260 7.9%
Manufacture-Nondurable............. 18716 3.1%
Manufacture-Durable ............... 43776 7.1%
Transportation ................... 27255 4.4%
Communication/Pub. Util ........... 19065 3.1%
Wholesales Trade .................. 30321 4.9%
Retail Trade ...................... 118048 19.3%
Finance/Ins/Real Estate............ 45749 7.5%
Business & Repair Serv............. 37023 6.0%
Personal Services ................ 36249 5.9%
Entertain/Recreation .............. 35363 5.8%
Professional & Related............. 113516 18.5%
Health Services .................. 40800 6.7%
Educational Services.............. 36176 5.9%
Other Professional ............... 36540 6.0%
Public Administration ............. 22871 3.7%
</TABLE>
<TABLE>
<CAPTION>
Employed
Occupation Persons 16+
---------- -------------------
<S> <C> <C>
Managerial/Prof. Spec............. 158974 25.9%
Exec/Admin/Managerial............ 81729 13.3%
Prof. Specialty.................. 77245 12.6%
Tech./Sales/Admin. Sup............ 208992 34.1%
Technician and Related........... 20763 3.4%
Sales............................ 88164 14.4%
Administration. Support.......... 100065 16.3%
Service Occupation................ 95629 15.6%
Private Household................ 2175 0.4%
Protective Service............... 11395 1.9%
Other Service.................... 82059 13.4%
Farming/Forestry/Fish............. 14273 2.3%
Precision/Craft/Repair............ 66430 10.8%
Operator/Fab./Laborer............. 68452 11.2%
Mach.Op/Assem./Insect............ 21882 3.6%
Trans. & Material Move........... 24746 4.0%
Laborers......................... 21824 3.6%
</TABLE>
<TABLE>
<CAPTION>
Transportation to Work Workers 16+
- ----------------------------------- ----------------
<S> <C> <C>
Drive Alone ...................... 479181 78.0%
Carpooled ........................ 82553 13.4%
Public Transportation ............. 8798 1.4%
All Other ......................... 43850 7.1%
</TABLE>
<TABLE>
<CAPTION>
Travel Time to Work Workers 16+
------------------- ------------------
<S> <C> <C>
Less than 10 Minutes.............. 85640 13.9%
10 to 19 Minutes.................. 183940 29.9%
20 to 29 Minutes.................. 139008 22.6%
30 Minutes or More................ 205794 33.5%
</TABLE>
<TABLE>
<CAPTION>
Occupied
Units In Structure Housing Units
- ----------------------------------- -------------
<S> <C> <C>
1-Detached ....................... 273206 58.7%
1-Attached ....................... 23348 5.0%
2 ................................ 11920 2.6%
3 or 4 ............................ 21921 4.7%
5 to 9 ............................ 27636 5.9%
10 To 19 .......................... 26658 5.7%
20 to 49 ......................... 17363 3.7%
50 or More ....................... 8844 1.9%
Other ............................ 54379 11.7%
</TABLE>
<TABLE>
<CAPTION>
Occupied
Year Structure Built Housing Units
- -------------------- -------------
<S> <C> <C>
1989 To March 1990............ 22956 4.9%
1985 To 1988.................. 93705 20.1%
1980 To 1984.................. 82766 17.8%
1970 To 1979.................. 121781 26.2%
1960 To 1969.................. 63006 13.5%
1950 To 1959.................. 50279 10.8%
1940 To 1949.................. 15871 3.4%
1939 or before................ 14911 3.2%
Median Year Built............. 1977
</TABLE>
<TABLE>
<CAPTION>
Occupied
Year Hhlder Moved In Housing Units
- -------------------- ----------------
<S> <C> <C> <C>
1989 To March 1990 ............... 136405 29.3%
1985 To 1988 ..................... 152483 32.8%
1980 To 1984 ..................... 67442 14.5%
1970 To 1979 ..................... 67379 14.5%
1960 To 1969 ...................... 25299 5.4%
1959 or Before .................... 16267 3.5%
</TABLE>
<TABLE>
<CAPTION>
Occupied
Vehicles Available: Housing Units
--------------------- -----------------
<S> <C> <C>
None................ 30993 6.7%
1................... 173307 37.2%
2................... 189243 40.7%
3................... 54341 11.7%
4................... 13224 2.8%
5 or More........... 4167 0.9%
</TABLE>
Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
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The Sandybrook Center, Mt Dora, Florida
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MARKET AREA and NEIGHBORHOOD
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The Sandybrook Center, Mt Dora, Florida
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MARKET AREA AND NEIGHBORHOOD
NEIGHBORHOOD
Most communities tend toward groupings of consistent land uses, with areas
devoted to the various uses termed "physical neighborhoods." Neighborhood use
in this context can be further defined as: "A portion of a larger community, or
an entire community, in which there is a homogeneous grouping of inhabitants,
buildings, or business enterprises. Inhabitants of a neighborhood usually have a
more than casual community of interests and a similarity of economic level or
cultural background. Neighborhood boundaries may consist of well defined
natural, political or man-made barriers, or they may be, more or less, defined
by distinct changes in land use or in the character of the inhabitants."
Frank Ramseur of HealthCare Property Appraisers of America, Inc. inspected the
subject property and its neighborhood on March 19, 1997; all comments should be
considered to be relative to the date of inspection.
The subject neighborhood is located approximately one mile north from the center
of the Central Business District of Mt. Dora, Florida. A part of the
neighborhood lies within the municipal limits of Mt. Dora and the balance lies
within unincorporated Lake County. Mt. Dora is considered to be a bedroom
community of the Greater Orlando MSA but is a part of the "Golden Triangle" of
Eustis, Taveres and Mt. Dora in Lake County. We consider the subject
neighborhood to include the area lying south of the Country Club of Mt. Dora,
north of Old Eustis Road, east of Eldorado and Alameda Del North, and west of CR
44B (Limit Street). This area is known or referred to locally as the Mt. Dora
New Country Club Area.
The neighborhood has good access to major traffic arteries. The major artery
through the area is U.S. 441, a four-lane divided highway connecting the Golden
Triangle to the Orlando MSA. The area is mixed in nature. The various property
types found in this neighborhood are distributed approximately as follows:
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The Sandybrook Center, Mt Dora, Florida
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<TABLE>
<S> <C>
Single-Family 10%
Commercial/Retail 10%
Office 20%
Institutional 3%
Industrial 2%
Agricultural 30%
Undeveloped 25%
----
Total 100%
</TABLE>
Single-family residential structures, which constitute approximately 10% of the
neighborhood, appear to be new to 20+ years in age. Typical homes range in size
from 1,400 to 2,300 square feet with home values generally ranging from $90,000
to $200,000. Homes are well maintained and exhibit considerable pride of
ownership. Typical neighborhood residents are considered as being in a high
middle income bracket and mixed in age. Owner occupancy in the neighborhood is
considered to be approximately 90%. The fringe area to the east is a
transitional neighborhood and not considered a part of this neighborhood as it
is older and segmented from the subject by being east of Limit Street. There is
no Multifamily development in the neighborhood.
Retail structures constitute approximately 10% of the neighborhood and consist
of neighborhood shopping centers. They are well maintained and occupancy appears
to be fairly full. Typical properties/tenants include Publics, Walgreens,
McDonalds, and miscellaneous local retail services.
Office buildings represent approximately 20% of the neighborhood, typically
consisting of single story structures. They are approximately three years in
age, and rated good in maintenance and condition. Typical office occupants
include lawyers, insurance firms and architectural offices.
Institutional structures comprise approximately 3% of the neighborhood. They are
within the Central Business District and consist of City Hall, a new library and
schools. These structures are 10+ years in age and fairly well maintained.
Churches of several denominations are within a five minute drive of subject. The
nearest hospital is Florida Hospital, approximately 5 minutes northwest. This is
a relatively new facility and has attracted some medical users to this traffic
artery, albeit closer to the hospital than to subject.
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The Sandybrook Center, Mt Dora, Florida
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Industrial development consists of a citrus packaging/processing plant and
represent approximately 2% of the neighborhood. It is approximately 20 years in
age and fairly well maintained. This property is a distribution facility. It
presents little noise and no odor problems and is innocuous visually. This
property has no adverse influence on the neighborhood.
The subject property is joined by US Hwy 441 on the North and the New Mt. Dora
Country Club. This is a newly developing planned community with an 18-hole golf
course and villas, Executive and Estate residential housing. It is joined on its
south by agricultural citrus areas and a distribution area. To the west also is
citrus related agricultural land and undeveloped agricultural land. A developing
small office complex adjoins subject on the east side.
The area receives water and sewer service from the city of Mt. Dora.
Electricity, gas and telephone services are provided by local utility companies.
The subject property is considered to be in general conformity with other
properties that are developed in the neighborhood. The appearance and reputation
of this area generally is considered to be good, and the property values in the
area appear to be increasing. We expect that trend to continue over the next few
years.
Neighborhoods generally evolve through a pattern of growth and development.
They evolve from vacant, unimproved land through slow growth, steady to rapid
growth, reach a built-up or stagnant phase, and then begin to decline, with
various plateaus and modernization periods along the way. In that continuum
of growth, development and aging, the subject neighborhood is currently
considered to be evolving from unimproved with available commercial/office
properties listed for sale in the immediate neighborhood.
In summary, this neighborhood is considered to be primarily a developing upper
executive class residential area with neighborhood shopping along traffic
arteries. It is in the early stages of growth. The proximity to the new high
class country club residential area across the street and the new hospital
suggests this will be a developing area over the next few years. As such it
should attract a buyer for subject who is interested in moving out of Orlando
into the "burbs" or who desires hospital access. However, it may be a slow
process finding such a buyer. Most buyers of office property will choose to
locate closer to the new hospital (further out the highway) or closer to the Mt.
Dora Central Business District.
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The Sandybrook Center, Mt Dora, Florida
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SITE DATA
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The Sandybrook Center, Mt Dora, Florida
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SITE DATA
LOCATION: The Sandybrook Center site is located at 19650 U.S. Hwy East 441,
approximately one mile north of Mt. Dora's Central Business District.
PHYSICAL CHARACTERISTICS: The subject is an interior lot with approximately 130
front feet along the south side of U.S. 441, approximately 850 front feet along
the north side of Limits Street. It is irregular in shape and contains
approximately 19.63 acres of gross area, based on public records.
ZONING: According to Dee Sanders of the City of Mt. Dora City Hall, the subject
property is zoned C-3, which generally permits highway commercial development.
The subject improvements are considered to be a legal, conforming use.
TOPOGRAPHY: The subject site lies above street grade. General area topography is
slightly rolling. The subject site is basically level and falls gradually from
north to south. This tract is partially wooded and drainage appears adequate.
The site was raised and a drainage system with retention ponds and drains
developed. These are well designed and appear efficiently developed.
EASEMENTS AND ENCROACHMENTS: Our site inspection of The Sandybrook Center
revealed no adverse easements or encroachments. This property is subject to
typical street and utility easements. It should be noted that we would defer to
competent legal counsel for verification of these and all other legal matters.
ACCESS: Access to the site is considered good. It has two access points. One is
from U.S. 441, a Paved, four-lane highway and the second from Limits Street, a
local paved connector to downtown Mt. Dora.
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The Sandybrook Center, Mt Dora, Florida
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VISIBILITY: The site's visibility is rated only fair. The main entrance is
across the street from the County Club of Mt. Dora. However, the subject
improvements are not visible from the highway as its street frontage is only
sufficient for an entrance way.
DRAINAGE/FLOOD ZONE: According to National Flood Certification Services, Inc.,
the subject property is located on a National Flood Insurance Program Map
(NFIP). It is found on Community Panel # 1204210250B, dated 04/01/82, in an area
designated as Zone C. A copy of their certification is located in the addenda of
this report. This Zone generally refers to: "Areas of minimal flooding".
UTILITIES: The site is served by all municipal utilities and services including
water, sewage, police and fire protection. Gas, telephone and electricity are
provided by public utility firms.
TRAFFIC ARTERIES: The site has limited frontage on U. S. 441 which is one of the
major traffic arteries in the area.
TAXES: According to the tax assessor's office the subject's real estate reported
tax value is $3,317,669 which is 100% of the assessed value. The tax rate for
the county is 22.348 mils. This indicates an annual tax of $74,122.69 for the
subject property, calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Real Estate Tax Assessment X Tax Rate = Annual Taxes
- -------------------------- ---------- ------------
$3,317,669 X .0223418 = $74,122.69
</TABLE>
HIGHEST AND BEST USE
The Highest and Best Use of land is that use which may be reasonably expected to
produce the greatest net return to the land over a given period of time.
Moreover, it is that legal use which will yield to the land the highest present
value which is economically feasible, legally
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The Sandybrook Center, Mt Dora, Florida
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permissible and maximally productive. The Highest and Best Use analysis is the
basis for the final conclusions drawn in this report.
Land is valued as though it were unimproved and available for whatever use
would produce the maximum return. Improved property is valued according to the
extent to which the improvements are consistent with the Highest and Best Use of
the site as if unimproved. The Highest and Best Use of the total properties "as
improved" is often determined to be different from the Highest and Best Use of
the land when considered as though "unimproved" and available for development.
In most cases, the existing use will continue until the land value under its
Highest and Best Use exceeds the total value of the property in its existing
use. As long as improvements contribute to the land, they constitute the Highest
and Best Use.
Highest and Best Use - Unimproved
Legal uses for the subject land, if unimproved, include: Apartments, Retirement
Apartments, Offices, Commercial Retail, Institutional, Single-family
Residential, Condominiums, Agricultural, and Office Complexes.
The site's physical characteristics of this site, i.e., size, shape, terrain,
etc. would permit the following uses: Apartments, Retirement Apartments,
Offices, Commercial Retail, Institutional Nursing Home, Single-family
Residential, Condominiums, Agricultural, and Office Complexes.
Our market analysis indicates there could be sufficient demand in the general
marketplace and in this specific location for the following uses: Apartments,
Retirement Apartments, Offices, Nursing Home, Single-family Residential,
Condominiums, and Office Complexes.
The following might be economically feasible-: Apartments, Retirement
Apartments, Nursing Home, Office, Single-family Residential, Condominiums, and
Office Complexes.
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The Sandybrook Center, Mt Dora, Florida
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The most probable and reasonable uses for the subject property, if
unimproved, might include development of: Apartments, Retirement Apartments,
Offices (General or Medical), Nursing Home, Condominiums, and Office
Complexes.
When considering the subject site as an unimproved tract of land, and after
considering all alternative uses, including use of the facility as a head/neck
trauma facility or converting to a nursing home as explained in the section
entitled Income Capitalization Approach to Value, it is the appraiser's opinion
that Office Complex use would be the ultimate Highest and Best Use. The highest
return (greatest value) to the land would ultimately be from office development.
Office land generally sells for a considerably higher price per acre than
residential land. Therefore, it appears prudent to utilize the subject's high
density Commercial (C-3) zoning if possible. Due to the developing nature of
this neighborhood, however, it is premature for office development. However, as
this corridor develops this should be a desirable office location. The question
remains as to how long it will take to reach developable stage for an office
complex. Until that time, the Highest and Best Use is an interim use as
Speculative Land.
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The Sandybrook Center, Mt Dora, Florida
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DESCRIPTION OF IMPROVEMENTS
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SUBJECT
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The Sandybrook Center, Mt Dora, Florida
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DESCRIPTION OF IMPROVEMENTS
Frank Ramseur of HealthCare Property Appraisers of America, Inc. made an
inspection of the subject property on March 19, 1997. The following description
of improvements describes the three buildings as they appeared to our inspector
on the date of inspection.
SUBJECT IMPROVEMENTS
The subject site is improved with three one-story buildings utilized as The
Sandybrook Center. The structure's initial completion date is 1985. The
appraiser considers the subject building structure to contain a functional area
of approximately 36,270 sf or 1008 sf per bed.
The structure appraised contains all of the functional spaces typically found in
buildings designed for Office Complex occupancy, including offices, lobby,
activity department, physical therapy, kitchen and dining area, laundry, therapy
and examination rooms, public and employee baths, and bedrooms. There are two
dining rooms. One in building A and one in building B. The structure has a total
possible utilization of 36 beds and is configured for 36 beds. The subject's
physical structure appears to be of excellent quality construction and
amenities.
The subject's physical structure appears to be of good quality construction and
amenities. No Physical Deterioration-Curable (deferred maintenance) was
observed. The structure contains some Functional Obsolescence in its special
purpose layout. There is also some External Obsolescence due to the remoteness
of the site from the more built up area of U.S. Highway 441.
In all of our analysis, we have assumed the subject improvements as
being Special Purpose buildings. That assumption is based upon not only the
building improvements, which are pod like structures, but also the surrounding
area. The building improvements are not so Special Purpose as to preclude
alternative uses. Almost any type of medical facility user, if willing to take
on development risks, would find these buildings adaptable. Furthermore, a
general office
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The Sandybrook Center, Mt Dora, Florida
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user could also utilize this space with substantial rehab of the interior.
There is little or nothing about the interior of these structures to preclude
utilization by a commercial enterprise. However, the limited demand for this
type space in this location is a problem. Despite the fact that the buildings
could conceivably be used for general or medical office use, the fact remains
that the subject is poorly located for such use. By illustration, the most
desirable physical structure imaginable would have no value if located in a
remote corner of the world. Subject's location is simply premature, a problem
which will eventually cure itself. But in the meantime, and for the
foreseeable future, the outlying location "limits" the demand for this type
space in this location.
While there is nothing in subject's construction and layout to absolutely
preclude utilization by a commercial enterprise, the reality is that office
users are reluctant to take on "development projects." They are particularly
reluctant to take on "rehab" projects due to the considerable and real potential
for unforeseen cost overruns. By the same token, few developers or speculators
would allow much value for subject's structure due to 1) its premature location
limiting demand and 2) its unique layout in pod units.
In summary, it is physically possible to utilize the subject's existing
structure for either general or medical use. But the reality is that neither
a speculator or a user would be likely to pay much for the existing structure
over and above land value, for the reasons just discussed.
The Effective Age of the structure is 8 years, and the Remaining Economic
Life is considered to be 42 years. Architecture and layout are considered
typical for a Office Complex and appears in conformity with the community.
Following is a topical outline of the major improvements:
SITE PREPARATION: The building site was cleared, graded and prepared for
construction.
FOUNDATION: The foundation was masonry footings.
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 45
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- -------------------------------------------------------------------------------
FRAME: Frame was wood posts and beams.
FLOOR STRUCTURE: Floor structure consisted of concrete on ground.
FLOOR COVERING: Floor covering was carpet on slab and vinyl composition tile.
CEILING: The ceiling was gypsum board, taped and painted.
INTERIOR CONSTRUCTION: Interior construction was framed.
PLUMBING: All patient bathrooms are two- or three-fixtured china/porcelain
fixtures including chrome hardware, grab bars and other invalid aids.
Individual bathtubs and showers feature non-slip surfaces, grab bars, shower
hoses and non-ambulatory lifts. The property's plumbing is adequate. All
bedrooms have a full, private bath with a tub or shower.
SPRINKLER: The buildings are fully sprinklered.
HEATING, COOLING, VENTILATION: The property is heated with a heat pump which
also provides air conditioning. Individual rooms are air conditioned with
thru-the-wall heat pumps with electrical resistance heating coils in the
residents' bedrooms.
ELECTRICAL: Fully wired and lighted with three-phase wiring, adequate to provide
lighting and power for all equipment operation including fluorescent and
incandescent lighting, reading lights over each bed, nurse call system, fire
alarm system, and intercom system.
EXTERIOR WALLS: Exterior walls are wood or steel stud with stucco.
WALL ORNAMENTATION: Wall ornamentation was stucco on wood frame.
ROOF STRUCTURE: The roof structure is wood joists, wood deck.
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 46
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- -------------------------------------------------------------------------------
ROOF COVER: The roof cover was clay tile.
PARKING: Parking and drives of 2" plant mix asphalt on a crushed stone base.
Marked parking areas.
DOORS & WINDOWS: Interior doors are solid core; windows are double hung in wood
frame.
EQUIPMENT: Specialized equipment necessary for operation as a Office Complex
facility has been considered in valuing the subject property. Included in this
category are institutional kitchen equipment, stainless steel sinks, food
preparation counters, ovens, stoves, dishwashers, walk-in coolers and freezers,
exhaust fans and grease traps. Kitchen equipment includes one Duelfin walk-in
freezer and one built in walk-in cooler.
ROOM FURNISHINGS: Include a bed, night stand, chair and retractable privacy
curtain.
WALKS & DRIVES: Walks are approximately 41" wide and constructed of 2 1/2"
concrete.
LANDSCAPING: Rated excellent. The lawn is well established. Landscaping is
excellent with plant material mature.
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 47
<PAGE>
COST APPROACH TO VALUE
<PAGE>
COST APPROACH TO VALUE
The Cost Approach is frequently a reliable indicator of a property's value. The
Principle of Substitution dictates that The Sandybrook Center will be worth no
more than the cost to reproduce improvements with equal utility on an equally
desirable site. Conversely, in an active building market, most properties are
usually worth at least as much as their cost to reproduce. Otherwise, developers
would not be building comparable buildings.
The initial step in the Cost Approach was the estimation of land value. The
appraiser next estimated the current construction costs to replace subject's
building improvements. The appraiser also considered the possible existence of
the three types of depreciation: Physical Deterioration, Functional
Obsolescence, and External Obsolescence.
To estimate the actual construction cost of the improvements, the appraiser
consulted with various contractors and architects familiar with this type
construction. We also have personal knowledge of comparable structures which
have been built and are familiar with their actual costs. Finally, we checked
with Marshall and Swift Valuation Service to ascertain the current cost factors
for this type construction in Mt Dora.
- ---------------------------
HealthCare Property Appraisers of America, Inc. 49
<PAGE>
Site Valuation
There are several methods which appraisers may use to estimate vacant
land values. These methods include the direct sales comparison, allocation, land
residual technique, direct capitalization of ground rent, and the land
development method. The direct sales comparison method is based upon the
principle of substitution. This is the best method whenever adequate quantities
of verified comparable sales data is available. We have used both the direct
sales comparison and allocation methods. For Office Complex sites, the land
residual or land development methods are not a reliable indicator of value.
Direct Sales Comparison
The direct sales comparison technique is based on the economic principle of
substitution. This principle states the value of a property tends to be fixed by
the costs of acquiring an equally desirable substitute property with the same or
similar utility and physical characteristics. Comparisons are made between the
property appraised and the sales of similar properties which have occurred in
the marketplace. Typically, units of comparison are derived such as a sales
price per square foot, sales price per front foot, or sales price per building
unit. In the case of an apartment property, the economic indicator might be cost
per apartment, whereas in the case of a nursing home, the unit of value would be
cost per patient bed. The comparables are adjusted to reflect similarities and
dissimilarities of each to the subject for such characteristics as location,
time of sale, existing market conditions, and the physical characteristics of
the property. The adjusted sales prices of the comparables then become an
indication of value for the subject. In the case of the subject, we have looked
to properties with similar zoning and land use which have sold within the Mt
Dora area.
The comparable sales utilized in this analysis are summarized in the land sales
summary and the adjustment grid which follow this section. A complete
description of the individual sales used is also included within this section.
- ---------------------------
HealthCare Property Appraisers of America, Inc. 50
<PAGE>
LAND SALE #1
<TABLE>
<CAPTION>
<S> <C>
LOCATION: US 441 at Mt. Dora Road
Mt. Dora, FL
BUYER: Sterling House Group
SELLER: Grace Lindbloom, et al
DATE OF SALE: 07/96
SIZE: 574' x 300'
FRONTAGE: 574 FF
ZONING: PPUD
SALE PRICE: $140,000
COST/UNIT: $35,476/Acre
COMMENTS: This site was purchased for an ACLF facility
</TABLE>
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HealthCare Property Appraisers of America, Inc. 51
<PAGE>
LAND SALE #2
<TABLE>
<CAPTION>
<S> <C>
LOCATION: S/S Merry Road on E/S of Lake Elsie
Mt. Dora, FL
BUYER: Central Florida YMCA
SELLER: Grace Lindbloom, et al
DATE OF SALE: 02/95
SIZE: 892' X 750'
FRONTAGE: 892 FF
ZONING: R-6
SALE PRICE: $237,500
COST/UNIT: $15,464/Acre
COMMENTS: This site adjoins the YMCA and contains 1.5 acres of lake bottom.
</TABLE>
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HealthCare Property Appraisers of America, Inc. 52
<PAGE>
LAND SALE #3
<TABLE>
<CAPTION>
<S> <C>
LOCATION: US 441 at Pine Avenue
Mt. Dora, FL
BUYER: N/A
SELLER: Walter Pharr
DATE OF SALE: For Sale
SIZE: 15.05 Acres
FRONTAGE: 950 FF
ZONING: C-1 and R-6
SALE PRICE: $525,000
COST/UNIT: $34,888 Acre
COMMENTS: This property is southeast of subject 1/4 mile and has similar
locational attributes.
</TABLE>
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HealthCare Property Appraisers of America, Inc. 53
<PAGE>
LAND SALE #4
<TABLE>
<CAPTION>
<S> <C>
LOCATION: US 441 at Sanford
Mt. Dora, FL
BUYER: N/A
SELLER: Listed by Fred Kurras, MAI
SIZE: 36 Acres
FRONTAGE: 700 FF
SALE PRICE: $1,100,000
COST/UNIT: $30,556 Acre
COMMENTS: The north half listed at $40,000, per acre
is zoned Commercial - 1. The back half at
$25,000 per acre is zoned R-1-A and R-3 and
has limited access to US 441. This site
located 1/4 mile east of subject with
similar locational and view/access
amenities.
</TABLE>
- ---------------------------
HealthCare Property Appraisers of America, Inc. 54
<PAGE>
LAND SALE #5
<TABLE>
<CAPTION>
<S> <C>
LOCATION: N/E corner 441 at Old Mt. Dora Rd.
Mt. Dora, FL
BUYER: Prestige Ford, Inc.
SELLER: Givens Trust
DATE OF SALE: 02/96
SIZE: 8.74 Acres
FRONTAGE: Excellent frontage on both highways
SALE PRICE: $1,100,000
COST/UNIT: $54,089 Acre
COMMENTS: This large irregular corner, formerly a citrus grove had been
cleared. The buyer, a Ford dealership, particularly wanted this
corner with strong frontage on both highways.
</TABLE>
- ---------------------------
HealthCare Property Appraisers of America, Inc. 55
<PAGE>
LAND SALES SUMMARY & ADJUSTMENT GRID
<TABLE>
<CAPTION>
Comp # Subject No. 1 No. 2 No. 3
Address 19650 US US 441 & Old W/S Merry Rd US Hwy 441
441 E Mt. Dora Rd & Lk Elsie At Pine Ave
Mt. Dora, FL Mt. Dora, FL Mt. Dora, FL Mt. Dora, FL
- ---------------------- -------------------- ----------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
SITE DATA
Size (SF) 855,083 171,900 669,000 655,500
Size (Acres) 19.63 3.95 15.36 15.05
Limited 574 892 950
Frontage/Visability
Zoning C-1/PUD PUD R-6 C1/R6
Topography Level Level Level Level
Utilities All All All All
SALE DATA
Reported Sale Price ????????? $140,000 $237,500 $525,000
Sale price/SF $0.00 $0.81 $0.36 $0.80
Sale Price/Acre $0 $35,476 $15,464 $34,888
Transaction Type ---- Closed Closed For Sale
Rights Conveyed ---- Fee Simple Fee Simple Fee Simple
Financing Terms ---- Cash Cash Cash
adjustment ---- ---- ---- ----
Condition of Sale ---- Arm's Length Arm's Length For Sale
---- ---- -15%
Recorded Sale Date ---- 796 2/95 Current
adjustment ---- ---- 5% ----
Location ---- Superior Inferior Similar
adjustment ---- -10% 20% ----
Size ---- Similar Similar Similar
adjustment ---- ---- ---- ----
Zoning ---- Similar Inferior Similar
adjustment ---- ---- 15% ----
Topography ---- Similar Similar Similar
adjustment ---- ---- ---- ----
---- Superior Superior Superior
Frontage/Visability ---- -20% -20% -20%
adjustment
Utilities ---- Similar Similar Similar
adjustment ---- ---- ---- ----
Adjstd Price/Sq Ft $0.59 $0.41 $0.54
Avg Price/Sq Ft $0.58
Adjstd Price/Acre $25,543 $17,926 $27,910
Avg Price/Acre $26,954
</TABLE>
LAND SALES SUMMARY & ADJUSTMENT GRID
<TABLE>
<CAPTION>
Comp # No. 4 No. 5
Address US Hwy 441 US 441 &
At Sanford Old Mt. Dora
Mt. Dora, FL Mt. Dora, FL
- -------------------------- ------------------------ ------------------------
<S> <C> <C>
SITE DATA
Size (SF) 1,568,160 1,006,672
Size (Acres) 36.00 23.11
700 932
Frontage/Visability
Zoning C1/R6 C-1/R-1
Topography Level Level
Utilities All All
SALE DATA
Reported Sale Price $1,100,000 $1,250,000
Sale price/SF $0.70 $1.24
Sale Price/Acre $30,556 $54,089
Transaction Type For Sale Closed
Rights Conveyed Fee Simple Fee Simple
Financing Terms Cash Cash
adjustment ---- ----
Condition of Sale For Sale Arm's Length
-15% ----
Recorded Sale Date Current 2/96
adjustment ---- ----
Location Similar Superior
adjustment ---- -10%
Size Similar Similar
adjustment ---- ----
Zoning Similar Similar
adjustment ---- ----
Topography Similar Similar
adjustment ---- ----
Superior Superior
Frontage/Visability -20% -20%
adjustment
Utilities Similar Similar
adjustment ---- ----
Adjstd Price/Sq Ft $0.48 $0.89
Avg Price/Sq Ft
Adjstd Price/Acre $24,444 $38,944
Avg Price/Acre
</TABLE>
<PAGE>
Reconciliation of Comparable Sales
The comparables have already been adjusted to the subject in respect to
location, size, zoning, topography, corner influence, and utilities. The
unadjusted sales prices range from $15,468 to $54,089 per acre. After the
adjustments, the comparables form a tighter range of $17,926 to $38,944 per
acre. The average adjusted price per acre was $26,954. Typically, the
comparables which have the least adjustments are most representative of the
subject. Accordingly, it is our opinion that the subject 19.63 acres site has
a market value of $500,000 or $25,471 per acre.
<TABLE>
<CAPTION>
<S> <C>
SITE VALUE $500,000
---------
---------
</TABLE>
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HealthCare Property Appraisers of America, Inc. 57
<PAGE>
Building Costs
This appraisal firm compiles construction cost data on new and proposed
facilities throughout the United States. The hard construction costs vary
considerable depending upon geographical location and quality of improvements.
To estimate the Replacement Cost of The Sandybrook Center, the appraiser
utilized the Segregated Cost Method of cost estimating. This method is designed
to give separate consideration to all the major construction components of a
building. Many parts of a building, such as floor, ceiling and lighting,
increase in cost directly as the floor area of the building increases. Other
building costs vary with relation to parameters other than the floor area.
However, most costs can be related to floor area, wall area, roof area, or
sometimes an individual count of unit installations.
To facilitate the application of these individualized costs, they are grouped so
that all costs related to floor area can be added together and applied to the
total floor area, all wall area costs can be added together and applied to the
wall area, and all roof costs can be applied to the ground floor or roof area.
The appraiser utilized the Marshall and Swift Valuation Service, which is the
most widely recognized cost estimating manual in the world. This manual
separates each type of building by occupancy, type of construction, and quality.
It also makes adjustments for current cost factors on a monthly update basis.
Using the Marshall and Swift Valuation Service, the appraiser selected the
particular construction characteristics of The Sandybrook Center building
improvements and selected the appropriate quantity cost factors and adjustments.
Using the computer program, a Replacement Cost New of subject's building
improvements as well as individual estimates of depreciation for each component
item were developed. The computer calculations included all Direct Costs. The
Marshall and Swift Valuation Service includes
- ---------------------------
HealthCare Property Appraisers of America, Inc. 58
<PAGE>
architectural fees, loan interest and some other minor Indirect Costs. It
specifically excludes some of the costs of doing business, or Indirect Costs,
which we have estimated as follows:
<TABLE>
<CAPTION>
<S> <C>
Taxes 0.4%
Marketing 0.4%
Loan Points and Fees 2.0%
Legal 0.5%
Accounting 0.2%
----
Total Indirect Costs 3.5%
</TABLE>
Our estimate of Indirect Costs were based on a percentage of Total Cost-New
(depreciated at the same rate as the building improvements). The Total Cost-New
includes not only Direct Cost of construction, as developed by the Marshall and
Swift Valuation Service, but also the cost of land.
Our on-site inspection of The Sandybrook Center did not reveal any obvious
Physical Deterioration-Curable (deferred maintenance). Overall, the property
appeared to be well maintained and only normal maintenance situations were
observed. The subject building improvements undoubtedly contain some functional
and/or external obsolescence. The buildings contain, to some extent, Special
Purpose improvements. Medical buildings generally contain an excess of
electrical and plumbing not found in general purpose buildings. A potential user
may not be able or willing to work with the specific office layouts or the room
configuration in the residential buildings. Therefore, a potential buyer would
probably make some discount in price to reflect the inefficiency of the room
layout and excess finish work found in the subject buildings. Additionally,
there is probably not a strong demand for medical type users in this specific
location as this is an outlying developing area. The new hospital has attracted
some medical users to Highway 441. A couple of medical practices have even
converted used car lots and fast food buildings to medical use. However, those
conversions were considerably closer to the hospital. The proximity to the
country club gives our subject excellent exposure. However, we suspect it will
be some time before a medical user can be found or a corporate user enticed out
of Orlando. At this time, there simply is little demand for office space this
far from the hospital or the Central Business District. How
- ---------------------------
HealthCare Property Appraisers of America, Inc. 59
<PAGE>
much the typical buyer would discount the property would depend upon his
specific situation. Therefore, there is no way to accurately measure functional
and/or external obsolescence of this specific property in this specific
location. After reviewing the experience of other sellers of Special Purpose
Properties in our Sales Comparison Approach, we have made a judgement that the
combination of functional obsolescence and external obsolescence in the subject
property is approximately 60%. It is our opinion that the probability of
obtaining a purchaser/user of the subject property who will allocate
considerable value to the building shell without making substantial discount for
functional and/or external obsolescence is rated only POOR. The most likely
scenario is that there will not be a purchaser who will pay ANYTHING for the
subject's improvements. However, if a buyer can be found who sees value there,
our discussions with realtors who deal with this type property revealed that the
buyer would expect a discount of between 50% and 75% ....... hence our selection
of a 60% discount.
- ---------------------------
HealthCare Property Appraisers of America, Inc. 60
<PAGE>
SECTION 1:
OCCUPANCY: OFFICE BUILDING
CLASS: D Frame COST RANK: 3.5 Above Average/High
EFFECTIVE AGE: 9 Years Condition: 3.5 Good
NUMBER OF STORIES: 1.0 AVERAGE STORY HEIGHTS: 10.0
FLOOR AREA: 17,100 Sq. Ft. COST AS OF: 3/97
<TABLE>
<CAPTION>
REPLACEMENT COST
--------------------------------
COMPONENT UNITS COST NEW DEPR
- --------------------------------------------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
FOUNDATION:
Concrete, Bearing walls.......................... 17,100 1.93 33,003 13,201
FRAME:
Wood, Mill Type.................................. 17,100 4.27 73,017 29,207
FLOOR STRUCTURE:
Concrete on Ground............................... 17,100 3.22 55,062 22,025
FLOOR COVER:
Carpet and Pad................................... 6,840 4.17 28,523 11,409
Tile, Ceramic.................................... 855 9.61 8,217 3,287
Vinyl Composition Tile........................... 9,405 1.74 16,365 6,546
SUBTOTAL......................................... 53,105 21,242
CEILING:
Gypsum Board, Taped & Paint...................... 17,100 1.34 22,914 9,166
Ceiling Insulation............................... 17,100 0.67 11,457 4,582
SUBTOTAL......................................... 34,371 13,749
INTERIOR CONSTUCTION:
Interior Construction, Framed.................... 17,100 18.92 323,532 129,413
PLUMBING:
Plumbing......................................... 17,100 6.19 105,849 42,340
HEATING AND COOLING:
Heat Pump........................................ 15,390 8.42 129,584 51,834
ELECTRICAL:
Electrical....................................... 17,100 10.58 180,918 72,367
Standby Generator, Diesel........................ 100 340 34,000 13,600
SUBTOTAL......................................... 214,918 85,967
EXTERIOR WALL:
Face Brick Veneer................................ 11,970 17.32 207,320 82,928
Insulation....................................... 11,970 0.57 6,823 2,729
SUBTOTAL......................................... 214,143 85,657
ROOF STRUCTURE:.....................................
Wood Joists, Composition Deck.................... 17,100 4.73 80,883 32,353
ROOF COVER:
Composition Shingle.............................. 17,100 1.58 27,018 10,807
TOTAL............................................... 1,344,485 537,795
ARCHITECT'S FEES.................................... 6.7% 90,753 36,301
- --------------------------------------------------- --------------- ---------------- --------------- ----------------
REPLACEMENT COST NEW................................ 17,100 83.93 1,435,238
DEPRECIATION........................................ (60.0%) (861,142)
DEPRECIATED COST.................................... 574,096
- --------------------------------------------------- --------------- ---------------- --------------- ----------------
</TABLE>
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HealthCare Property Appraisers of America, Inc. 61
<PAGE>
OCCUPANCY: APARTMENT
CLASS: D Frame COST RANK: 3.5 Above Average/High
EFFECTIVE AGE: 9 Years Condition: 3.5 Good
NUMBER OF STORIES: 1.0 AVERAGE STORY HEIGHTS: 10.0
FLOOR AREA: 19,170 Sq. Ft. COST AS OF: 3/97
<TABLE>
<CAPTION>
REPLACEMENT COST
--------------------------------
COMPONENT UNITS COST NEW DEPR
- --------------------------------------------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
EXCAVATION & SITE PREPARATION
Site Preparation................................. 19,170 0.21 4,026 1,610
FRAME:
Wood, Mill Type.................................. 19,170 3.87 74,188 29,675
FLOOR STRUCTURE:
Concrete on Ground............................... 19,170 3.05 58,468 23,387
FLOOR COVER:
Carpet and Pad................................... 9,585 3.54 33,931 13,572
Tile, Ceramic.................................... 958 8.95 8,579 3,432
Vinyl Composition Tile........................... 8,626 1.64 14,147 5,659
SUBTOTAL......................................... 56,657 22,663
CEILING:
Gypsum Board, Taped & Paint...................... 19,170 1.29 24,729 9,892
Ceiling Insulation............................... 19,170 0.73 13,994 5,598
SUBTOTAL......................................... 38,723 15,490
INTERIOR CONSTRUCTION:
Interior Construction, Framed.................... 19,170 13.73 263,204 105,282
PLUMBING:
Plumbing......................................... 19,170 6.25 119,813 47,925
FIRE PROTECTION:
Sprinklers....................................... 14,000 2.38 33,320 13,328
HEATING AND COOLING:
Heat Pump........................................ 7,500 6.19 46,425 18,570
Window Heat Pump................................. 11 1,426 15,686 6,274
SUBTOTAL......................................... 62,111 24,844
ELECTRICAL:
Electrical....................................... 19,170 5.14 98,534 39,414
EXTERIOR WALL:
Face Brick Veneer................................ 13,419 16.10 216,046 86,418
Insulation....................................... 13,419 0.53 7,112 2,845
SUBTOTAL......................................... 223,158 89,263
ROOF STRUCTURE:.....................................
Wood Joists, Composition Deck.................... 19,170 4.41 84,540 33,816
ROOF COVER:
Composition Shingle.............................. 19,170 1.45 27,796 11,118
SUBTOTAL SUPERSTRUCTURE............................. 19,170 59.70 1,144,538 457,815
</TABLE>
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HealthCare Property Appraisers of America, Inc. 62
<PAGE>
<TABLE>
<CAPTION>
REPLACEMENT COST
--------------------------------
COMPONENT UNITS COST NEW DEPR
- --------------------------------------------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
YARD IMPROVEMENTS:
Paving, Asphalt.................................. 120,000 2.10 252,000 100,800
- --------------------------------------------------- --------------- ---------------- --------------- ----------------
TOTAL............................................... 1,396,538 558,615
ARCHITECT'S FEES.................................... 6.9% 96,128 38,451
- --------------------------------------------------- --------------- ---------------- --------------- ----------------
REPLACEMENT COST NEW................................ 19,170 77.86 1,492,666
DEPRECIATION........................................ (60.0%) (895,600)
DEPRECIATED COST.................................... 597,066
- --------------------------------------------------- --------------- ---------------- --------------- ----------------
SUMMARY ......... TOTAL COST NEW DEPR
1: OFFICE BUILDING 1,435,238 574,096
2: APARTMENT..... 1,492,666 597,066
TOTAL COST........ 2,927,904 1,171,162
ROUNDED TO NEAREST $100 2,927,900 1,171,200
Cost Data by MARSHALL & SWIFT
</TABLE>
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HealthCare Property Appraisers of America, Inc. 63
<PAGE>
SUMMARY OF COST APPROACH
<TABLE>
<CAPTION>
<S> <C> <C>
Bldg. Improvements - Replacement Cost $2,927,900
Indirect Costs 119,977
------------
Total Costs: $3,047,877
Less Depreciation:
Physical Deterioration - Curable $0
Physical Deterioration - Incurable
Replacement Costs 0
Physical Deterioration - Incurable
Indirect Costs 0
Physical Deterioration - Incurable
Devel. Profit & Overhead 0
Functional Obsolescence 1,828,726
------------
External Obsolescence @ 60%
Total Depreciation 1,828,726
------------
Depreciated Value $1,219,151
Land Value $ 500,000
------------
Market Value - Real Estate $1,719,151
Add Furniture, Fixtures, Equipment $0
Less Depreciation 0
------------
Depreciated Value of FF&E $0
------------
MARKET VALUE OF REAL & PERSONAL PROPERTY By Cost Approach "As Is"
$1,719,151
(R) $1,720,000
------------
------------
</TABLE>
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HealthCare Property Appraisers of America, Inc. 64
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
INCOME CAPITALIZATION APPROACH TO VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 65
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
INCOME CAPITALIZATION APPROACH TO VALUE
To estimate the Market Value of The Sandybrook Center through the Income
Capitalization Approach, the appraiser attempted to project the income the
subject might generate by a lease to other healthcare and non-healthcare users.
A major underlying premise of the Income Capitalization Approach holds that the
subject property can be rented. This premise assumes a viable rental market
sufficient to develop rates of: (1) rental, (2) occupancy, (3) expenses and (4)
capitalization. We were unable to develop sufficient data to process a
convincing Income Approach to Value. The absence of sufficient data to develop
an Income Approach suggests the buyers for this type property are users rather
than investors seeking an income stream. This tends to invalidate the use of the
Income Approach for this appraisal. Both the lack of market rental data and the
available sales data on this type property suggest that the most likely
purchaser will be an owner/occupant not an investor buying for income. It was
not deemed helpful to develop and analyze rental data in great detail. However
as a check against the other two approaches to value, an overview of rental
possibilities and alternatives was considered to see what return and capitalized
value might be expected if in fact an investor/purchaser could be found. In
attempting an Income Capitalization Analysis, this appraiser considered the
leasability of subject property to:
- Similar Residential Healthcare Tenants
- Alternative Medical Non-residential User/Lessees
- Alternative Non-medical Institutional Users
- General Office/Retail Users
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 66
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
Alternatives by type included:
1. Similar Healthcare Residential Use:
a. Nursing Home
b. Rest Home
c. Assisted Living Facility
d. Head Trauma
e. Drug/Chemical Rehab
f. Group Home
2. Alternative Health Care, Non-residential Use
a. Kidney Dialysis
b. Outpatient Services
c. Adult Care
d. Medical Office
e. Mental Health
3. Alternative Non-Medical Institutional Use
a. Correctional Facility
b. Corporate Retreat
4. General Real Property Use
a. Office
b. Retail
The subject property has limited leasability as a nursing home, assisted living
facility, or rest home for several reasons. It is configured in several
buildings which makes a nursing home operation quite inefficient. The square
feet per bed in a nursing home is also much lower (avg nursing home = 300 SF Per
Bed) than in the subject (approximately 1000 SF Per Bed). Furthermore the rental
paid per bed or per square foot for a nursing home is determined mostly from the
economics of the nursing home operation, making each facility unique and
distorting any comparison.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 67
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
The possibility of leasing the subject to another operator of head trauma rehab
facilities is probably impractical. We did not consult other operators in the
interest of confidentiality. However, the present lessee is one of the best
operators of this type. One must assume that if they cannot make the head
trauma rehab business work in this facility, any other operator would have
similar problems. The problems in the head trauma industry and the rehab
industry generally evolve from tightening up of HMO's and other managed care
operations. These same problems are also a concern for drug/chemical rehab
operations and all other rehab operators. Therefore, most operators of this type
are not seeking to expand and certainly not into marginal markets or locations
where other medical operators have had difficulty. When they do, the rent is
dictated by the business potential of the specific operation in that specific
location. Comparisons of other special use rehab buildings in other locations
were of little assistance in establishing fair market rental for the subject in
.
There is some potential for leasing the subject to some type of group home
operator, i.e., homes for troubled teens, halfway houses, mentally retarded,
etc. This is an expanding market. However, the rentals paid by this type
operation are dictated by politics, altruism, and the construction cost of the
facility, rather than by market competition. Therefore, analysis of this type
rental is of limited use in attempting to establish a fair market rental for the
subject in Mt Dora.
In looking at alternative healthcare in non-residential settings, we did find
that there has been considerable expansion of this type service. Those uses
most often encountered include kidney dialysis, outpatient services, adult care,
medical offices and mental health services. However, as in residential
healthcare operations, we found that rentals were not determined by market
competitive factors. Most often they were a function of the cost of the special
use property and the rent necessary to service the debt.
There is some market for the subject for rental to an alternative non-medical
institutional user such as a correctional facility. The privatization of the
penal system is a slowly evolving phenomena but certainly a trend. However, the
instances are scarce and riddled with politics making comparison of rentals
useless. The other non medical use would be for a corporate retreat. While there
are
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 68
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
buyers for this type use, they generally require an even more remote site than
subject's and are bought by owner/occupants not for investment. We do feel there
is some potential for selling the subject as an owner/occupant corporate retreat
- -- but not much as a rental corporate retreat.
Some properties like subject have been purchased for conversion to general
office or retail use. The rentals here are usually dictated by market forces as
there are other alternatives available.
The subject probably has very little potential for acquisition by an investor
intending to rent out for retail use. Its location is out of the most desirable
commercial development and visibility is very poor. The subject probably has
fair potential for rental for office use. Its location is good for office, just
premature. Office properties in Mt Dora are currently bringing $4.00 to $5.00
per square foot on a net basis. The subject might then be expected to have a
theoretical potential to develop net income of $163,215 (36,270 sf x $4.50).
Utilizing a capitalization rate of 10% would suggest a value by the Income
Capitalization Approach of:
<TABLE>
<CAPTION>
CAPITALIZATION
NET INCOME DIVIDED BY RATE = VALUE
---------- -------------- -----
<S> <C> <C>
$163,215 DIVIDED BY 10% = $1,630,000
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 69
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
SALES COMPARISON APPROACH TO VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
70
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
SALES COMPARISON APPROACH TO VALUE
The sales comparison approach is defined as "a set of procedures in which an
appraiser derives a value indication by comparing the property being appraised
to similar properties that have been sold recently, applying appropriate units
of comparison, and making adjustments, based on the elements of comparison, to
the sales prices of the comparables." (This information taken from The
Dictionary of Real Estate & Appraisal, American Institute of Real Estate
Appraisers, second edition.)
In this approach, the market value of the subject is estimated by comparing it
to similar properties that have sold, recently. This approach is predicated on
the direct relationship between subject property's market value and the sale
prices of comparable properties.
The accurate application of this approach is based, in part, on the choice of an
appropriate unit of comparison, as shown on the summary grid. The income
multiplier was not considered appropriate as the potential buyers for this type
property come from several dissimilar industries with different income
characteristics. The physical indicators included sales price per revenue-
generating unit (beds) and sales price per square foot of building area. Both
the sales price per bed and per square foot were considered appropriate with the
price per square foot viewed as having the highest correlation to market value.
The appraiser researched sales of Special Purpose medical use buildings that
have re-sold for a different use. The following section presents information on
the sales analysis of comparables for an indicated value of the subject
property.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
71
<PAGE>
IMPROVED SALE #95075
[INSERT PHOTOGRAPH HERE]
<TABLE>
<CAPTION>
PROPERTY DATA
<S> <C>
Name/Location: Melbourne Hotel & Conference Ctr.
4611 Bee Caves Road
Austin, TX
Level of Care: Hotel
Improvements/Condition: Class D, wood frame w/ masonry interior
walls in average condition.
Age: 1985
Number of Units: 60
Gross Building Area: 44000 s.f.
S.F./Unit: 733 s.f.
</TABLE>
<PAGE>
IMPROVED SALE #95074 (continued)
<TABLE>
<CAPTION>
SALE DATA
<S> <C>
Date of Sale: OCT 91
Grantor: Comprehensive Addiction Prog.
Grantee: West Star Dev. Co.
Sale Price: $900000
Financing: Cash; conventional loan.
</TABLE>
<TABLE>
<CAPTION>
INDICATIONS
<S> <C>
Price/Unit (Apt/Bed) $15000
Price/S.F.: $56 s.f.
Comments: 25 semi-pvt with F/B; State of FL does not require CON for substance abuse facility;
purchased vacant with intent to renovate at cost of $600K for use as medical office
bldg. w/ lab, X-ray and short procedure surgery.
</TABLE>
<PAGE>
IMPROVED SALE #95074
[INSERT PHOTOGRAPH HERE]
<TABLE>
<CAPTION>
PROPERTY DATA
<S> <C>
Name/Location: Capitol Medical Center
2711 Capitol Med. Ctr. Blvd.
Tallahassee, FL
Level of Care: REHAB
Improvements/Condition: Class D, metal frame, 1-story in average
condition.
Age: 1989
Number of Units: 60
Gross Building Area: 16000 s.f.
S.F./Unit: 267 s.f.
</TABLE>
<PAGE>
ADJUSTED SALES COMPARISONS
SALE PRICE PER SQUARE FOOT
[GRAPH]
<PAGE>
<TABLE>
<CAPTION>
SALES COMPARISON SUMMARY GRID
- ------------------------- ------------------------- ----------------------- ------------------------ -------------------------
Comp # SUBJECT #95074 #95075 #95076
Name Sandybrook Bowling Green Bowling Green Chaps
Center Of Tallahassee Of the Hills Koala
Mt. Dora Tallahassee Austin Durham
City FL FL TX NC
State
- ------------------------- ------------------------- ----------------------- ------------------------ -------------------------
<S> <C> <C> <C> <C>
PROPERTY DATA
Year Built 1988 1989 1985 1986
# Beds 36 50 60 42
GBA (sf) 36,270 16,000 44,000 22,812
SF Per Bed/Apt 1008 320 733 543
SALE DATA
Date of Sale 10/91 5/92 10/93
Sale Price $900,000 $850,000 $640,000
Price/Bed $18,000 $14,167 $15,238
Price/SF $56.25 $19.32 $28.06
CUMULATIVE ADJUSTMENTS
Rights Conveyed 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238
$56 $19 $28
Financing Terms 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238
$56 $19 $28
Conditions of Sale 0% 0% 0%
Adjusted Price $18,000 $14,167 $15,238
$56 $19 $28
Market Conditions 17% 15% 0%
Adjusted Price $20,970 $16,292 $16,838
$66 $22 $31
NON-CUMULATIVE
ADJUSTMENTS
Physical 15% 15% 15%
Characteristics:
Location -10% 0% 0%
Economic Factors 0% 0% 0%
Non-Cumulative 5% 15% 15%
Adjustments
ADJUSTED VALUE
INDICATORS
Sale Price/Bed $22,019 $18,735 $19,364
Sale Price/SF $69 $26 $36
Average Sale Price/Bed $21,853
Average Sale Price/SF $40
</TABLE>
<TABLE>
<CAPTION>
SALES COMPARISON SUMMARY GRID
- ------------------------- ----------------------- ------------------------ -------------------------
Comp # #95077 #95078 #1778
Name Joseph B Hunt Ferncrest
Thomas Hsp Hospital Manor
Peabody Danvers New Orleans
City MA MA LA
State
- ------------------------- ----------------------- ------------------------ ========================
<S> <C> <C> <C>
SITE DATA
Year Built N/A N/A 1987
# Beds 59 120 214
GBA (sf) 40,474 120,000 94,840
SF Per Bed/Apt 686 1000 443
SALE DATA
Date of Sale 12/92 7/90 9/94
Sale Price $2,800,000 $3,000,000 $6,503,000
Price/Bed $47,458 $25,000 $30,388
Price/SF $69.18 $25.00 $68.57
CUMULATIVE ADJUSTMENTS
Rights Conveyed 0% 0% 0%
Adjusted Price $47,458 $25,000 $30,388
$69 $25 $69
Financing Terms 0% 0% 0%
Adjusted Price $47,458 $25,000 $30,388
$69 $25 $69
Conditions of Sale 0% 0% 0%
Adjusted Price $47,458 $25,000 $30,388
$69 $25 $69
Market Conditions 14% 21% 8%
Adjusted Price $53,864 $30,250 $32,895
$79 $30 $74
NON-CUMULATIVE
ADJUSTMENTS
Physical -25% 0% -35%
Characteristics:
Location -25% -25% 0%
Economic Factors 0% 0% 0%
Non-Cumulative -50% -25% -35%
Adjustments
ADJUSTED VALUE
INDICATORS
Sale Price/Bed $26,932 $22,688 $21,382
Sale Price/SF $39 $23 $48
Average Sale Price/Bed
Average Sale Price/SF
</TABLE>
<PAGE>
IMPROVED SALE #1778 (continued)
<TABLE>
<CAPTION>
SALE DATA
<S> <C>
Date of Sale: SEP 94
Grantor: New Orleans Health Care
Grantee: Prestige Care, L.L.C.
Sale Price: $6503473
Financing: $1,534,723 cash; Note for $968,750 at 8.5%.
</TABLE>
<TABLE>
<CAPTION>
INDICATIONS
<S> <C>
Price/Unit (Apt/Bed) $30390
Price/S.F.: $69 s.f.
Comments: Sale at RTC sealed bid auction; grantee proposed to partially convert to adolescent
psyc facility.
</TABLE>
<PAGE>
IMPROVED SALE #1778
[INSERT PHOTOGRAPH HERE]
<TABLE>
<CAPTION>
PROPERTY DATA
<S> <C>
Name/Location: Ferncrest Manor Nursing Home
14500 Hayne Blvd.
New Orleans, LA
Level of Care: NH
Improvements/Condition: 1-story, masonry in good condition.
Age: 1987
Number of Units: 214
Gross Building Area: 94840 s.f.
S.F./Unit: 443 s.f.
Occupancy: 0.61
</TABLE>
<PAGE>
IMPROVED SALE #95078 (continued)
<TABLE>
<CAPTION>
SALE DATA
<S> <C>
Date of Sale: JUL 90
Grantor: Town of Danvers
Grantee: Beverly Hospital Corp.
Sale Price: $3000000
Financing: Cash.
</TABLE>
<TABLE>
<CAPTION>
INDICATIONS
<S> <C>
Price/Unit (Apt/Bed) $25000
Price/S.F.: $25 s.f.
Comments: Sold with all FF&E; After sale 50% was converted to outpatient, day surgery, Phys. &
Occ. therapy and EMER. room at cost of $322K. Remainder converted to SNF licensed for
60 beds; Conversion cost was $950K with $200K for F&F; Plus $350K to repair roof,
parking and other maint.
</TABLE>
<PAGE>
IMPROVED SALE #95078
[INSERT PHOTOGRAPH HERE]
<TABLE>
<CAPTION>
PROPERTY DATA
<S> <C>
Name/Location: Hunt Hospital
75 Lindall Street
Danvers, MA
Level of Care: HOSP
Number of Units: 120
Gross Building Area: 120000 s.f.
S.F./Unit: 1000 s.f.
</TABLE>
<PAGE>
IMPROVED SALE #95077 (continued)
<TABLE>
<CAPTION>
SALE DATA
<S> <C>
Date of Sale: DEC 92
Grantor: City of Peabody
Grantee: Lahey Clinic
Sale Price: $2800000
Financing: Cash to seller.
</TABLE>
<TABLE>
<CAPTION>
INDICATIONS
<S> <C>
Price/Unit (Apt/Bed) $47458
EGIM: 0.19
Overall Rate: -1.1670
Comments: Inc/Exp adjusted YE 1991; Purchased for conversion to rehab hospital.
</TABLE>
<PAGE>
IMPROVED SALE #95077
[INSERT PHOTOGRAPH HERE]
<TABLE>
<CAPTION>
PROPERTY DATA
<S> <C>
Name/Location: Josiah B. Thomas Hospital
15 King Street
Peabody, MA
Level of Care: HOSP
Number of Units: 59
Occupancy: 0.76
Effective Gross Income: $15016254
Expenses: $18283314
Net Income: $3267060
</TABLE>
<PAGE>
IMPROVED SALE #95076 (continued)
SALE DATA
Date of Sale: OCT 93
Grantor: Koala North Carolina, Inc.
Grantee: J. Chapman and F. Blackwell
Sale Price: $640000
Financing: All cash.
INDICATIONS
Price/Unit (Apt/Bed) $15238
Price/S.F.: $28 s.f.
Comments: Opened in '86, closed in '92; Purchased for conversion to ALF;
Of the 9.17 acre site, 6.42 is considered undevelopable;
all equipment is included.
<PAGE>
IMPROVED SALE #95076
[PHOTO]
PROPERTY DATA
Name/Location: Chaps Koala Center
5010 Alston Avenue
Durham, NC
Level of Care: REHAB
Improvements/Condition: 1-story, steel frame, vinyl siding
in good condition.
Age: 1986
Number of Units: 42
Gross Building Area: 22812 s.f.
S.F./Unit: 543 s.f.
<PAGE>
IMPROVED SALE #95075 (continued)
<TABLE>
<CAPTION>
SALE DATA
<S> <C>
Date of Sale: MAY 92
Grantor: Comprehensive Addiction Prog.
Grantee: Peter C. Kern
Sale Price: $850000
Financing: Cash to seller; conventional financing.
</TABLE>
<TABLE>
<CAPTION>
INDICATIONS
<S> <C>
Price/Unit (Apt/Bed) $14167
Price/S.F.: $19 s.f.
Comments: Purchased vacant w/ no license to renovate into an ALF; TX has not required CON since
1985; all utilities and on-site septic.
</TABLE>
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
COMPARISON OF COMPARABLES TO SUBJECT
In our final and most detailed analysis and comparison to subject, the appraiser
selected comparable sales with the highest combination of important similar
characteristics. The sales selected were all special use medical facilities that
were sold for a different use than that of the previous tenant. All sales
utilized were from the period of 1990 to 1994. We would have preferred to
utilize more recent sales data. However, our primary consideration in comp
selection was to find buildings that had a former medical use that had been
converted to a new and different use. Some buildings were converted from nursing
homes to office use. Others from hospitals to general or medical use. The
critical factor was felt to be a need to find sales that reflected the
functional obsolescence problems inherent in a transition from medical to other
use. The amount of data available that addresses this specific situation is
limited. The appraiser was able to develop such data and the sales used are the
result of that research. We were unable to find any more recent sales that
addressed the specific appraisal problem. It was felt more important to utilize
sales that addressed the specific appraisal problem, albeit not current sales,
rather than use sales of a more current date that did not specifically address
this unique situation.
There is. no real trend evident in analysis of this data. Each sales situation
is very unique and reflects the level of desperation of the seller to unload
his "white elephant" as well as the willingness of a new user to take on a
complicated real estate renovation project and his available options both from a
real estate and business standpoint.
The appraiser utilized the same sales for all properties appraised in this
assignment. The problems studied and affecting the value of each problem are the
same. The analysis of discount in the market place for conversion to another use
will be similar. The medical market is a national or regional market and
therefore sales in one state are applicable to another in this particular
situation. The specific discount applied to one property will have some
locational characteristics. However, this has more to do with the specific
analysis of each particular purchaser and his own business situation rather than
the specific location.
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<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
Sales of office buildings were not compared as the typical office building is so
considerably different from the subject as to require major adjustments for
comparison purposes. The main point derived from analysis of the sales used is
to illustrate that the market will make a very substantial adjustment downward
in price to reflect the functional obsolescence problems to be dealt with in a
conversion of use process. Analysis of office building sales would not deal with
the main appraisal problem affecting the subject.
Explanation of Adjustments
All sales are of Special Purpose medical buildings. Each sale has been adjusted
for differences, both economic and physical, in relation to the subject.
Following is a discussion of each characteristic of the property with an
explanation of the adjustments made to each comparable sale.
Cumulative Adjustments
"Cumulative Adjustments" were applied to the sales prior to other adjustments in
order to reconcile the sales prices for intangible occurrences which could alter
the sales prices. Additional non-cumulative adjustments for physical and
economic considerations are analyzed thereafter. Cumulative adjustments
considered included:
Property Rights Conveyed
This adjustment is for sales which had rights conveyed differently than
the subject's. In this appraisal, the Fee Simple Going Concern is being
appraised. All of the sales were also sold as Going Concerns, none of
which were leased facilities. As the appraiser, at this point in this
analysis, is seeking Fee Simple Value of Going Concern, no adjustment
was made.
Financing
No adjustment is applied for financing, as all sales are reported to be
cash to seller or cash equivalent transactions. We are not aware of
atypical financing that would require an adjustment for cash
equivalency.
Conditions of Sale
No adjustments were considered necessary to reflect any special
conditions or terms of sale.
- --------------------------------------------------------------------------------
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<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
Market Conditions (Date of Sale)
Adjustments for recorded sales date, or time, is reflective of
differences in the market at different times. An upward adjustment of
approximately 10% annually was made to the comparables sale prices.
Non-Cumulative Adjustments
Location
Locational adjustments reflect the difference in value attributed to a
property's specific location. The subject's location in an outlying
location without any other medical users in the immediate area
indicates the need for a discount.
Quality/Design
This adjustment reflects physical differences of specific properties
for varying qualities of building materials, layout, building finish,
etc.
Condition/Age
Many older facilities receive renovations and on going maintenance due
to State requirements and market expectations. However, their appeal to
the private pay market is less than newer facilities. In addition,
newer facilities are generally more efficient to operate, thus
increasing profit.
Average Square Footage Per Bed
The comparables presented a range of 320 s.f. to 1,000 s.f. per bed.
The subject, at 1,008 s.f., is at the upper end of the range. The area
per bed is an indication of the existence, or at least the potential,
for better support areas which can positively affect profitability.
Sales Price Per Bed
HealthCare Property Appraisers maintains a nationwide data bank on long term
health care facilities, which currently includes sales of over 1,200 facilities.
Facilities that are sold for shell value only sometimes bring as little as
$10,000 to $12,000 per bed. Facilities which are of good quality but
predominantly medicaid funded are selling on a nationwide basis for
approximately $25,000 to
- --------------------------------------------------------------------------------
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<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
$50, 000 per bed. The- higher quality homes, which
offer better care services, more amenities, and therapy areas (or homes which
show unusual profit potential), are generally sold for $45,000 to $75,000 per
bed.
The comparables selected for close analysis have an unadjusted sales price per
bed range from $14,167 to $47,458 with an average of $25,042. The factors which
affect the sales price per bed include unit mix, number of residents per room,
project amenities, and average area per bed. Typically, a property which has a
larger average area per bed will sell at a higher unit price.
After adjusting the comparables to the subject using the net income
differential multiplier, the sales price per bed formed a range of $18,735 to
$26,932 with an average of $21,853. Giving further consideration to subject's
average bed area and other physical characteristics, the value range on a per
bed basis is estimated at $21,500 to $22,500. Applying this range to the
subject's 36 indicates a value range of $774,000 to $810,000.
<TABLE>
<CAPTION>
# BEDS X SALE PRICE PER BED INDICATED VALUE
-------
<S> <C> <C>
36 X $21,500 to $22,500 $774,000 to $810,000
</TABLE>
Sales Price Per Square Foot
The unadjusted comparables formed a sales price range from $19 to $69 per square
foot with an average of $44. An inverse relationship usually exists between the
sales price per square foot and the average area per bed, assuming all amenities
and services are similar. A smaller unit usually generates more income on a per
square foot basis than a larger unit. This is reflective of the staffing costs
as, typically, the per resident day costs are not directly influenced by the
unit size. After adjustments, the comparables formed a sales price per square
foot range of $23 to $69 with an average of $40.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
89
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
Considering the subject's functional utility, area per resident, quality and
condition, we believe a value range of $37.50 to $42.50 per square foot to
be indicated. Applying the unit values to the subject's 36,270 of gross building
area indicates a value range of $1,360,125 to $1,541,475.
<TABLE>
<CAPTION>
BUILDING SIZE X SALE PRICE PER SF = INDICATED VALUE
- ------------- ----------------- ---------------
<S> <C> <C>
36,270 X $37.50 to $42.50 = 1,360,125 to $1,541,475
</TABLE>
Reconciliation of Sales Comparison Indicators
The value ranges developed by both of the physical indicators are summarized
below:
<TABLE>
<CAPTION>
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
INDICATORS OF VALUE VALUE RANGE
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
<S> <C>
SALES PRICE PER BED $774,000 to $810,000
SALES PRICE PER SQUARE FOOT $1,360,125 to $1,541,475
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
</TABLE>
The sales price per bed tends to be a good indicator if the comparables have
similar rates, per patient day occupancy, and self pay ratios. Due to the
uniqueness of each of the comparables, the price per bed is not considered to be
a strong indicator. The sales price per square foot is considered a stronger
indicator. Giving consideration to current market conditions and the subject's
physical characteristics, the sales comparison approach suggests a narrower
range of $1,350,000 to $1,450,000.
The Sales Comparison Approach has a limited use in providing a value range.
Differences in location and many other variables make a precise comparison
between the comparable sales and the subject property extremely difficult.
- --------------------------------------------------------------------------------
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90
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
Summary
The validity of the Sales Comparison Approach depends upon whether a buyer can
be found who would be willing to pay some amount for the building improvements.
In our opinion, the chance of that happening are rated as only POOR. While this
is an attractive developing area, the lack of any other large medical or general
office user in the area suggests a slow market for subject's improvements in
this location. The reconciled market value range indicated by the Sales
Comparison Approach:
$1,350,000 to $1,450,000
- --------------------------------------------------------------------------------
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91
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
RECONCILIATION AND FINAL VALUE ESTIMATE
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------ --------------------------------------
INDICATED VALUE BY $1,1720,000
COST APPROACH
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ------------------------------------------------------ --------------------------------------
INDICATED VALUE BY $1,630,000
INCOME APPROACH
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ------------------------------------------------------ --------------------------------------
INDICATED VALUE BY $1,350,000
SALES COMPARISON APPROACH to $1,550,000
- ------------------------------------------------------ --------------------------------------
</TABLE>
To estimate the final Market Value for The Sandybrook Center, it is necessary to
reconsider all three approaches, correlate the data, and determine what emphasis
to give each approach.
The Cost Approach was based upon a component cost breakdown prepared by a
computer utilizing the Marshall and Swift Valuation Service Cost Data Bank. This
nationally recognized building costs service prepared a very accurate estimate
of replacement costs for subject's improvements. From replacement costs (direct
and indirect) was deducted depreciation based upon observation and age of the
improvements and sales data as well as consideration of Functional and External
Obsolescence. Subject's 19.63 acres of land were valued at $25,471 per acre or
$500,000. This approach indicated a market value for The Sandybrook Center of
$1,720,000.
The value indicated by the Cost Approach is an important consideration for a
potential buyer as it provides a starting point for estimating value in use.
However, most purchasers of a special use property will make a fairly
substantial deduction from cost new to reach their offering price. The amount of
that deduction is dependent upon a number of factors that vary from investor to
investor and property to property and cannot be predicted or quantified with any
high degree of accuracy. If a buyer can be found who can use the building
improvements it is my opinion that this deduction would be a minimum of 50% but
in many cases could be as much as 100%. We believe this depreciated value by our
Cost Approach of $1,720,000, which assumes depreciation of 60% probably sets the
upper limit of value for the subject property.
- --------------------------------------------------------------------------------
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92
<PAGE>
The Sandybrook Center, Mt Dora, Florida
- --------------------------------------------------------------------------------
Under the Income Approach to value, the appraiser analyzed the subject property
from the standpoint of a potential investor who would be most interested in its
income stream. This approach was considered to be the weakest of the three as it
is based on the least data and has the weakest correlation to the actual thought
process of the typical buyer. Few buyers of this type property would be
acquiring it for its investment potential, but rather for its value in use in a
business. The projected Net Income to Real Estate of $163,215 was capitalized at
10%. Based upon a consideration of current financing, available alternatives,
and equity demands, the Market Value of The Sandybrook Center was indicated by
the Income Approach to be $1,630,000.
Under the Sales Comparison Approach, the appraiser reviewed a considerable
number of sales of former medical facilities that have been converted to other
uses. Analysis of this data after adjustments for property differences indicated
a Maximum Market Value for The Sandybrook Center of $1,350,000 to $1,550,000,
based on $37.50 to $42.50 per square foot.
The preceding analysis assumes a buyer can be found who will be willing to pay
something for the subject's improvements. The limited market for the subject's
improvements and consideration of its location suggest that only a low price
will attack a buyer to these improvements.
Our three Approaches to Value when correlated together suggest a value of
$1,350,000 to $1,720,000. However, that conclusion is based upon:
- The assumption that a user for subject's improvements can be found
- Analysis of sales of former medical buildings which were resold
(ignoring the fact that many never did sell)
- A large estimate of depreciation by the appraiser that cannot be
accurately proven.
The reality of the matter is that there probably will be no buyer for the
improvements and the property will have to be sold for Land Value only. It is
very unlikely that a speculator/developer can be persuaded to take on this
renovation/conversion project due to the risks inherent in changing a buildings
use. Any renovation project is by nature very difficult to cost estimate and
they are
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notorious for cost overruns. The more unique the building (like
subject) and the more extensive the wiring and plumbing, etc (like subject) and
the more premature or remote the location (like subject) the higher the risk to
a developer/speculator/renovator. So it is felt that the subject will have very
poor appeal to a purchaser of this type.
It is not impossible that the subject can be sold to a buyer who intends to be
an actual user/occupant. However, a user would have to be willing to undertake
the same risks and work as described above. Most users are not knowledgeable
enough in construction and design to undertake such or a project. Nor do they
wish to take the time away from their real business which is usually something
other than real estate. The only real potential purchaser would have to be
someone who 1) is in the real estate or construction business already, 2) has
experience in renovation of older or change/use buildings 3) has the time,
capital and interest to take on such a project, 4) has need for office space he
can utilize himself, and 5) has a business that can utilize a premature outlying
location. The number of buyers fitting these requirements are few and far
between. Moreover, they know it. Which adds the final required characteristic:
6) they know they are one of a very few buyers and will pay very little for
subject's improvements. If they can buy the property for land value only, then
they have some opportunity for profit in the renovation project. Without a
substantial discount, the buyer has no incentive to take on an obvious problem
project. Therefore, we believe the most likely sale price for the subject to be
its Land Value only.
Based on the enclosed data and analyses, I believe the Subject Property
described herein has the following estimated Final Market Value as of March 19,
1997:
FINAL MARKET VALUE OF SUBJECT PROPERTY: $500,000
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MARKETING PERIOD
Due to the weak market for Office Complexes, The Sandybrook Center may not be
saleable to a health care user. The appraiser has reviewed sales of a number of
Office Complexes that have taken place over the past five years. The average
sales time for those properties was approximately three years. If the subject
property were priced to include "some" value for the improvements and adequately
marketed, we believe it could be sold at our appraised value within
approximately three years. However, it must be recognized that there may be very
little demand for this property as improved and it may be necessary to sell it
for land value alone -- which could also take three years.
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SUMMARY OF VALUES
After considering the subject's functional utility, neighborhood and general
market conditions, we would estimate the probability of finding a buyer/user for
the existing improvements as only POOR. Due to the slowly developing pace of
this suburban area, we do not believe an investment type buyer can be found for
the buildings as improved. The market for a "user" buyer is very limited. The
most realistic price for the subject includes no value for the improvements.
Therefore, we estimate the Market Value of the subject to be the value of the
land only or:
Land $500,000
It should be noted that there is some upside potential for finding a buyer who
will pay something for the improvements. But due to the low probability of that
happening we do not believe a prudent buyer would pay more than land value.
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UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS
1. The Appraiser assumes no responsibility for legal matters nor renders
an opinion of title. Good title to The Sandybrook Center is assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to appear
in court, commission, or in any other capacity without
prior arrangements and additional compensation.
This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc.. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report without the preparer's written consent is
an unintended user, and does so at his own risk.
3. The factual information in this report--furnished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
4. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each
appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared. However, selected portions of
this appraisal report shall not be given to third parties without prior
written consent of the signatories of this appraisal report. Further,
neither all nor any part of this appraisal report shall be disseminated
to the general public by use of advertising, public relations, news,
sales, or other media for public communication without the prior
written consent of the signatories of this appraisal report.
5. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not responsible
for any adverse condition that may be found in these matters.
6. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters (including
but not limited to termites, dry rot, wet rot, and other
wood-destroying organisms) are not present or have been detected and
properly corrected.
7. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations and mechanical, plumbing, electrical, heating, ventilation,
air conditioning, and roof systems are assumed to be adequate, in good
working order and capable of performing the function for which they
were designed. The appraiser has no expertise in this area and cannot
certify
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the condition or functional adequacy of these items. A qualified
inspector should be utilized for that purpose. The appraiser assumes no
responsibility for any hidden or unapparent conditions of the property,
soil, subsoil, or structures that would affect its value.
8. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
9. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
10. The appraiser has not researched the subject property for liens nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value. The property is therefore appraised as though it were free and
clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
11. The value estimate and estimated income and expenses assume responsible
ownership and typical, competent management.
12. The appraiser was not furnished with construction plans or physical
surveys and due to the confidential nature of this assignment, did not
measure the building improvements. Gross area of land and improvements
is estimated by methods and from sources considered reliable and the
data is believed to be accurate. However, no responsibility is assumed
for its accuracy and it is recommended that a licensed surveyor be
employed for that purpose. Any substantial difference in the subject's
actual land or improvement size would have some effect on its true
market value. Any statement by the appraiser contained herein as to the
size of land or building improvements is for descriptive purposes and
is a statement of the appraiser's opinion as to the property's
functional utility and not a statement of fact as to its physical size.
13. The appraiser's projections of income and expenses are not predictions
of the future. They are our best estimates of current market thinking
about what future income and expenses might be. We make no warranty or
representations that these projections will materialize.
14. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale.
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15. To the best of the Appraiser's knowledge, this report conforms to the
current requirements prescribed by the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation as required by the Financial Institutions Reform,
Recovery and Enforcement Act (FIRREA) and the Appraisal Institute.
16. The Americans with Disabilities Act "ADA" became effective January 26,
1992. We have 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
we have no direct evidence relating to this issue, I (we) did not
consider possible noncompliance with the requirements of ADA in
estimating the value of the property. Based on our personal inspection,
we are not aware of any irregular or apparent non-compliant handicap
items.
17. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
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APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- - The statements of fact contained in this appraisal report are true
and correct.
- - The reported appraisal 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 personal interest or bias with respect to
the parties involved.
- - My compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event.
- - My analyses, opinions and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation as required by the Financial Institutions Reform,
Recovery and Enforcement Act (FIRREA) and the Code of Professional
Ethics and Standards of Professional Appraisal Practice of the
Appraisal Institute.
- - As of the date of this report, J. Michael Burroughs, MAI, SRA has
completed the requirements of the continuing education program 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.
- - The subject property was inspected by Franklin M. Ramsey and was not
inspected by J. Michael Burroughs.
- - Eve L. Burroughs and Bonny J. Sinclair provided valuable assistance in
compiling data for this report. No one else provided significant
professional assistance to the undersigned. The appraiser gratefully
acknowledges the contribution of data from several sources.
- - The appraiser has complied with the USPAP competency provision.
- - The USPAP departure provision does not apply.
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- - This appraisal assignment was not based on a requested minimum or
maximum valuation, a specific valuation, or the approval of a loan.
I do not authorize the out-of-context quoting from or partial
reprinting of this appraisal report. Further, neither all nor any part of this
appraisal report shall be disseminated to the general public by the use of media
for public communication without the prior written consent of the appraiser(s)
signing this appraisal report.
/s/ J. Michael Burroughs
-----------------------------
J. MICHAEL BURROUGHS, MAI SRA
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REFERENCES
The appraiser would like to acknowledge the following resources:
1. Laventhol & Horwath, Retirement Housing Industry 1989 (Laventhol &
Horwath, Philadelphia, PA 1990).
2. Laventhol & Horwath, Nursing Home Industry 1988 (Laventhol & Horwath,
Philadelphia, PA 1989).
3. Marshall and Swift Computerized Services, Los Angeles, CA.
4. National Planning Data Corporation, Ithaca, NY.
5. SMG Marketing Group, Inc. -C-1993.
6. Ernst & Young and American Association of Homes for the Aging Study.
Continuing Care Retirement Communities: An Industry in Action, Analysis
and Developing Trends, 1989.
7. The Dictionary of Real Estate Appraisal, American Institute of Real
Estate Appraisers, second edition.
8. The Appraisal of Real Estate, ninth edition.
9. The Guide to the Nursing Home Industry, 1993. A joint publication of
Health Care Investment Analysts, Inc. and Arthur Andersen & Co.
10. U. S. Bureau of Census.
11. Marion Merrell Dow Managed Care Digest Long Term Care Edition 1993.
Marion Merrell Dow, Inc.
12. An Overview of The Assisted Living Industry, October 1993, Coopers &
Lybrand and The Assisted Living Facilities Association of America.
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QUALIFICATIONS OF APPRAISER
J. MICHAEL BURROUGHS, MAI & SRA
POST OFFICE BOX 2227
HWY 64 EAST, LAUREL TERRACE, 2ND FLOOR
- CASHIERS, NORTH CAROLINA 28717
BUSINESS EXPERIENCE
J. Michael Burroughs has been engaged in the preparation of appraisals,
feasibility studies, economic analyses, and general consulting on all types of
properties for various clients. In the mid-1970s, Mr. Burroughs began
specializing in the appraisal of long-term health care facilities and housing
for the elderly. Since 1985, Mr. Burroughs has worked exclusively with long-term
health care and housing for the elderly in the areas of appraising, brokerage,
and finance.
Assignments have been in more than 44 of the 50 United States. Current
assignments include all types of healthcare and senior housing real estate:
Nursing Homes
Continuing Care Retirement Communities (Both Rental and Endowment)
Assisted Living Facilities
Acute Care Hospitals
Psychiatric Hospitals
Congregate Living Facilities
Properties appraised total approximately 3,000 in number and exceed $7 Billion
in appraised value. Mr. Burroughs has also been active as a general partner in
five successful apartment to condominium conversion projects and is actively
engaged in the buying and selling of investment real estate for his own account
and for clients. He is a nationally recognized convention speaker and published
author on healthcare appraising and financing.
EMPLOYMENT
HealthCare Property Appraisers of America, Inc. - President
June, 1973 to Present
Atlantic Mortgage and Investment Company - First Vice President
January, 1972 to July, 1973, Winston-Salem, NC
Wachovia Mortgage Company - Asst. VP and Manager of the Charlotte
Income Property Loan Department May, 1970 to January, 1972,
Charlotte, NC
Prudential Insurance Company -- Real Estate and Mortgage Loan
Department Regional Appraiser December, 1964 to April, 1969,
Montgomery, Alabama May 1969 to May, 1970, Charlotte, N. C.
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GENERAL EDUCATION
Mars Hill College--Associate of Arts--1962
University of North Carolina at Chapel Hill--B.S. in Business Administration
(Major: Banking and Finance) 1964
REAL ESTATE EDUCATION
American Institute of Real Estate Appraisers--Real Estate Valuation--Course
I--University of Mississippi, 1966.
American Institute of Real Estate Appraisers--Real Estate Valuation--Course
II--Tulane University, 1967.
Various Seminars In Tax Deferred Exchanging and Computer Applications for
Real Estate Analysis.
PROFESSIONAL CONTRIBUTIONS
Mr. Burroughs has authored articles for national industry periodicals and is a
nationally recognized speaker on the valuation of healthcare and senior living
properties.
MEMBERSHIPS AND PROFESSIONAL DESIGNATIONS
The Appraisal Institute--MAI, SRA
Licensed Real Estate Broker
The Academy of Real Estate Exchangers
State Certified General Appraiser
AREA OF SPECIALTY--LONG-TERM HEALTH CARE
<TABLE>
<CAPTION>
Healthcare and Nursing Home Facilities
<S> <C>
Facilities Appraised: 2500
Location: Located in 44 States
Type: Skilled, ICF, Personal Care, Head Trauma, Long-Term Pediatric Care, Substance
Abuse, Mentally Retarded (MR), Rehabilitation, Alzheimer's, Acute, Sub-Acute,
Rehab, and Psychiatric Hospitals
</TABLE>
<TABLE>
<CAPTION>
Retirement Housing
<S> <C>
Facilities Appraised: 60+
Location: Located in over 14 States
Type: Lease Rental, Condo Ownership, Retirement Apartments with or without Nursing
Home, Assisted Living, and Luxurious Hotel-type for the well elderly. Housing
for the elderly requiring some personal care and services.
</TABLE>
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TYPICAL NURSING HOME CLIENTS (Partial List)
Mortgage/Bond Lenders
Bank One, Indianapolis, IN
Bear Sterns Investment Bankers, New York, NY
Dominion Bank, Richmond, VA
First American National Bank, Nashville, TN
First National of Maryland, Baltimore, MD
Grove Capital, Atlanta, GA
Healthcare REIT, Toledo, OH
Hibernia National Bank, New Orleans, LA
J. C. Bradford, Nashville TN and Pensacola, FL
Maryland National Bank, Baltimore, MD
Society Bank, Dayton, Ohio
Southtrust Bank, N.A., Birmingham, AL
Van Kampen Merritt, Philadelphia, PA
Wachovia Bank & Trust, Raleigh, NC
Wright One Financial, Dayton, OH
Healthcare Management Companies
- -------------------------------
American Retirement Corporation, Nashville, TN
The Angell Group, Winston-Salem,NC
Asheville Psychiatric Hospital, Asheville, NC
Beverly Enterprises, Ft. Smith, AR
Brian Management Group, Hickory, NC
The Brunner Companies, Dayton, OH
Charlotte Memorial Hospital, Charlotte, NC
Convalescent Services, Atlanta, GA
Cumberland Health Systems, Nashville, TN
Denver Health Group, Denver, CO
Diversicare Corporation of America, Franklin, TN
Elmhurst Psychiatric Hospital, Portland, CT
Genesis Health, West Point, PA
Health Care Capital, Atlanta, GA
Health Care Concepts, Atlanta, GA
Health Prime, Atlanta, GA
Meridian Healthcare, Towson, MD
Multicare Management, Inc., Hackensack, NJ
National Health Corporation, Murfreesboro, TN
Nomura, New York, NY
Quest Rescue, Atlanta, GA
Quorum Health Services, Inc., Wellesley, MA
Regency Health Care, Ormond Beach, FL
Resource Housing of America, Atlanta, GA
Royal Care, Inc., Cleveland, TN
Southern Care Enterprises, Atlanta, GA
TheraTx, Baltimore, MD
Total CareSystems, Inc., West Point, PA
WellCare, Inc., Atlanta, GA
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ADDENDA
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<PAGE>
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- -------------------------------------------------------------------------------
FEDERAL EMERGENCY MANAGEMENT AGENCY See the Attached O.N.B No. 20bi 0264
STANDARD FLOOD HAZARD DETERMINATION Instructions Expires
April 30, 1998
- -------------------------------------------------------------------------------
Section I - LOAN INFORMATION
- -------------------------------------------------------------------------------
1. LENDER NAME AND ADDRESS 2. COLLATERAL (Building Mobile Home/Personal
Property) PROPERTY ADDRESS (Legal
Description may be attached).
- -
- -
HEALTHCARE PROPERTY APPRAISERS
HWY 64 EAST BOX 2227 1300 US HWY F. 441
CASIDERS, NC 23717 MONT DORA, FL 32757-0000
- -------------------------------------------------------------------------------
3. LENDER I.D. NO. 4. LOAN IDENTIFIER 5. AMOUNT OF FLOOD INSURANCE REQUIRED
3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Section II
- -------------------------------------------------------------------------------
A. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) COMMUNITY JURISDICTION
- -------------------------------------------------------------------------------
NFIP Community County(ies) State NFIP Community
Name Number
- -------------------------------------------------------------------------------
LAKE COUNTY UNINCORPORATED AREAS FL 120421
- -------------------------------------------------------------------------------
B. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) DATA AFFECTING BUILDING/
MOBILE HOME
- -------------------------------------------------------------------------------
NFIP Map Number or
Community-Panel Number
(Community name if not NFIP Map Panel LOMA/ Flood No NFIP
the same as "A") Effective/Revised Data LOHR Zone Map
- -------------------------------------------------------------------------------
1204218250B 04/01/82 ___ ____ C
Yes Date
- -------------------------------------------------------------------------------
C. FEDERAL FLOOD INSURANCE AVAILABILITY (Check all that apply)
- -------------------------------------------------------------------------------
/X/ Federal Flood Insurance /X/ Regular Program / / Emergency
is available Program of
NFIP (community
participates in NFIP)
/ / Federal Flood insurance is not available because community is not
participating in the NFIP
/ / Building/Mobile Home is in a Coastal Barrier Resources Area (CBRA),
Federal Flood insurance may not be available.
CBRA designation date:____________________
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D. DETERMINATION
- -------------------------------------------------------------------------------
IS BUILDING/MOBILE HOME IN SPECIAL FLOOD HAZARD AREA
(ZONES BEGINNING WITH LETTERS "A" OR "V")? / / YES /X/ NO
If yes, flood insurance is required by the Flood Disaster Protection Act of
1973.
If no, flood insurance is not required by the Flood Disaster Protection Act
of 1973.
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E. COMMENTS (Optional): Cert. No: 140S429-D
Name: Client ID: 7425
Type: REGULAR
Priority: REGULAR
Requested by: EVE OR BONNY
- -------------------------------------------------------------------------------
This determination is based on examing the NFIP map, any Federal Emergency
Management Agency revisions to it, and any other information needed to locate
the building/mobile home on the NFIP map.
- -------------------------------------------------------------------------------
F. PREPARER's INFORMATION
- -------------------------------------------------------------------------------
NAME, ADDRESS, TELEPHONE NUMBER (if other than Lender) DATE OF DETERMINATION
BANKERS HAZARD DETERMINATION SERVICES - BHDS
PO BOX 33001 03/19/97
ST. PETERSBURG, FL 33733
PHONE: 1-800-723-6327
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<PAGE>
The Cambridge
Nursing Home
1 Russell Street
Cambridge, Massachusetts
<PAGE>
APPRAISAL REPORT
ON
The Cambridge
Nursing Home
1 Russell Street
Cambridge, Massachusetts
PREPARED BY:
HealthCare Property Appraisers of America, Inc.
Hwy 64 East, Laurel Terrace, 2nd Floor
Post Office Box 2227
Cashiers, North Carolina 28717
Copyright 1997, HealthCare Property Appraisers of America, Inc.
<PAGE>
SUBJECT
[PICTURE: AN URBAN STREET WITH CARS PARKED CURBSIDE]
<PAGE>
HealthCare Property Appraisers J. MICHAEL BURROUGHS, MAI, SRA
OF AMERICA, INC. PRESIDENT
[MAI LOGO]
Post Office Box 2227
Hwy. 64 E., Laurel Terrace, 2nd Floor
Cashiers, North Carolina 28717
Phone: 704-743-5204
Fax: 704-743-1730
April 10, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
14160 Dallas Parkway
Dallas, TX 75240
Re: The Cambridge
Nursing Home
Cambridge, Massachusetts
Dear Mr. Brickman:
HealthCare Property Appraisers of America, Inc. inspected The Cambridge
Nursing Home for the purpose of estimating the Market Value of its fee simple
estate as a going concern. All factors which might influence the value of this
property were investigated and fully considered to the best of my ability.
The accompanying report describes the method of appraisal and contains the
information necessary for forming realistic conclusions. The supporting data
analyses and conclusions are an integral part of this report. The maps,
sketches, and statistics are included to aid the reader in visualizing the
property. Your attention is directed to the "Underlying Assumptions and Limiting
Conditions" section which provides the basis for all conclusions and the Final
Value Estimate.
Based on the enclosed data and analyses, we believe the Subject Property
described herein had a Market Value, at Stabilized Rates, Census, and Occupancy,
as of April 1, 1997, when the deferred maintenance described herein has been
cured:
$1,650,000
This value estimate included all real and personal property as well as the
business value as a Going Concern. The furniture, fixtures and equipment were
estimated to have a contributory value of approximately $124,950 and the
intangible business assets were estimated to contribute $250,000 to the total
value. The real estate alone was estimated to contribute $1,275,050. These
estimated contributory values are allocations of the Going Concern and may not
represent the amount that would be realized if components were sold separately.
The above Value Estimate was predicated upon completion of the deferred
maintenance of $25,000 and assuming initial occupancy. To estimate the current
"as is" value of the subject property
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
at initial occupancy and in its present physical condition, a deduction was made
for the cost of new air conditioners required by the city by July 1, 1997. The
"as is" value of the subject property was:
$1,625,000
The value conclusions in this report assume that this property is not
subject to any leases or management contracts. After studying the sales
histories of similar properties, the Appraiser estimates a reasonable marketing
period for the subject property to be twelve months.
To the best of my knowledge, this report conforms to the current
requirements prescribed by the Uniform Standards of Professional Appraisal
Practice of the Appraisal Standards Board of the Appraisal Foundation (as
required by the Financial Institutions Reform, Recovery and Enforcement Act or
FIRREA) and the Appraisal Institute.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by the Uniform Standards of
Professional Appraisal Practice (USPAP).
Special Condition
After discussions with appropriate state agencies, the appraiser believes
the property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have a
dramatic impact on the property's value.
I appreciate the opportunity to provide these appraisal services to you. If
you have any questions on this report or any other matters, please do not
hesitate to call.
Respectfully submitted
/s/J. MICHAEL BURROUGHS, MAI,SPA.
----------------------------------------
J. MICHAEL BURROUGHS, MAI,SPA.
State Certified General Appraiser, #A218
President
JMB:ela
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SUMMARY OF IMPORTANT CONCLUSIONS
Self-Contained Report of a Complete Appraisal
<TABLE>
<S> <C>
Subject Property: The Cambridge
Nursing Home
Property Location: I Russell Street
Cambridge, Massachusetts
Report Date: April 10, 1997
Effective Date: April 1, 1997
Purpose of Appraisal: Market Value
Area of Site: 21,600 sf (approx.)
Highest and Best Use: For nursing home Use
Improvements:
Number of Units: 119 Beds
Building size: 24,700 sf (approx.)
Building date: 1967
Economics:
Gross Income: $5,557,800
Vacancy: (166,734)
----------
Effective Gross Income: $5,391,066
Expenses: (5,223,318)
----------
Net Income: $ 167,748
Indicated Values:
Cost Approach: $1,590,000
Income Approach: $1,450,000
Sales Comparison Approach: $1,500,000 to $1,650,000
</TABLE>
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<TABLE>
<S> <C>
Final Estimated Market Value
After Curing Deferred Maintenance
and At Stabilized Occupancy:
Real Estate $1,275,050
Personal Property $ 124,950
Business Value $ 250,000
----------
Total Property $1,650,000
Final Estimated Market Value "As Is":
Real Estate $1,275,000
Personal Property $ 100,000
Business Value $ 250,000
----------
Total Property $1,625,000
</TABLE>
Special Condition
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have a
dramatic impact on the property's value.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
TRANSMITTAL LETTER ....................................................... 2
SUMMARY OF IMPORTANT CONCLUSIONS ......................................... 4
TABLE OF CONTENTS ........................................................ 6
GENERAL IDENTIFICATION OF PROPERTY ....................................... 7
PROPERTY RIGHTS APPRAISED ................................................ 7
SCOPE OF APPRAISAL ....................................................... 7
HISTORY OF PROPERTY ...................................................... 8
THE PURPOSE OF THE APPRAISAL ............................................. 9
METHOD OF APPRAISAL ...................................................... 13
REGIONAL ANALYSIS ........................................................ 15
MARKET AREA and NEIGHBORHOOD ............................................. 37
SITE DATA ................................................................ 42
DESCRIPTION OF IMPROVEMENTS .............................................. 45
COST APPROACH TO VALUE ................................................... 51
INCOME CAPITALIZATION APPROACH TO VALUE .................................. 69
SALES COMPARISON APPROACH TO VALUE ....................................... 101
RECONCILIATION AND FINAL VALUE ESTIMATE .................................. 125
ALLOCATION OF VALUE BETWEEN REAL PROPERTY, PERSONAL
PROPERTY AND BUSINESS ENTERPRISE ......................................... 128
SUMMARY OF VALUES ........................................................ 136
UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS ........................... 137
APPRAISER'S CERTIFICATION ................................................ 141
QUALIFICATIONS OF APPRAISER .............................................. 144
</TABLE>
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GENERAL IDENTIFICATION OF PROPERTY
The subject property, known as The Cambridge Nursing Home, is located at I
Russell Street, Cambridge, Massachusetts. The subject site and improvements are
described further in subsequent sections of this report. The subject of this
analysis includes all real, personal and business property necessary to operate
as a nursing home.
PROPERTY RIGHTS APPRAISED
The appraiser, in completing this appraisal assignment, considered the subject
property to include all of those rights that may be lawfully owned and are
legally referred to as being held in "fee simple".
Definition of Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate; subject
only to the limitations of eminent domain, escheat, police power, and
taxation. (The Dictionary of Real Estate Appraisal, American Institute of
Real Estate Appraisers, Third Printing, October, 1987)
SCOPE OF APPRAISAL
In conducting this appraisal, our staff
- Inspected the subject property.
- Developed and analyzed significant data from primary and secondary
sources, confirming that data where possible.
- Analyzed sales, income and expense data and projected a reasonable
cash flow for the subject.
- Completed Income Capitalization, Cost and Sales Comparison Approaches
To Value and reached a Final Market Value conclusion as reported
herein.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by USPAP.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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HISTORY OF PROPERTY
To the best of the appraiser's knowledge, the complete subject property (land,
building, equipment and business) has not been sold, listed or placed under
contract within the past three years.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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THE PURPOSE OF THE APPRAISAL
The purpose of the Complete Appraisal contained in this Self-Contained Appraisal
Report is to estimate the Market Value of The Cambridge Nursing Home. This
report is intended for the internal use of the property owner.
Definition of Market Value
The most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated.
(2) Both parties are well informed or well advised, and acting in what
they consider their own best interests.
(3) A reasonable time is allowed for exposure in the open market.
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto.
(5) The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.*
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Definition of Going Concern Value
As most properties of subject's type are usually owned, operated, and sold
as one entity including the real estate, personal property, and business,
in this report Market Value is considered, to be synonymous with the Going
Concern Value, which includes any intangible enhancement attributable to
the operation of the property. The physical real estate assets are such
integral parts of the business that the market values for the land and
building or the business aspects are difficult, if not impossible, to
segregate from the total value of the property.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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COMPETENCY
The Office of the Comptroller of the Currency has issued the following Final
Rule, which requires lenders to evaluate appraiser competency for each specific
appraisal assignment:
"Not all appraisers are competent to perform every type of appraisal that
will be needed in connection with federally related transactions. For
instance, an appraiser who is experienced in appraising shopping centers
may not possess sufficient expertise to appraise a golf course. A financial
institution should look beyond an individual's title to determine if he or
she has the experience and training needed to perform the appraisal. This
provision is not intended to prohibit, in every circumstance, an individual
from appraising a type of property with which he or she is not familiar.
However in such instances, an appraiser may perform the appraisal only in
accordance with the Competency Provision in the USPAP."
HealthCare Property Appraisers of America, Inc. is a national appraisal firm
limiting its appraisal practice to Health Care and Senior Housing properties.
HealthCare Property Appraisers of America, Inc. has prepared over 3,000
appraisal reports in 42 states on a wide variety of health care-oriented
facilities and housing for the elderly. Property types encompass the complete
continuum of health care facilities including:
- General and Acute Care Hospitals
- Psychiatric Hospitals
- Substance Abuse Facilities
- Skilled Nursing Homes
- Assisted Living Homes
- Rest Homes, Personal Care and Homes for the Aged
- Facilities for the Developmentally Disabled
- Independent Living Apartments for Retirees
- Continuing Care Retirement Communities
Our office maintains a constant dialogue with public health departments,
medicaid reimbursement officials and healthcare licensing agencies in all 50
states. We constantly update our data bank in accordance with changes within the
various state health care programs.
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HealthCare Property Appraisers of America, Inc. maintains an in-house database
which currently contains in excess of 1,300 sales of health care-related and
senior housing properties.
Source of Definitions
- Title XI, Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 (FIRREA), [Pub. L. No. 101-73,103 Stat. 183 (1989)], 12 U.S.C.
3310,3331-3351, and section 5(b) of the Bank Holding Company Act, 12
U.S.C. 1844(b); Part 225, Subpart G: Appraisals Paragraph 225.62(f).
- Uniform Standards of Professional Appraisal Practice, Page 1-7.
- Federal Reserve System, 12 CFR Parts 208 and 225, Sec. 225.62.
- Office of the Comptroller of the Currency, 12 CFR part 34, Sec. 34.42.
- FDIC, 12 CFR Part 323, Sec. 323.2.
- Office of Thrift Supervision, 12 CFR Part 564, Sec. 564.2.
- NCUA, 12 CFR Part 722, Sec. 722.2.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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METHOD OF APPRAISAL
The Appraisal Profession generally recognizes three approaches to value:
1. Cost Approach to Value: The appraiser: (a) estimates the land value as
though the site were vacant and available for development and (b) estimates
the cost to replace subject's improvements (at their same stage of
depreciation). The depreciated Replacement Cost is usually based upon
consultation with local contractors and construction cost data services.
2. Income Capitalization Approach to Value: The Appraiser compiles and
analyzes market data to estimate subject property's economic rental and
expenses. The net income thus derived is capitalized into a value estimate.
This indicates the property's value to an investor receiving this income
stream and develops the present value of perceived future benefits and
property reversion.
3. Sales Comparison Approach to Value (also known as the Comparative Approach
or Market Data Method): The Appraiser researches sales of nursing homes in
this market area and developes units of comparison which are adjusted and
applied to the subject property.
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REGIONAL ANALYSIS
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- --------------------------------------------------------------------------------
<PAGE>
[MAP: North Cambridge Area]
<PAGE>
[MAP: Massachusetts State]
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
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REGIONAL ANALYSIS
OVERVIEW
The subject property is located in the city of Cambridge (Boston), Middlesex
County, Massachusetts. Specifically, the subject's area is referred to as North
Cambridge and is approximately 45 minutes north of the Central Business District
of Boston. Cambridge is the county seat of Middlesex County and can be
considered a bedroom community of the Greater Boston Area and part of the
Boston, Massachusetts-New Hampshire Metropolitan Statistical Area (hereafter
referred to as the Boston-NH MSA). The following counties make up the Boston-NH
MSA: Essex, Middlesex, Norfolk, Plymouth and Suffolk along with parts of Bristol
and Worcester counties.
TERRAIN AND CLIMATE
Cambridge is located in the Massachusetts Bay area at the mouth of Charles
River. The terrain is basically at sea level being either level or rolling. Two
of the more famous hills are Beacon Hill in Boston and Bunker Hill in
Charlestown.
The area's proximity to the Atlantic greatly influences its climate which is
described as damp, changeable, and relatively mild, considering its northern
location. Breezes from the Atlantic moderate the temperature in both winter and
summer. Rain is plentiful and well distributed throughout the year. The area
receives a great deal of snow. Temperatures range from an average low in January
of 22.5DEG. to an average high in July of 81.4DEG. Annual rainfall averages
43 inches and snowfall averages 42 inches.
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POPULATION AND DEMOGRAPHICS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHANGE PROJECTED CHANGE
1990-1996 1996-2001
--------- ----------------
<S> <C> <C>
UNITED STATES 6.5% 4.9%
STATE 0.5% 0.3%
MSA 0.4% 0.3%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
According to the Claritas, Inc., a demographics survey firm, the estimated 1996
population of the United States has increased 6.5% since 1990, and an additional
4.9% increase can be expected by 2001.
According to the 1990 Census, Massachusetts's population totaled 6,016,425
residents. Claritas estimates the current population at 6,044,263, representing
an increase of 0.5%. By 2001, the population is projected to reach 6,062,912
residents, an increase of 0.3%.
The 1990 Census indicates the Boston-NH MSA population totaled 3,226,935
residents. Claritas estimates the current population at 3,240,708 representing
an increase of 0.4%. By 2001, the population is projected to reach 3,249,729
residents, an increase of 0.3%.
DEMOGRAPHICS OF THE ELDERLY POPULATION
Percentage of Change - Elderly Population
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1990-1996 1996-2001
--------- ---------
75-79 80-84 85 & Over 75 -79 80- 84 85 & Over
----- ----- ---------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES 14.4% 21.0% 32.9% 11.3% 12.4% 19.0%
STATE 8.0% 14.8% 24.2% 5.2% 6.6% 13.2%
MSA 8.1% 13.0% 24.8% 6.6% 6.6% 12.6%
</TABLE>
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The market segments of primary interest in this demographics study are the age
groups: (a) 75 to 79, (b) 80 to 84, and (c) 85 and over. Between 1990 and 1996,
the estimated increase nationally in the 75 to 79 year old age bracket was
14.4%. In the 80 to 84 age group the change was 21.0% and the change in the 85
and over age group was 32.9%. By 2001, the 75 to 79 age group is projected to
increase by an additional 11.3%, the 80 to 84 group by 12.4% and the age group
85 and over by 19.0%.
In the state of Massachusetts, the 75 to 79 age group is currently estimated at
172,045 which is an increase of 8.0% since the last census. The age group 80 to
84 has shown an increase of 14.8% in that same time period and the 85 and over
age group has shown an increase of 24.2%. It is estimated that by 2001, there
will be 181,056; 130,015 and 132,448 residents in these age groups or a change
of 5.2%, 6.6, and 13.2%.
In the Boston-NH MSA, the 75 to 79 age group is currently estimated at 88,670
which is an increase of 8.1% since the last census. The age group 80 to 84 has
shown an increase of 13.0% in the time period between 1990 and 1996 and the 85
and over age group has shown an increase of 24.8%. It is estimated that by 2001,
there will be 94,499; 67,811 and 69,750 residents in these age groups or a
change of 6.6%, 6.6%, and 12.6%.
Median Household Income - Ages 75+
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1990-1996 1996-2001
--------- ---------
75 - 79 80- 84 85 & Over 75-79 80-84 85 & Over
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
U.S. +$3,462 +$3,355 +$3,233 +$3,344 +$3,359 +$3,357
STATE +$2,326 +$2,151 +$1,970 +$3,158 +$3,173 +$3,237
MSA +$3,323 +$3,207 +$3,134 +$3,224 +$3,171 +$3,198
</TABLE>
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Nationally, the 75 to 79 age group median household income increased $3,462
between 1990 and 1996 and is projected to increase an additional $3,344 by 2001.
The 80 to 84 age group showed an increase nationally in median household income
of $3,355 between 1990 and 1996 and is projected
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The Cambridge Nursing Home, Cambridge, Massachusetts
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to increase an additional $3,359 by 2001. The age group 85 and over showed an
increase between 1990 and 1996 of $3,233 and is projected increase an
additional $3,357 by 2001.
In the state of Massachusetts, the median household income for the 75-79 age
group increased $2,326 between 1990 and 1996, and is projected to reach $19,300
or increase an additional $3,158 by 2001. The median household income for the 80
to 84 age group during the time period 1990 to 1996 increased $2,151 and is
expected to reach $18,932 or increase an additional $3,173 by 2001. The age
group 85 and over showed an increase of $1,970 between 1990 and current
estimates and is projected to reach $18,656 or increase an additional $3,237 by
2001.
In the Boston-NH MSA, the median household income for the 75-79 age group
increased $3,323 between 1990 and 1996, and is projected to reach $21,233 or
increase an additional $3,224 by 2001. The median household income for the 80 to
84 age group during the 1990-1996 time period increased $3,207 and is expected
to reach $20,913 or increase an additional $3,171 by 2001. The age group 85 and
over showed an increase of $3,134 between 1990 and current estimates and is
projected to reach $20,855 or an additional increase of $3,198 by 2001.
Elderly Households With Income $35,000+
(As a % of Total Household Income For 55+ population)
- --------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
1990 1996 2001
ESTIMATED PROJECTED
---- --------- ---------
<S> <C> <C> <C>
UNITED STATES 42.4% 52.0% 58.3%
STATE 52.9% 58.2% 60.9%
MSA 56.7% 62.7% 66.3%
</TABLE>
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One of the best indicators of the ability of the subject's residents to be self
supporting (rather than government funded) is their level of affluence. The
appraiser compared the subject's potential local market with that of
Massachusetts and the USA as a whole. The comparison was based upon the
percentage of population aged 55+ with an annual household income exceeding
$35,000.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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GOVERNMENT AND SERVICES, UTILITIES
The subject property falls within the jurisdiction of the town of Cambridge
which has a Type E, Council/Manager form of government, where the council hires
a manager and selects a mayor. Water and sewer service are provided through the
City of Cambridge, electricity is provided by Commonwealth Electric and gas by
Commonwealth Gas. Local phone service is provided by Nynex and long distance by
AT&T, Sprint, MCI. The City of Cambridge Police Department has 255 officers the
City Fire Department has 278 full-time personnel with an ISO rating of 3.
EDUCATION
The Cambridge School System has 13 elementary schools (grades K-8), and one high
school (grades 9 - 12) with an enrollment of 8,140 students. There are two
private/parochial high schools and one state charter school. There are four
facilities for higher education located in Cambridge, including Harvard,
Massachusetts Institute of Technology. The Greater Boston area offers numerous
opportunities for higher education and technical training.
TRANSPORTATION
The area's principal highways include Interstates 90, to the south, I-93 to the
north and I-95 to the west. The principal road through Cambridge is State
Highway 2A, which bisects Cambridge and the North Cambridge area, and State
Highway 2/3, which forms the southern border of Cambridge. There are no road
improvement projects currently underway within the city limits of Cambridge and
none are slated for the near future. Airports are located throughout the area,
with the nearest commercial airport being Boston's Logan International,
approximately 8 miles southeast. Passenger rail service is provided by Amtrak
out of Boston. Other modes of transportation in the Boston metro area include
city buses, rapid rail cars, trolley coaches, commuter railroads, and a ferry
system. Local bus service in Cambridge is provided by Massachusetts Bay Transit
Authority with service in and around Cambridge.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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HEALTH CARE
There are 5 hospitals serving the Cambridge area and the closest to the subject
in Cambridge is Mt. Auburn Hospital approximately two miles south. Other
hospitals serving the Cambridge area include Sancta Maria, Youville and
Cambridge hospitals in Cambridge and Somerville Hospital in the neighboring town
of Somerville, all within 5 miles of the subject. Numerous doctors and dentists
serve the area. Additionally, there are in excess of 55 short-term general
hospitals in Boston and an abundance of physicians, specialists, dentists and
other medical practitioners. Cambridge has five other nursing homes, including
The Cambridge Homes (12 nursing beds and 58 retirement beds), Cantabridgia
Health care (99 beds) and Vernon Hall (83).
ECONOMY
Cambridge has several financial institutions, including Bank Boston (which
recently merged with Bay Bank), Cambridge Savings Bank, Cambridge Trust and East
Cambridge Bank.
According to the Places Rated Almanac the Boston-NH MSA ranks 17th of the
nation's 343 MSAs in the area of employment opportunity. The area is projected
to show an overall increase of 2.41% in new jobs, with an increase of 60,748
white collar positions and a decrease of 345 blue collar positions. Distribution
by sector and percentage of employees is as follows:
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<TABLE>
<CAPTION>
Sector Percentage
- ------ ----------
<S> <C>
Services........................................................... 39.2%
Manufacturing...................................................... 15.1%
Wholesale/Retail Trade............................................. 19.5%
Construction....................................................... 5.1%
Transportation/Communications/Utilities............................ 6.4%
Finance/Insurance/Real Estate...................................... 9.3%
Government......................................................... 4.4%
Agriculture/Forestry/Fishing....................................... 0.8%
Mining............................................................. 0.1%
</TABLE>
The area's major employers are:
<TABLE>
<CAPTION>
Employer # of Employees Product/Service
- -------- -------------- ---------------
<S> <C> <C>
Harvard University and MIT 14,721 Education
City of Cambridge 4,090 Government
Mt. Auburn Hospital 1,900 Health Care
Lotus Dev. Corp./IBM 1,685 Computer Software
Polaroid 1,500 Photography & Optics
Bolt, Beranek & Newman 2,361 Research & Development
and Draper Labs
Arthur D. Little 1,152 Management Consulting
Genzyme 829 Pharmaceutical Products
Star Market 792 Retail
Raytheon Engineering 600 Construction
</TABLE>
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United States/State/MSA Household Income
(General Population)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% OF CHANGE
-------------------------------------------
1990 - 1996 1996 - 2001
---------- ----------
<S> <C> <C>
UNITED STATES 21.7% 15.4%
STATE 13.1% 9.0%
MSA 15.4% 10.8%
</TABLE>
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- --------------------------------------------------------------------------------
An important indicator of economic health is growth in Median Household Income.
The national increase in Median Household Income between 1990 and 1996 was
21.7%. Claritas projects the National Median Household Income will reach $42,259
(i.e. increase by 15.4%) by 2001.
Median Household Income for Massachusetts in 1996 is estimated at $41,859, or an
increase of 13.1% since 1989. It is projected that by 2001 the Median
Household Income will reach $45,609, or increase by 9.0%.
Median Household Income for Boston-NH MSA in 1996 has increased to $46,444, or
15.4%, since 1989. It is projected that by 2001 the Median Household Income will
reach $51,460 or increase 10.8%.
Number of Housing Units
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% OF CHANGE
---------------------------------
1990 - 1996 1996 - 2001
---------- ----------
<S> <C> <C>
UNITED STATES 7.6% 5.7%
STATE 2.9% 1.1%
MSA 2.7% 0.9%
</TABLE>
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Growth in the number of housing units in a specified area is another good
indication of economic health. Housing units increased 7.6% nationally between
1990 and 1996. By 2001, it is projected that total housing units nationally will
have increased by an additional 5.5%.
The number of housing units in Massachusetts is currently 2,545,192, which is an
increase of 2.9% since the 1990 Census. It is estimated that by 2001, this
figure will reach 2,572,588, or increase by 1.1%.
The number of housing units in the Boston-NH MSA is currently 1,341,110, which
is an increase of 2.7% since the 1990 Census. It is estimated that by 2001, this
figure will reach 1,353,155, or increase by 0.9%.
METROPOLITAN STATISTICAL AREA (MSA) DATA
The economy of Cambridge and Middlesex County are strongly effected by the
Boston-NH Metropolitan Statistical Area.
The appraiser considered the cost of living in Cambridge (Boston), as this
factor affects The Cambridge Nursing Home in two ways: (a) the likelihood of
retirees remaining in the area or being attracted to it and (b) payroll costs.
The Places Rated Almanac Cost of Living Index ranks the subject MSA 329th of the
343 MSAs nationwide (with the first place MSA having the lowest cost of living).
Ranked against the national average of 100, the Boston, MA-NH MSA indexes are:
Housing:
<TABLE>
<S> <C>
Median Price: 219
Utilities: 136
Property Taxes: 328
</TABLE>
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Miscellaneous Living Cost Indexes:
<TABLE>
<S> <C>
College Tuition: 133
Food: 115
Health Care: 136
Transportation: 120
</TABLE>
The Places Rated Almanac rates and ranks 343 metropolitan areas on ten factors
that greatly influence the quality of an area: costs of living, job outlook,
housing, transportation, education, health care, crime, the arts, recreation,
and climate. The Boston-NH MSA is ranked as follows:
<TABLE>
<S> <C>
Costs of Living 329
Job Outlook 76
Housing 325
Transportation 4
Education 4
Health Care 7
Crime 221
The Arts 7
Recreation 63
Climate 61
</TABLE>
Based on these factors, the Boston-NH MSA had an overall rank of 17 of the 343
Metropolitan Statistical Areas.
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TRENDS, FUTURE OUTLOOK, CONCLUSIONS
Economic indicators suggest that the Boston-NH MSA is a stable area. Residents
of Cambridge use Boston for services, employment, and entertainment while
maintaining a suburban way of life. Cambridge itself has few industries and is
fully developed. This would indicate that its character as a suburban
residential area and college town should continue for the foreseeable future.
Demographics indicators predict stable population and income growth, with the
most growth in the 85+ age group and this trend should continue to provide a
desirable economic climate for the senior services industry and the operation of
a nursing home.
*All population and household income figures were taken from the most recent
U.S. Census (if actual numbers) or were provided to the appraiser by Claritas,
Inc. (if projected numbers), the local Chamber of Commerce or the Community
Development Office.
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(Page 1 of 2)
(MSA 1120) Boston, MA-NH
(Weight: 100.0%)
1990 Demographic Overview Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Population 3226843 Housing Units 1305398 Median Age 33.7
Households 1218525 Group Quarters 117282 Median HH Inc 40176
Families 796836 Avg. HH Size 2.55 Median Value 184468
Vehicles 1817482
</TABLE>
<TABLE>
Income in 1989 Household Family Non-Family
- -------------- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Less than $5,000 .......... 49828 4.1% 17587 2.2% 33662 8.0%
$5,000 to $9,999 .......... 99012 8.1% 29681 3.7% 71008 16.8%
$10,000 to $12,499 ........ 38318 3.1% 16318 2.0% 22802 5.4%
$12,500 to $14,999 ........ 31400 2.6% 15369 1.9% 16620 3.9%
$15,000 to $17,499 ........ 38333 3.1% 19621 2.5% 19445 4.6%
$17,500 to $19,999 ........ 35304 2.9% 18486 2.3% 17269 4.1%
$20,000 to $22,499 ........ 42750 3.5% 22621 2.8% 20848 4.9%
$22,500 to $24,999 ........ 34175 2.8% 19473 2.4% 15108 3.6%
$25,000 to $27,499 ........ 43658 3.6% 24538 3.1% 19858 4.7%
$27,500 to $29,999 ........ 34835 2.9% 21444 2.7% 13696 3.2%
$30,000 to $32,499 ........ 46914 3.9% 28059 3.5% 19247 4.6%
$32,500 to $34,999 ........ 34244 2.8% 23014 2.9% 11280 2.7%
$35,000 to $37,499 ........ 43180 3.5% 28233 3.5% 15184 3.6%
$37,500 to $39,999 ........ 34311 2.8% 23561 3.0% 10602 2.5%
$40,000 to $42,499 ........ 42734 3.5% 29742 3.7% 12978 3.1%
$42,500 to $44,999 ........ 31645 2.6% 23393 2.9% 8072 1.9%
$45,000 to $47,499 ........ 36493 3.0% 26818 3.4% 9500 2.3%
$47,500 to $49,999 ........ 28962 2.4% 22004 2.8% 6890 1.6%
$50,000 to $54,999 ........ 65188 5.3% 50151 6.3% 14581 3.5%
$55,000 to $59,999 ........ 54191 4.4% 42976 5.4% 10757 2.6%
$60,000 to $74,999 ........ 132148 10.8% 106909 13.4% 23248 5.5%
$75,000 to $99,999 ........ 114352 9.4% 95084 11.9% 16592 3.9%
$100,000 to $124,999 ...... 50352 4.1% 42994 5.4% 6312 1.5%
$125,000 to 149,999 ....... 21244 1.7% 18030 2.3% 2561 0.6%
$150,000 or More .......... 34954 2.9% 30730 3.9% 3569 0.8%
Aggregate Income ($Mil) ... 60904 47016 13225
Median Income ........... 40176 48688 24021
Average Income .......... 49982 59004 31362
</TABLE>
<TABLE>
<CAPTION>
Persons Persons
Educational Attainment 25 Yrs & Over Employment Status 16 Yrs & Over
- ---------------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Less than 9th Grade ....... 136035 6.3% In Labor Force ...... 1817430 69.2%
9th - 12th Grade, No Dip .. 223991 10.3% Civilian ........... 1806515 68.8%
High School Graduate ...... 615152 28.4% Employed .......... 1693791 64.5%
Some College, No Degree ... 338239 15.6% Male ............. 880185 33.5%
Associate Degree .......... 151193 7.0% Female ........... 813606 31.0%
Bachelor's Degree ......... 415337 19.2% Unemployed ........ 112724 4.3%
Graduate/Prof. Degree ..... 284447 13.1% Not in Labor Force... 809788 30.8%
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
26
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The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
(Page 2 of 2)
(MSA 1120) Boston, MA-NH
(Weight: 100.0%)
<TABLE>
<CAPTION>
Employed Employed
Industry Persons 16+ Occupation Persons 16+
- -------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Agriculture/Forest/Fish ... 14045 0.8% Managerial/Prof. Spec ..... 604021 35.7%
Mining .................... 1351 0.1% Exec/Admin/Managerial. .... 277558 16.4%
Construction .............. 85908 5.1% Prof. Speciality .......... 326463 19.3%
Manufacture-Nondurable. ... 82043 4.8% Tech./Sales/Admin. Sup. ... 572392 33.8%
Manufacture-Durable ....... 174717 10.3% Technician and Related .... 75388 4.5%
Transportation ............ 65407 3.9% Sales ..................... 194985 11.5%
Communication/Pub. Util ... 41742 2.5% Administration Support .... 302019 17.8%
Wholesales Trade .......... 71067 4.2% Service Occupation ........ 207682 12.3%
Retail Trade .............. 258758 15.3% Private Household ......... 5098 0.3%
Finance/Ins/Real Estate ... 157693 9.3% Protective Service ........ 33288 2.0%
Business & Repair Serv. ... 88881 5.2% Other Service ............. 169296 10.0%
Personal Services ......... 46039 2.7% Farming/Forestry/Fish ..... 11876 0.7%
Entertain/Recreation ...... 20391 1.2% Precision/Craft/Repair. ... 144472 8.5%
Professional & Related. ... 510596 30.1% Operator/Fab./Laborer ..... 153348 9.1%
Health Services ........... 180240 10.6% Mach.Op/Assem./Inspect .... 66362 3.9%
Educational Services ...... 164625 9.7% Trans. & Material Move .... 43564 2.6%
Other Professional ........ 165731 9.8% Laborers .................. 43422 2.6%
Public Administration ..... 75153 4.4%
</TABLE>
<TABLE>
<CAPTION>
Transportation to Work Workers 16+ Travel Time to Work Workers 16+
- ---------------------- ----------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
Drive Alone .............. 1120098 67.1% Less than 10 Minutes ...... 267302 16.0%
Carpooled ................ 166047 9.9% 10 to 19 Minutes .......... 468742 28.1%
Public Transportation .... 218298 13.1% 20 to 29 Minutes .......... 314129 18.8%
All Other ................ 165038 9.9% 30 Minutes or More ........ 619308 37.1%
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Units In Structure Housing Units Year Structure Built Housing Units
- ------------------ ------------- -------------------- -------------
<S> <C> <C> <C> <C> <C>
1-Detached ............... 549143 45.0% 1989 to March 1990 ........ 13172 1.1%
1-Attached ............... 46337 3.8% 1985 to 1988 .............. 62098 5.1%
2 ........................ 169930 13.9% 1980 to 1984 .............. 58881 4.8%
3 or 4 ................... 147680 12.1% 1970 to 1979 .............. 154677 12.7%
5 to 9 ................... 78094 6.4% 1960 to 1969 .............. 153820 12.6%
10 to 19 ................. 69326 5.7% 1950 to 1959 .............. 156841 12.9%
20 to 49 ................. 65347 5.4% 1940 to 1949 .............. 101873 8.3%
50 or More ............... 72778 6.0% 1939 or before ............ 518885 42.5%
Other .................... 21612 1.8% Median Year Built ......... 1949
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Year Hhlder Moved In Housing Units Vehicles Available Housing Units
- -------------------- ------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
1989 To March 1990 ....... 215190 17.6% None ...................... 196151 16.1%
1985 To 1988 ............. 333494 27.3% l ......................... 449837 36.9%
1980 To 1984 ............. 179786 14.7% 2 ......................... 418172 34.3%
1970 To 1979 ............. 218815 17.9% 3 ......................... 110285 9.0%
1960 To 1969 ............. 127318 10.4% 4 ......................... 34112 2.8%
1959 or Before ........... 145644 11.9% 5 or More ................. 11690 1.0%
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
27
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
(MSA 1120) Boston, MA-NH
(Weight: 100.0%)
Household Trend Report
<TABLE>
<CAPTION>
1980 1990 % Chg 1996 % Chg 2001 % Chg
Universe Census Census 80-90 (Est.) 90-96 (Proj.) 96-01
- -------------- ------- ------- ----- ------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Population ....... 3148867 3226935 2.5 3240708 0.4 3249729 0.3
Households ....... 1124641 1220258 8.5 1241001 1.7 1252191 0.9
Families ......... 769200 791111 2.8 798228 0.9 799586 0.2
Housing Units. ... 1196076 1305397 9.1 1341110 2.7 1353155 0.9
Grp Qrt. Pop ..... 113694 116682 2.6 118255 1.3 118851 0.5
Household Size ... 2.70 2.55 -5.6 2.52 -1.3 2.50 -0.6
</TABLE>
<TABLE>
<CAPTION>
1979 1989 % Chg 1996 % Chg 2001 % Chg
Income (Census) (Census) 79-89 (Est.) 89-96 (Proj.) 96-01
- ------ -------- -------- ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate($MM)...... 25342 61786 143.8 75939 22.9 88987 17.2
Per Capita ......... 8048 19147 137.9 23433 22.4 27383 16.9
Avg. Household ..... 22201 50043 125.4 60370 20.6 69757 15.5
Median Hhold ....... 18606 40234 116.2 46444 15.4 51460 10.8
Avg. Family HH ..... 26069 60179 130.8 72599 20.6 82935 14.2
Med: Family HH ..... 22470 49721 121.3 56552 13.7 61756 9.2
Avg. HH Wealth ..... 149185 162671 9.0
Med. HH Wealth ..... 63791 73921 15.9
</TABLE>
<TABLE>
<CAPTION>
Households
------------------------------------------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
- ---------------------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total .......................... 1220258 1241001 1252191
Less than $5,000 ........... 49696 4.1% 35340 2.8% 27902 2.2%
$5,000 to $9,999 ............. 98839 8.1% 88030 7.1% 82333 6.6%
$10,000 to $14,999 ............ 69647 5.7% 73253 5.9% 74453 5.9%
$15,000 to $19,999 ............ 73572 6.0% 60207 4.9% 54480 4.4%
$20,000 to $24,999 ............ 76863 6.3% 68210 5.5% 59289 4.7%
$25,000 to $29,999 ............ 78576 6.4% 66482 5.4% 62446 5.0%
$30,000 to $34,999 ............ 81238 6.7% 70632 5.7% 62227 5.0%
$35,000 to $39,999 ............ 77691 6.4% 67500 5.4% 60112 4.8%
$40,000 to $44,999 ............ 74625 6.1% 69304 5.6% 61315 4.9%
$45,000 to $49,999 ............ 65653 5.4% 68312 5.5% 62403 5.0%
$50,000 to $59,999 ............ 119758 9.8% 122658 9.9% 125907 10.1%
$60,000 to $74,999 ............ 132470 10.9% 144228 11.6% 147710 11.8%
$75,000 to $99,999 ............ 114769 9.4% 149538 12.0% 165787 13.2%
$100,000 to $124,999 ........... 50515 4.1% 80408 6.5% 103508 8.3%
$125,000 to $149,999 ........... 21317 1.7% 34207 2.8% 50074 4.0%
$150,000 to $249,999 ........... 22696 1.9% 26662 2.1% 33623 2.7%
$250,000 to $499,999 ........... 8881 0.7% 11259 0.9% 12788 1.0%
$500,000 or More ............... 3452 0.3% 4771 0.4% 5834 0.5%
</TABLE>
- ----------
NOTE: When the median household wealth for an area is less than $25,000 it will
be listed on this report as $24,999.
Data on income are expressed in "current" dollars for each year.
Decennial Census data reflects prior year income.
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
28
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
(MSA 1120) Boston, MA-NH
(Weight: 100.0%)
(Page 1 of 7)
Senior Life Report
<TABLE>
<CAPTION>
Population Age 55 Years and Over
-------------------------------------------------------
Population by Age and Sex 1990 1996 Estimate 2001 Proj.
- ------------------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Population Age 55+ ............. 701628 100.0% 721712 100.0% 753997 100.0%
55 to 59 ..................... 138853 19.8% 142297 19.7% 165310 21.9%
60 to 64 ..................... 140629 20.0% 126489 17.5% 132237 17.5%
65 to 69 ..................... 129752 18.5% 124988 17.3% 114233 15.2%
70 to 74 ..................... 104467 14.9% 113723 15.8% 110157 14.6%
75 to 79 ..................... 82023 11.7% 88670 12.3% 94499 12.5%
80 to 84 ..................... 56257 8.0% 63590 8.8% 67811 9.0%
85 + ......................... 49647 7.1% 61955 8.6% 69750 9.3%
Males Age 55+ .................. 290019 41.3% 301012 41.7% 319022 42.3%
55 to 59 ..................... 66298 9.4% 67787 9.4% 79691 10.6%
60 to 64 ..................... 65307 9.3% 59778 8.3% 62639 8.3%
65 to 69 ..................... 56923 8.1% 56814 7.9% 52515 7.0%
70 to 74 ..................... 42652 6.1% 47821 6.6% 47677 6.3%
75 to 79 ..................... 29587 4.2% 33623 4.7% 36726 4.9%
80 to 84 ..................... 17391 2.5% 20520 2.8% 22839 3.0%
85 + ......................... 11861 1.7% 14669 2.0% 16935 2.2%
Female Age 55+ ................. 411609 58.7% 420700 58.3% 434975 57.7%
55 to 59 ..................... 72555 10.3% 74510 10.3% 85619 11.4%
60 to 64 ..................... 75322 10.7% 66711 9.2% 69598 9.2%
65 to 69 ..................... 72829 10.4% 68174 9.4% 61718 8.2%
70 to 74 ..................... 61815 8.8% 65902 9.1% 62480 8.3%
75 to 79 ..................... 52436 7.5% 55047 7.6% 57773 7.7%
80 to 84 ..................... 38866 5.5% 43070 6.0% 44972 6.0%
85 + ......................... 37786 5.4% 47286 6.6% 52815 7.0%
</TABLE>
<TABLE>
<CAPTION>
Population
-------------------------------------------------------
Population by Age and Race 1990 1996 Estimate 2001 Proj.
- -------------------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total Population .............. 3226935 100.0% 3240708 100.0% 3249729 100.0%
White Population ............ 2893735 89.7% 2861265 88.3% 2828365 87.0%
Age 65 and Over ............ 403210 12.5% 431640 13.3% 431833 13.3%
Black Population ............ 227966 7.1% 244366 7.5% 259063 8.0%
Age 65 and Over ............ 14045 0.4% 14874 0.5% 15826 0.5%
Asian Population ............ 99107 3.1% 128584 4.0% 155369 4.8%
Age 65 and Over ............ 4493 0.1% 5809 0.2% 8153 0.3%
Am. Indian Population ....... 6127 0.2% 6493 0.2% 6932 0.2%
Age 65 and Over ............ 398 0.0% 603 0.0% 638 0.0%
Hispanic Population ......... 137432 4.3% 174571 5.4% 206275 6.3%
Age 65 and Over ............ 5582 0.2% 6207 0.2% 7615 0.2%
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
29
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
(MSA 1120) Boston, MA-NH
<TABLE>
<CAPTION>
(Weight: 100.0%)
(Page 2 of 7)
Senior Life Report
Households with Householder Age 55 and Over
Household Income by --------------------------------------------------------
Age of Householder 1990 1996 Estimate 2001 Proj.
- ------------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 55 to 64... 164700 100.0% 154814 100.0% 168050 100.0%
Under $5,000............. 5392 3.3% 3683 2.4% 3368 2.0%
$5,000-$9,999 ............ 9017 5.5% 7635 4.9% 8669 5.2%
$10,000-$14,999 .......... 7012 4.3% 6677 4.3% 7667 4.6%
$15,000-$24,999 .......... 18102 11.0% 13900 9.0% 13207 7.9%
$25,000-$34,999 .......... 19545 11.9% 15927 10.3% 15927 9.5%
$35,000-$49,999 ......... 28393 17.2% 24687 15.9% 24672 14.7%
$50,000-$74,999 ......... 35206 21.4% 34005 22.0% 37408 22.3%
$75,000-$99,999 ......... 20625 12.5% 20816 13.4% 23371 13.9%
$100,000-$149,999 ......... 14517 8.8% 19669 12.7% 24040 14.3%
$150,000-$249,999 ......... 4460 2.7% 4897 3.2% 6188 3.7%
$250,000-$499,999 ......... 1753 1.1% 2053 1.3% 2455 1.5%
$500,000 or More ......... 678 0.4% 865 0.6% 1078 0.6%
Median Income ......... 47299 53600 57027
Householder Age 65 to 69... 78909 100.0% 75653 100.0% 67709 100.0%
Under $5,000 .......... 3944 5.0% 2575 3.4% 1718 2.5%
$5,000-$9,999 .......... 10822 13.7% 8540 11.3% 6796 10.0%
$10,000-$14,999 .......... 8395 10.6% 7719 10.2% 6511 9.6%
$15,000-$24,999 .......... 14691 18.6% 12549 16.6% 9854 14.6%
$25,000-$34,999 .......... 11139 14.1% 10748 14.2% 9593 14.2%
$35,000-$49,999 ......... 11008 14.0% 11445 15.1% 10774 15.9%
$50,000-$74,999 ......... 10317 13.1% 11119 14.7% 11245 16.6%
$75,000-$99,999 ......... 4316 5.5% 5440 7.2% 5477 8.1%
$100,000-$149,999 ......... 2763 3.5% 3923 5.2% 4317 6.4%
$150,000-$249,999 ......... 963 1.2% 953 1.3% 894 1.3%
$250,000-$499,999 ......... 388 0.5% 447 0.6% 351 0.5%
$500,000 or More ......... 163 0.2% 195 0.3% 179 0.3%
Median Income ......... 26439 30995 34356
Householder Age 70 to 74... 70548 100.0% 70808 100.0% 66554 100.0%
Under $5,000 .......... 3653 5.2% 2488 3.5% 1770 2.7%
$5,000-$9,999 .......... 10433 14.8% 8616 12.2% 7068 10.6%
$10,000-$14,999 .......... 7813 11.1% 7642 10.8% 6753 10.1%
$15,000-$24,999 .......... 13189 18.7% 11935 16.9% 9984 15.0%
$25,000-$34,999 .......... 9747 13.8% 9924 14.0% 9496 14.3%
$35,000-$49,999 ......... 9677 13.7% 10459 14.8% 10416 15.7%
$50,000-$74,999 ......... 8843 12.5% 10103 14.3% 10675 16.0%
$75,000-$99,999 ......... 3676 5.2% 4857 6.9% 5165 7.8%
$100,000-$149,999 ......... 2270 3.2% 3423 4.8% 3986 6.0%
$150,000-$249,999 ......... 787 1.1% 835 1.2% 792 1.2%
$250,000-$499,999 ......... 329 0.5% 367 0.5% 290 0.4%
$500,000 or More ......... 131 0.2% 159 0.2% 159 0.2%
Median Income ......... 25191 29759 33111
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
30
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
(MSA 1120) Boston, MA-NH
<TABLE>
<CAPTION>
(Weight: 100.0%)
Senior Life Report (Page 3 of 7)
Households with Householder Age 55 and Over
Household Income by --------------------------------------------------------
Age of Householder 1990 1996 Estimate 2001 Proj.
- ------------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 75 to 79.... 54160 100.0% 60711 100.0% 64746 100.0%
Under $5,000 .......... 4487 8.3% 3376 5.6% 2576 4.0%
$5,000-$9,999 .......... 14985 27.7% 13500 22.2% 11603 17.9%
$10,000-$14,999 .......... 8118 15.0% 10298 17.0% 10712 16.5%
$15,000-$24,999 .......... 9136 16.9% 10574 17.4% 12004 18.5%
$25,000-$34,999 .......... 5461 10.1% 6915 11.4% 8537 13.2%
$35,000-$49,999 .......... 4647 8.6% 5974 9.8% 7374 11.4%
$50,000-$74,999 .......... 3985 7.4% 5171 8.5% 6276 9.7%
$75,000-$99,999 .......... 1641 3.0% 2438 4.0% 2817 4.4%
$100,000-$149,999 .......... 1123 2.1% 1778 2.9% 2141 3.3%
$150,000-$249,999 .......... 352 0.6% 421 0.7% 438 0.7%
$250,000-$499,999 .......... 155 0.3% 181 0.3% 177 0.3%
$500,000 or More .......... 70 0.1% 85 0.1% 91 0.1%
Median Income .......... 14686 18009 21233
Householder Age 80 to 84.... 37731 100.0% 44260 100.0% 46301 100.0%
Under $5,000 .......... 3169 8.4% 2481 5.6% 1870 4.0%
$5,000-$9,999 .......... 10679 28.3% 10076 22.8% 8468 18.3%
$10,000-$14,999 .......... 5532 14.7% 7497 16.9% 7791 16.8%
$15,000-$24,999 .......... 6277 16.6% 7572 17.1% 8493 18.3%
$25,000-$34,999 .......... 3785 10.0% 4928 11.1% 5973 12.9%
$35,000-$49,999 ......... 3219 8.5% 4396 9.9% 5193 11.2%
$50,000-$74,999 ......... 2767 7.3% 3768 8.5% 4510 9.7%
$75,000-$99,999 ......... 1127 3.0% 1758 4.0% 2025 4.4%
$100,000-$149,999 ......... 750 2.0% 1288 2.9% 1515 3.3%
$150,000-$249,999 ......... 265 0.7% 296 0.7% 281 0.6%
$250,000-$499,999 ......... 116 0.3% 136 0.3% 113 0.2%
$500,000 or More ......... 45 0.1% 64 0.1% 69 0.1%
Median Income ......... 14535 17742 20913
Householder Age 85 + ...... 27359 100.0% 32098 100.0% 35776 100.0%
Under $5,000 .......... 2285 8.4% 1784 5.6% 1444 4.0%
$5,000-$9,999 .......... 7787 28.5% 7391 23.0% 6597 18.4%
$10,000-$14,999 .......... 3988 14.6% 5426 16.9% 6021 16.8%
$15,000-$24,999 .......... 4493 16.4% 5450 17.0% 6535 18.3%
$25,000-$34,999 .......... 2764 10.1% 3561 11.1% 4558 12.7%
$35,000-$49,999 ......... 2303 8.4% 3129 9.7% 3995 11.2%
$50,000-$74,999 ......... 2041 7.5% 2753 8.6% 3461 9.7%
$75,000-$99,999 ......... 834 3.0% 1311 4.1% 1584 4.4%
$100,000-$149,999 ......... 552 2.0% 932 2.9% 1201 3.4%
$150,000-$249,999 ......... 179 0.7% 210 0.7% 239 0.7%
$250,000-$499,999 ......... 97 0.4% 99 0.3% 94 0.3%
$500,000 or More ......... 36 0.1% 52 0.2% 47 0.1%
Median Income ......... 14523 17657 20855
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
31
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
(MSA 1120) Boston, MA-NH
<TABLE>
<CAPTION>
(Weight: 100.0%)
Senior Life Report (Page 4 of 7)
Total Households
--------------------------------------------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Total .................... 1220258 100.0% 1241001 100.0% 1252191 100.0%
Under $5,000 ...... 49696 4.1% 35340 2.8% 27902 2.2%
$5,000 to $9,999 ...... 98839 8.1% 88030 7.1% 82333 6.6%
$10,000 to $14,999 ...... 69647 5.7% 73253 5.9% 74453 5.9%
$15,000 to $24,999 ...... 150435 12.3% 128417 10.3% 113769 9.1%
$25,000 to $34,999 ...... 159814 13.1% 137114 11.0% 124673 10.0%
$35,000 to $49,999 ...... 217969 17.9% 205116 16.5% 183830 14.7%
$50,000 to $74,999 ...... 252228 20.7% 266886 21.5% 273617 21.9%
$75,000 to $99,999 ...... 114769 9.4% 149538 12.0% 165787 13.2%
$100,000 to $124,999...... 50515 4.1% 80408 6.5% 103508 8.3%
$125,000 to $149,999...... 21317 1.7% 34207 2.8% 50074 4.0%
$150,000 to $249,999...... 22696 1.9% 26662 2.1% 33623 2.7%
$250,000 to $499,999...... 8881 0.7% 11259 0.9% 12788 1.0%
$500,000 or More ...... 3452 0.3% 4771 0.4% 5834 0.5%
Median Household Income .. 40234 46444 51460
</TABLE>
<TABLE>
<CAPTION>
Total Specified Owner-Occupied Housing Units
---------------------------------------------------------
Housing Value 1990 Census 1996 Estimate 2001 Proj.
- ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Total Units .............. 501434 526112 541554
Less than $15,000...... 651 0.1% 647 0.1% 641 0.1%
$15,000 to $19,999...... 417 0.1% 403 0.1% 387 0.1%
$20,000 to $24,999...... 357 0.1% 352 0.1% 349 0.1%
$25,000 to $29,999...... 320 0.1% 311 0.1% 307 0.1%
$30,000 to $34,999...... 343 0.1% 323 0.1% 311 0.1%
$35,000 to $39,999...... 293 0.1% 285 0.1% 274 0.1%
$40,000 to $44,999...... 380 0.1% 350 0.1% 317 0.1%
$45,000 to $49,999...... 370 0.1% 400 0.1% 377 0.1%
$50,000 to $59,999...... 1222 0.2% 1128 0.2% 1128 0.2%
$60,000 to $74,999...... 3217 0.6% 2900 0.6% 2733 0.5%
$75,000 to $99,999...... 14609 2.9% 13189 2.5% 12209 2.3%
$100,000 to $124,999...... 35063 7.0% 31181 5.9% 28463 5.3%
$125,000 to $149,999...... 67442 13.4% 59456 11.3% 53774 9.9%
$150,000 to $174,999...... 94317 18.8% 85746 16.3% 78826 14.6%
$175,000 to $199,999...... 78359 15.6% 83723 15.9% 82684 15.3%
$200,000 to $249,999...... 85460 17.0% 100114 19.0% 109945 20.3%
$250,000 to $299,999...... 46033 9.2% 56125 10.7% 64325 11.9%
$300,000 to $399,999...... 39806 7.9% 48031 9.1% 55137 10.2%
$400,000 to $499,999...... 15166 3.0% 20296 3.9% 24859 4.6%
$500,000 and over ...... 17609 3.5% 21152 4.0% 24508 4.5%
Median Housing Value...... 185119 194823 203637
</TABLE>
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1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
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HealthCare Property Appraisers of America, Inc.
32
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
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(MSA 1120) Boston, MA-NH
(Weight: 100.0%)
Senior Life Report (Page 5 of 7)
<TABLE>
<CAPTION>
Household
Household --------------------------------------------------------
Type and Relationship Population 65+ Type and Relationship Population 65+
- --------------------- --------------- ---------------------------------------
<S> <C> <C> <C> <C> <C>
Total ............... 423467 100.0%
In Family Households 260458 61.5% In Nonfamily Hhlds ..... 134929 31.9%
Householder ........ 137608 32.5% Male Householder ...... 27630 6.5%
Spouse ............. 86357 20.4% Living Alone ......... 26073 6.2%
Other Relative ..... 34847 8.2% Not Living Alone ..... 1557 0.4%
Nonrelative ........ 1646 0.4% Female Householder .... 104090 24.6%
Living Alone ......... 101905 24.1%
In Group Quarters ... 28080 6.6% Not Living Alone ..... 2185 0.5%
Institutionalized... 26048 6.2% Nonrelative ........... 3209 0.8%
Other .............. 2032 0.5%
</TABLE>
<TABLE>
<CAPTION>
Spec. Owner-Occ Units
by Age of Householder
Monthly Owner Costs as a --------------------------------
Percent of 1989 HH Inc. Total Units 65 Yrs +
- ------------------------ ------------- ---------------
<S> <C> <C> <C> <C>
Total ............... 508257 100.0% 119390 100.0%
Less than 20% ....... 260680 51.3% 70174 58.8%
20 - 24% ............ 67749 13.3% 11905 10.0%
25 - 29% ............ 53215 10.5% 7808 6.5%
30 - 34% ............ 36524 7.2% 6186 5.2%
35% or More ......... 86848 17.1% 21934 18.4%
Not computed ........ 3241 0.6% 1383 1.2%
</TABLE>
<TABLE>
<CAPTION>
Spec. Renter-Occ Units
by Age of Householder
Gross Rent as Percent -----------------------------------
of 1989 HH Income Total Units 65 Yrs +
- --------------------- --------------- ---------------
<S> <C> <C> <C> <C>
Total ................ 526564 100.0% 105235 100.0%
Less than 20% ....... 147225 28.0% 17632 16.8%
20 - 24% ............ 81335 15.4% 15782 15.0%
25 - 29% ............ 67693 12.9% 15787 15.0%
30 - 34% ............ 46063 8.7% 10082 9.6%
35% or More ......... 160008 30.4% 39495 37.5%
Not computed ........ 24240 4.6% 6457 6.1%
</TABLE>
<TABLE>
<CAPTION>
Occupied Housing Units
-----------------------------------
Attribute Total Hhldr 65 +
- ----------------------- -------------- ---------------
<S> <C> <C> <C> <C>
Owner Occupied Units .. 691701 56.7% 170208 61.7%
Rnter Occupied Units .. 528546 43.3% 105521 38.3%
Complete Plumbing Facil 1215642 99.6% 274673 99.6%
Lacking Plumbing Facil. 4605 0.4% 1056 0.4%
With Telephone ........ 1200893 98.4% 272816 98.9%
No Telephone .......... 19354 1.6% 2913 1.1%
One or More Vehicles .. 1024096 83.9% 191209 69.3%
No Vehicles Available . 196151 16.1% 84520 30.7%
</TABLE>
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The Cambridge Nursing Home, Cambridge, Massachusetts
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(MSA 1120) Boston, MA-NH
(Weight: 100.0%)
Senior Life Report (Page 6 of 7)
<TABLE>
<CAPTION>
1990 Households by Age of Householder
Poverty Status by -----------------------------------------------------------
Household Type Total Age 65-74 Age 75 +
- ------------------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total ..................... 1218525 100.0% 151656 100.0% 117672 100.0%
Married Couple Family ... 622469 51.1% 73100 48.2% 32101 27.3%
Other Family ............ 174367 14.3% 18185 12.0% 14222 12.1%
Male Householder ...... 36888 3.0% 4267 2.8% 2995 2.5%
Female Householder .... 137479 11.3% 13918 9.2% 11227 9.5%
Nonfamily ............... 421689 34.6% 60371 39.8% 71349 60.6%
HHer Living Alone ...... 328005 26.9% 58347 38.5% 69631 59.2%
HHer Not Living Alone .. 93684 7.7% 2024 1.3% 1718 1.5%
Above Poverty ............ 1112620 91.3% 138953 91.6% 100769 85.6%
Married Couple Family ... 606752 49.8% 71079 46.9% 30256 25.7%
Other Family ............ 143987 11.8% 17308 11.4% 13481 11.5%
Male Householder ...... 34611 2.8% 4084 2.7% 2862 2.4%
Female Householder .... 109376 9.0% 13224 8.7% 10619 9.0%
Nonfamily ............... 361881 29.7% 50566 33.3% 57032 48.5%
HHer Living Alone....... 280655 23.0% 48756 32.1% 55560 47.2%
HHer Not Living Alone .. 81226 6.7% 1810 1.2% 1472 1.3%
Below Poverty ............ 105905 8.7% 12703 8.4% 16903 14.4%
Married Couple Family ... 15717 1.3% 2021 1.3% 1845 1.6%
Other Family ............ 30380 2.5% 877 0.6% 741 0.6%
Male Householder ...... 2277 0.2% 183 0.1% 133 0.1%
Female Householder .... 28103 2.3% 694 0.5% 608 0.5%
Nonfamily ............... 59808 4.9% 9805 6.5% 14317 12.2%
HHer Living Alone ...... 47350 3.9% 9591 6.3% 14071 12.0%
HHer Not Living Alone .. 12458 1.0% 214 0.1% 246 0.2%
</TABLE>
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1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
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HealthCare Property Appraisers of America, Inc.
34
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The Cambridge Nursing Home, Cambridge, Massachusetts
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(MSA 1120) Boston, MA-NH
(Weight: 100.0%)
Senior Life Report (Page 7 of 7)
<TABLE>
<CAPTION>
Civilian Noninstitutionalized Persons Age 16+
-------------------------------------------------
Mobility and Disability Total Age 65+ Age 75+
- ------------------------ --------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Persons ........................ 2574165 100.0% 397419 100.0% 164356 100.0%
With Mblty or Care Lmts. ...... 155569 6.0% 76531 19.3% 48526 29.5%
Mobility Limits Only ......... 54553 2.1% 31996 8.1% 21284 12.9%
Self Care Limits Only ........ 54702 2.1% 16910 4.3% 8084 4.9%
Both Limits .................. 46314 1.8% 27625 7.0% 19158 11.7%
No Mblty or Care Limits ........ 2418596 94.0% 320888 80.7% 115830 70.5%
With a Work Disability ......... 255171 9.9% 110687 27.9%
In Labor Force ................ 70502 2.7% 7207 1.8%
Employed ..................... 61341 2.4% 6365 1.6%
Unemployed ................... 9161 0.4% 842 0.2%
Not in Labor Force ............ 184669 7.2% 103480 26.0%
Prevented from Working ....... 159636 6.2% 89709 22.6%
Not Prevented from Wrk ....... 25033 1.0% 13771 3.5%
No Work Disability ............. 2318994 90.1% 286732 72.1%
In Labor Force ................ 1736013 67.4% 58429 14.7%
Employed ..................... 1632450 63.4% 55498 14.0%
Unemployed ................... 103563 4.0% 2931 0.7%
Not in Labor Force ............ 582981 22.6% 228303 57.4%
</TABLE>
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1996 estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
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The Cambridge Nursing Home, Cambridge, Massachusetts
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MARKET AREA AND NEIGHBORHOOD
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<PAGE>
NEIGHBORHOOD
[PICTURES]
<PAGE>
NEIGHBORHOOD
[PICTURES]
<PAGE>
NEIGHBORHOOD
[PICTURES]
<PAGE>
NEIGHBORHOOD
[MAPS]
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
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MARKET AREA and NEIGHBORHOOD
MARKET AREA
The overall market area served by The Cambridge Nursing Home covers a wide
geographic range. The proximity of the subject facility to its supporting
population base (i.e., prospective residents and their families) is important to
its successful operation. Prospective residents consider the distance from their
homes and neighborhoods, but also the distance from their families and
established support services (e.g., doctors, therapists). Proximity to the
subject facility may be less important for government subsidized residents, who
often have fewer choices and limited input in the selection process. Financially
independent residents can afford to be selective about their living
accommodations, but are often more concerned about the availability and quality
of services. After considering a wide range of facts pertaining to the subject
market and neighborhood, we believe the subject property's market area to
include the entire neighborhood of Cambridge.
NEIGHBORHOOD
Most communities tend toward groupings of consistent land uses, with areas
devoted to the various uses termed "physical neighborhoods." Neighborhood use in
this context can be further defined as: "A portion of a larger community, or an
entire community, in which there is a homogeneous grouping of inhabitants,
buildings, or business enterprises. Inhabitants of a neighborhood usually have a
more than casual community of interests and a similarity of economic level or
cultural background. Neighborhood boundaries may consist of well defined
natural, political or man-made barriers, or they may be, more or less, defined
by distinct changes in land use or in the character of the inhabitants."
Frank Ramseur of HealthCare Property Appraisers of America, Inc. inspected the
subject property and its neighborhood on April 1, 1997; all comments should be
considered to be relative to the date of inspection.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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The subject neighborhood is located approximately one mile northeast from the
center of the Central Business District of Cambridge, Massachusetts. All of
the neighborhood lies within the municipal limits of Cambridge, which is
considered to be a bedroom community of Boston. We consider the subject
neighborhood to include the area lying south of the Somerville City Limits,
north of Massachusetts Avenue, east of Alewife Brook Parkway and west of
Porter Square and Somerville Avenue. This area is known or referred to
locally as the North Cambridge Area.
The area is mixed in nature. The various property types found in this
neighborhood are distributed approximately as follows:
<TABLE>
<S> <C>
Single-Family 30%
Multifamily 15%
Commercial/Retail 24%
Office 10%
Institutional 20%
Recreation/Parks 1%
----
Total 100%
</TABLE>
Single-family residential structures, which constitute approximately 30% of
the neighborhood, appear to be 30 to 80 years in age. Typical homes range in
size from 1400 to 2500 square feet with home values generally ranging from
$185,000 to $400,000. Homes are well maintained and exhibit some pride of
ownership. Typical neighborhood residents are considered as being in a upper
middle income bracket. Owner occupancy in the neighborhood is considered to
be approximately 85%. Multifamily properties, which make up approximately 15%
of this neighborhood, are approximately relatively new and fairly well
maintained. They serve a part of the multifamily market best described as
middle income tenants.
Retail structures constitute approximately 24% of the neighborhood and consist
of neighborhood shopping centers and local mall shopping centers. They are
fairly well maintained and occupancy appears to be full.
Office buildings represent approximately 10% of the neighborhood, typically
consist of low- and mid-rise brick structures. They are approximately 10-50
years in age, and rated good in maintenance
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The Cambridge Nursing Home, Cambridge, Massachusetts
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and condition. Typical office occupants include dentists' offices, and other
general neighborhood-type offices.
Institutional structures comprise approximately 20% of the neighborhood. They
consist of libraries with colleges and universities near by. These structures
are approximately new to 50 years in age and fairly well maintained. Houses of
worship of several denominations are within a five minute drive of subject.
Parks and recreational facilities consist of small parks in Cambridge with parks
along the Charles River.
The subject property is joined by single-family and multi-family apartments
on its north side, retail/offices and commercial and Massachusetts Avenue on
its south side, offices and retail on its west side, and an apartment under
construction on its east side. There is construction ongoing across the
street from subject for the new luxury townhouses.
The subject property is considered to be in general conformity with other
properties in the neighborhood. The appearance and reputation of this area
generally is considered to be good, and the property values in the area
appear to be stable. We expect that trend to continue over the next few years.
Neighborhoods generally evolve through a pattern of growth and development.
They evolve from vacant, unimproved land through slow growth, steady to rapid
growth, reach a built-up or stagnant phase, and then begin to decline, with
various plateaus and modernization periods along the way. In that continuum
of growth, development and aging, the subject neighborhood is currently
considered to be fully developed with some redevelopment ongoing.
A neighborhood's population make-up can dramatically affect the success of a
nursing home. As in all real estate, the economics of the immediately
surrounding population affect the ability of The
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<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
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Cambridge Nursing Home to market its real estate and services. The subject
neighborhood's population make-up would have a good appeal to a self-pay
oriented market.
In summary, this neighborhood is considered to be primarily a middle to upper
middle class residential area with neighborhood shopping along traffic arteries.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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SITE DATA
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The Cambridge Nursing Home, Cambridge, Massachusetts
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SITE DATA
LOCATION: The Cambridge Nursing Home site is located at 1 Russell Street at the
corner of Russell Street and Massachusetts Avenue.
PHYSICAL CHARACTERISTICS: The subject is a corner lot with approximately 150
front feet along the west side of Russell Street and approximately 144 front
feet along the north side of Massachusetts Avenue. It is rectangular in shape
and contains approximately 21,600 sf of gross area, based on public records.
ZONING: According to the town of Cambridge, the subject property is zoned both
Business A-2 and Residential B-2. The subject improvements are considered to be
a legal, conforming use.
TOPOGRAPHY: , The subject site lies at street grade. General area topography is
level. The subject site is basically level and cleared. Drainage appears
adequate.
EASEMENTS AND ENCROACHMENTS: Our site inspection of The Cambridge Nursing Home
revealed no adverse easements or encroachments. This property is subject to
typical street and utility easements. It should be noted that we would defer to
competent legal counsel for verification of these and all other legal matters.
ACCESS: Access to the site is considered excellent. It has two access points
from Massachusetts Avenue, a paved four-lane traffic artery. Russell Street is
designated as one way north bound.
VISIBILITY: The site's visibility is rated excellent from Massachusetts as the
subject property is a corner lot.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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DRAINAGE/FLOOD ZONE: According to National Flood Certification Services, Inc.,
the subject property is not located on a National Flood Insurance Program Map
(NFIP) designated flood hazard area. It is found on Community Panel #
250186-0001B dated 07/05/82, in an area designated as Zone C. This Zone
generally refers to: "Areas of minimal flooding".
UTILITIES: The site is served by all municipal utilities and services including
water, sewage, police and fire protection. Gas, telephone and electricity are
provided by public utility firms.
TRAFFIC ARTERIES: The site has excellent proximity to major traffic arteries.
It fronts on Massachusetts Avenue which connects to two N/S arterial streets:
Alwife Brook parkway one mile west and US Hwy 1 and Massachusetts Turnpike I-9
approximately five miles east.
HIGHEST AND BEST USE
The Highest and Best Use of land is that use which may be reasonably expected to
produce the greatest net return to the land over a given period of time.
Moreover, it is that legal use which will yield to the land the highest present
value which is economically feasible, legally permissible and maximally
productive. The Highest and Best Use analysis is the basis for the final
conclusions drawn in this report.
Land is valued as though it were unimproved and available for whatever use would
produce the maximum return. Improved property is valued according to the extent
to which the improvements are consistent with the Highest and Best Use of the
site as if unimproved. The Highest and Best Use of the total properties "as
improved" is often determined to be different from the Highest and Best Use of
the land when considered as though "unimproved" and available for development.
In most cases, the existing use will continue until the land value under its
Highest and Best Use exceeds the total value of the property in its existing
use. As long as improvements contribute to the land, they constitute the Highest
and Best Use.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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DESCRIPTION OF IMPROVEMENTS
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<PAGE>
SUBJECT
[PICTURES]
<PAGE>
SUBJECT
[PICTURES]
<PAGE>
FLOOR PLAN
[MAPS]
<PAGE>
FLOOR PLAN
[MAPS]
<PAGE>
FLOOR PLAN
[MAPS]
<PAGE>
FLOOR PLAN
[MAPS]
<PAGE>
SUBJECT
[PICTURES]
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
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DESCRIPTION OF IMPROVEMENTS
Long-term care facilities must be designed with specific needs in mind. Typical
residents frequently have partially impaired vision, hearing, sense of touch,
mobility, agility, and orientation to time and place. To compensate for a
decrease in ability to distinguish colors, brightness, and depth perception,
developers need to emphasize bright colors against neutral backgrounds and bold
prints. There is also a need for increased interior and exterior lighting,
prevention of glare, and an emphasis on different color carpets to distinguish
stairs from floors. To compensate for decreased overall hearing ability, reduced
capability to discern high pitched sounds, and inability to discriminate normal
conversation from background noises, developers need to emphasize amplifiers on
telephones, PA systems, smoke detectors, installation of alarm systems with
flashing lights, and sound-absorbing materials in areas promoting socialization.
To deal with poor mobility and agility, including the use of wheelchairs, canes
and walkers, developers need to be cognizant of the length of halls, chairs
versus benches, smooth walking surfaces, wide halls and doorways for
wheelchairs, automatic sliding doors, the placement of handrails usable by both
wheelchair and ambulatory residents, and special kitchen and bathroom
arrangements. Decreased sensitivity to touch and circulation requires an
awareness of the increased need for and ease of adjustment in heating/cooling
for the private areas, and attention to the environmental tactile question in
general. Poor orientation to time and place and memory loss can be assisted by
environmental cues such as different colored floors, culturally familiar
designs, activity boards, and large clocks. A well-designed facility for the
disabled will incorporate many or all of these features. The subject property
includes many of these features.
Frank Ramseur of HealthCare Property Appraisers of America, Inc. made an
inspection of the subject property on April 1, 1997. The following description
of improvements describes the buildings as they appeared to our inspector on the
date of inspection.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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SUBJECT IMPROVEMENTS
The subject site is improved with a three-story building utilized as The
Cambridge Nursing Home. The structure's initial completion date was 1967. It is
rectangular in shape. The appraiser considers the subject building structure to
contain a functional area of approximately 24,700 sf or 208 sf per bed.
The structure appraised contains all of the functional spaces typically found in
buildings designed for nursing home occupancy, including offices, lobby,
activity department, physical therapy, beauty shop, kitchen and dining area,
laundry, therapy rooms, three nurses' stations, public and employee baths, and
bedrooms. There are dining rooms on each floor which makes it possible to serve
meals at one seating per meal. The structure has a total possible utilization of
119 beds and is configured for 119 beds.
The subject's physical structure appears to be of good quality construction and
amenities. The physical plant has average appeal to potential residents and
families with sufficient financial resources to be selective in their choice of
a facility.
No Physical Deterioration-Curable (deferred maintenance) was observed. The
structure contains no Functional Obsolescence and the facility is considered to
be functional and modern with the exception of the need for window air
conditioning units. These will be required by the city on July 1, 1997. No
External Obsolescence is noted.
The Effective Age of the structure is 30 years, and the Remaining Economic Life
is considered to be 30 years. Architecture and layout are considered typical for
a nursing home and appears in conformity with the community.
Following is a topical outline of the major improvements:
SITE PREPARATION: The building site was cleared, graded and prepared for
construction.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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FOUNDATION: Foundations consisted of concrete bearing walls.
FRAME: Frame was reinforced concrete with brick face.
FLOOR STRUCTURE: Floor structure was elevated concrete slab.
FLOOR COVERING: Floor covering was carpet on pad and vinyl composition tile.
CEILING: The ceiling consisted of acoustical, organic fiber in the basement
hallway and gypsum board, taped and painted with insulation in all other areas.
INTERIOR CONSTRUCTION: Interior construction was masonry.
PLUMBING: All patient bathrooms are two- or three-fixtured china/porcelain
fixtures including chrome hardware, grab bars and other invalid aids. Individual
bathtubs and showers feature non-slip surfaces, grab bars, shower hoses and
non-ambulatory lifts. The property's plumbing is adequate. All rooms have a
private half-bath (toilet).
SPRINKLER: The subject is partially sprinklered.
HEATING, COOLING, VENTILATION: The property is heated with hot water and air
conditioned with window units in the administrator's office and dining area.
ELECTRICAL: Fully wired and lighted with three-phase wiring, adequate to provide
lighting and power for all equipment operation including fluorescent and
incandescent lighting, reading lights over each bed, nurse call system, fire
alarm system, and intercom system.
EXTERIOR WALLS: Exterior walls were brick on concrete block.
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EXTERIOR STAIRS: There are two exterior fire escapes and one interior flight of
concrete and steel stairs. The interior stairs are carpeted and finished out.
ELEVATORS: There is one hydraulic elevator serving three floors and the
basement.
WALL ORNAMENTATION: Wall ornamentation was face brick.
ROOF STRUCTURE: Roof structure was wood joists, wood deck.
ROOF COVER: Roof was built-up composition with tar and gravel roof cover.
BASEMENT: The basement was brick masonry walls with finished interior with
electricity and lighting.
PARKING: Parking and drives of 2" plant mix asphalt on a crushed stone base.
Marked parking areas.
DOORS & WINDOWS: Interior doors are solid core. Windows were double hung in wood
frame.
EQUIPMENT: Specialized equipment necessary for operation as a nursing home
facility has been considered in valuing the subject property. Included in this
category are institutional kitchen equipment, stainless steel sinks, food
preparation counters, ovens, stoves, dishwashers, walk-in coolers and freezers,
exhaust fans and grease traps.
There are three Century tubs with two Hoyer lifts.
Laundry equipment includes two Uniwash washers and two American 50 pound dryers
rated good in condition.
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Kitchen equipment includes a dishwasher, one walk-in freezer, one freestanding
freezer, one Hobart Refrigerator, one freestanding cooler, one natural gas
range/oven and gas one steam table.
ROOM FURNISHINGS: Include a bed, night stand, chair and retractable privacy
curtain.
WALKS & DRIVES: Walks are approximately 41"wide and constructed of 2 1/2"
concrete.
LANDSCAPING: Rated average. The lawn is/is to be well established.
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COST APPROACH TO VALUE
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The Cambridge Nursing Home, Cambridge, Massachusetts
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COST APPROACH TO VALUE
The Cost Approach is frequently a reliable indicator of a property's value. The
Principle of Substitution dictates that The Cambridge Nursing Home will be worth
no more than the cost to reproduce improvements with equal utility on an equally
desirable site. Conversely, in an active building market, most properties are
usually worth at least as much as their cost to reproduce.
Otherwise, developers would not be building comparable buildings.
The initial step in the Cost Approach was the estimation of land value. The
appraiser next estimated the current construction costs to replace subject's
building improvements. The appraiser also considered the possible existence of
the three types of depreciation: Physical Deterioration, Functional
Obsolescence, and External Obsolescence.
To estimate the actual construction cost of the improvements, the appraiser
consulted with various contractors and architects familiar with this type
construction. We also have personal knowledge of comparable structures which
have been built and are familiar with their actual costs. Finally, we checked
with Marshall and Swift Valuation Service to ascertain the current cost factors
for this type construction in Cambridge.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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Site Valuation
There are several methods which appraisers may use to estimate vacant land
values. These methods include the direct sales comparison, allocation, land
residual technique, direct capitalization of ground rent, and the land
development method. The direct sales comparison method is based upon the
principle of substitution. This is the best method whenever adequate quantities
of verified comparable sales data is available. We have used both the direct
sales comparison and allocation methods. For nursing home sites, the land
residual or land development methods are not a reliable indicator of value.
Direct Sales Comparison
The direct sales comparison technique is based on the economic principle of
substitution. This principle states the value of a property tends to be fixed by
the costs of acquiring an equally desirable substitute property with the same or
similar utility and physical characteristics. Comparisons are made between the
property appraised and the sales of similar properties which have occurred in
the marketplace. Typically, units of comparison are derived such as a sales
price per square foot, sales price per front foot, or sales price per building
unit. In the case of an apartment property, the economic indicator might be cost
per apartment, whereas in the case of a nursing home, the unit of value would be
cost per patient bed. The comparables are adjusted to reflect similarities and
dissimilarities of each to the subject for such characteristics as location,
time of sale, existing market conditions, and the physical characteristics of
the property. The adjusted sales prices of the comparables then become an
indication of value for the subject. In the case of the subject, we have looked
to properties with similar zoning and land use which have sold within the
Cambridge area.
The comparable sales utilized in this analysis are summarized in the land sales
summary and the adjustment grid which follow this section. A complete
description of the individual sales used is also included within this section.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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LAND SALE #1
LOCATION: 258 Monsignor O'Brien Hwy
Cambridge, MA
BUYER: Cambridge Inn Realty Trust
SELLER: Modern Continental Enterprises, Inc.
CONFIRMATION: Grantor
DATE OF SALE: 06/28/96
SIZE: 22,000 plus or minus s.f,
ZONING: Special District I
TOPOGRAPHY: Level
SALE PRICE: $570,000
COST/UNIT: $25.91 s.f.
COMMENTS: Site is located on Msgr. O'Brien Highway near the
Somerville lien within walking distance of Lechmere
MBTA train station, the Galleria, and the Museum of
Science. A special permit was granted to construct a
112 room hotel. In addition to the purchase price, the
grantee paid approx. $30,000 to remediate an
environmental issue. The special permit required that
the grantee secure 10 additional off site parking
spaces.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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LAND SALE #2
LOCATION: 191-199 Monsignor O'Brien Highway
Cambridge, MA
BUYER: Natraj Realty Trust
SELLER: Salvatore A. Ramasci, Jr.
CONFIRMATION: Broker, All Star Realty
DATE OF SALE: 08/20/96
SIZE: 17,330 s.f,
ZONING: Special District I
TOPOGRAPHY: Level
SALE PRICE: $615,000
COST/UNIT: $35.49 s.f.
COMMENTS: Site is to be developed with a 120 room hotel. The site
was vacant at the time of sale and there were no
environmental problems, according to the selling broker.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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LAND SALE #3
LOCATION: 844 McGrath Highway
Somerville, MA
BUYER: Tage Asspcoates Limited Partnership
SELLER: 844 McGrath Limited Partnership
CONFIRMATION: Grantee's Attorney
DATE OF SALE: 08/29/96
SIZE: 97,685 s.f.
ZONING: Business Park
TOPOGRAPHY: Level
SALE PRICE: $1,684,500
COST/LTNIT: $17.24 s.f.
COMMENTS: Located near Assembly Square Mall, site of the
"Memory Lane" restaurant and parking lot. Purchased
with no permits in place. Discussions with Somerville
officials indicate that a 120 room motel is
anticipated on the site although the developer may
request approval for 150 rooms.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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LAND SALE #4
LOCATION: 201 Salem Street
Medford, MA
BUYER: Medford Cooperative Bank
SELLER: Anthony & Frances Salvati
CONFIRMATION: Broker and Grantee
DATE OF SALE: 03/17/95
SIZE: 11,725 s.f.
FRONTAGE: 90 FF on Salem and 87 FF on Hadley
ZONING: Apartment I
TOPOGRAPHY: Level
SALE PRICE: $189,900
COST/UNIT: $16.20 s.f.
COMMENTS: Corner lot one block east of Route 93, previously
improved with a wood frame two family dwelling that
was demolished for construction of a 3,000 plus or
minus s.f. branch bank. Proposed development required
a use variance, however, sale was not contingent upon
City Approvals.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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LAND SALE #5
LOCATION: 367 Medford Street
Malden, MA
BUYER: Robert W. Palmer, Trustee
SELLER: John J. Troisi, Trustee
CONFIRMATION: Mortgagee
DATE OF SALE: 11/01/94
SIZE: 8,525 s.f.
FRONTAGE: 95.16 FF on Medford, 90.50 FF on
Highland
ZONING: Neighborhood Business
TOPOGRAPHY: Level
SALE PRICE: $175,000
COST/UNIT: $20.53 s.f.
COMMENTS: Site of former gasoline service station. The 1,380
shell is to be remodeled into a neighborhood
restaurant. Site is located at the intersection of
Medford Street and Highland Avenue near the Medford
line.
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<TABLE>
<CAPTION>
LAND SALES SUMMARY & ADJUSTMENT GRID
- --------------------------------------------------------------------------------------------------------------------
Comparison # Subject No.1 No. 2 No. 3 No. 4 No. 5
Address 1 Russell 258 MOB Hwy 191 MOB Hwy 844 McGrath 201 Salem 367 Medford
Cambridge, MA Cambridge, MA Cambridge, MA Somrvle, MA Medford, MA Malden, MA
MA MA MA MA MA MA
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SITE DATA
Size (SF) 21,600 22,000 17,330 97,685 11,725 8,525
Size (Acres) 0.50 0.51 0.40 2.24 0.27 0.20
Zoning A2/B2 SDI SDI Bus Prk Apt I Neigh Bus
Topography Level Level Level Level Level Level
Utilities All All All All All All
SALE DATA
Reported Sale Price $570,000 $615,000 $1,684,500 $189,900 $175,000
Sale Price / SF $25.91 $35.49 $17.24 $16.20 $20.53
Sale Price / Acre $1,128,600 $1,545,840 $751,157 $705,505 $894,194
Transaction Type ---- Closed Closed Closed Closed Closed
Rights Conveyed ---- Fee Simple Fee Simple Fee Simple Fee Simple Fee Simple
Financing Terms ---- Cash Cash Cash Cash Cash
adjustment ---- ---- ---- ---- ---- ----
Condition of Sale ---- Arm's Arm's Arm's Arm's Arm's
Length Length Length Length Length
---- ---- ---- ---- ---
Recorded Sale Date ---- 6/96 8/96 8/96 3/95 11/94
adjustment ---- ---- ---- ---- ---- ---
Location ---- Similar Similar Similar Similar Similar
adjustment ---- ---- ---- ---- ---- ----
Size ---- Similar Similar Larger Similar Similar
adjustment ---- ---- ---- 35% ---- ----
Zoning ---- Similar Similar Similar Inferior Similar
adjustment ---- ---- ---- ---- 50% ----
Topography ---- Similar Similar Similar Similar Similar
adjustment ---- ---- ---- ---- ---- ----
Frontage/Visability ---- Similar Similar Similar Similar Similar
adjustment ---- ---- ---- ---- ---- ----
Utilities ---- Similar Similar Similar Similar Similar
adjustment ---- ---- ---- ---- ---- ----
Adjusted Price / Sq Ft $25.91 $35.49 $23.28 $24.29 $20.53
Avg Price / Sq Ft $25.90
Adjstd Price / Acre $1,128,600 $1,545,840 $1,014,063 $1,058,257 $894,194
Avg Price / Acre $1,128,191
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</TABLE>
58
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The Cambridge Nursing Home, Cambridge, Massachusetts
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Reconciliation of Comparable Sales
The comparables have already been adjusted to the subject in respect to
location, size, zoning, topography, corner influence, and utilities. The
unadjusted sales prices range from 16.20 to $35.49 per square foot. After the
adjustments, the comparables form a tighter range of $20.53 to $35.49 per square
foot. The average adjusted price per square foot was $25.90. Typically, the
comparables which have the least adjustments are most representative of the
subject. Accordingly, it is our opinion that the subject 21,600 sf site has a
market value of $550,000 or $25.46 sf.
Considering the land sales data available and prices being paid by developers of
nursing homes in similar communities, we estimate the land value of the site
supporting the building and improvements to be $550,000.
This represents the following value per indicator:
<TABLE>
<S> <C>
Land Value Per Size Unit $25.46 sf
Land Value Per Unit (bed/apt) $4,622/bed
Land Value as % of Project Cost 14.43%
SITE VALUE $550,000
-----------
-----------
</TABLE>
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Building Costs
This appraisal firm compiles construction cost data on new and proposed
facilities throughout the United States. The hard construction costs vary
considerable depending upon geographical location and quality of improvements.
To estimate the Replacement Cost of The Cambridge Nursing Home, the appraiser
utilized the Segregated Cost Method of cost estimating. This method is designed
to give separate consideration to all the major construction components of a
building. Many parts of a building, such as floor, ceiling and lighting,
increase in cost directly as the floor area of the building increases. Other
building costs vary with relation to parameters other than the floor area.
However, most costs can be related to floor area, wall area, roof area, or
sometimes an individual count of unit installations.
To facilitate the application of these individualized costs, they are grouped so
that all costs related to floor area can be added together and applied to the
total floor area, all wall area costs can be added together and applied to the
wall area, and all roof costs can be applied to the ground floor or roof area.
The appraiser utilized the Marshall and Swift Valuation Service, which is the
most widely recognized cost estimating manual in the world. This manual
separates each type of building by occupancy, type of construction, and quality.
It also makes adjustments for current cost factors on a monthly update basis.
Using the Marshall and Swift Valuation Service, the appraiser selected the
particular construction characteristics of The Cambridge Nursing Home building
improvements and selected the appropriate quantity cost factors and adjustments.
Using the computer program, a Replacement Cost New of subject's building
improvements as well as individual estimates of depreciation for each component
item were developed. The computer calculations included all Direct Costs. The
Marshall and Swift Valuation Service includes
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architectural fees, loan interest and some other minor Indirect Costs. It
specifically excludes some of the costs of doing business, or Indirect Costs,
which we have estimated as follows:
<TABLE>
<S> <C>
Taxes 0.4%
Marketing 0.4%
Loan Points and Fees 2.0%
Legal 0.5%
Accounting 0.2%
Government Licensure & Permits 4.5%
Working Capital 4.0%
-------
Total Indirect Costs 12.0%
</TABLE>
Our estimate of Indirect Costs and Developer's Profit and Overhead were based on
a percentage of Total Cost-New (depreciated at the same rate as the building
improvements). The Total Cost-New includes not only Direct Cost of construction,
as developed by the Marshall and Swift Valuation Service, but also the cost of
land, furniture, fixtures and equipment.
The Developer's Profit and Overhead was estimated at 15% of the Total Cost-New.
As an alternative to investors, Baa Bonds are currently yielding seven to eight
percent. The developer's profit should be higher than the Baa Bond rate as it is
somewhat riskier.
HealthCare Property Appraisers of America, Inc. compiles cost data on furniture,
fixtures and equipment budgets for facilities like subject. A summary of some of
the more recent transactions follows:
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The Cambridge Nursing Home, Cambridge, Massachusetts
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NURSING HOME EQUIPMENT COST DATA
<TABLE>
<CAPTION>
PRICE OF COST OF
DATE SOLD CITY STATE BEDS FF&E FF&E/BED
<S> <C> <C> <C> <C> <C>
05/92 Clearwater FL 120 $210,000 $1,750
02/90 Fluvanna VA 60 $225,000 $3,750
03/90 Goochland VA 72 $250,000 $3,472
04/92 Decaturville TN 60 $210,000 $3,500
02/92 Charlotte NC 120 $420,000 $3,500
05/92 Asheville NC 120 $420,000 $3,500
01/92 Virburnum MO 60 $120,000 $2,000
09/91 Corrigan TX 90 $160,000 $1,778
09/91 Wells TX 96 $168,000 $1,750
09/91 Brownwood TX 130 $230,000 $1,769
10/91 Port Orange FL 120 $600,000 $5,000
07/91 Orange City FL 120 $600,000 $5,000
05/91 Covington TN 196 $350,000 $1,786
02/91 Melbourne FL 120 $315,000 $2,625
04/91 Whites Creek TN 97 $280,000 $2,887
07/92 Casper WY 120 $350,804 $2,923
07/92 Palm City FL 116 $650,000 $5,603
07/92 Ashland TN 90 $260,000 $2,889
02/94 Lychburg VA 100 $380,000 $3,800
06/93 Ashland City TN 90 $260,000 $2,889
05/94 Hilo HI 120 $490,000 $4,083
12/95 Dyer TN 120 $400,000 $3,333
------
Average $3,163
Minimum $1,750
Maximum $5,603
</TABLE>
After considering the geographical location, size, and quality of the subject
property, we believe a cost new of $3,500 per unit to be appropriate. This
indicates a personal property value for the subject as follows:
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FF&E COST NEW # OF INCOME FF&E COST NEW
(PER UNIT) X GENERATING UNITS = (TOTAL)
------------- ---------------- -------------
$3,500 X 119 Beds = $416,500
Our on-site inspection of The Cambridge Nursing Home did not reveal any obvious
Physical Deterioration-Curable (deferred maintenance). Overall, the property
appeared to be well maintained with the exception of the need for window air
conditioning units (estimated cost of $25,000). These will be required by the
city on July 1, 1997. Otherwise, only normal maintenance situations were
observed. Physical Deterioration-Incurable, caused by natural aging of the
building structure in existing buildings, was estimated by the Marshall & Swift
Valuation Service based upon a data bank of sold depreciated properties.
The depreciation section of the Marshall and Swift Valuation Service is
primarily designed to measure Physical Deterioration-Incurable only. It does not
measure Physical Deterioration-Curable, i.e., Deferred Maintenance, or any loss
in value due to Functional Obsolescence that might be found in the specific
subject property, or External Obsolescence that might exist in the subject
neighborhood. The Marshall and Swift Valuation Service calculations are based
upon analysis of actual sales data from a large number of properties of
subject's type that have been sold within the last year. These sales prices,
after deletion of personal property and land values, are compared to
construction cost figures for new and similar properties. The resulting
depreciation estimate by the Marshall and Swift Valuation Service will not
exactly equal depreciation when calculated on an age-life basis (which is
basically an accounting method that has little or nothing to do with the market
place.) The Marshall and Swift market data method is considered to be a more
refined and accurate method as it is based on actual data from the market.
The real estate is functional in all respects and considered to be competitive
with nursing homes being constructed today. [Therefore, no Functional
Obsolescence was deducted.]
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Our inspection of the neighborhood and the surrounding properties did not reveal
any situations which would detract from subject's value. Therefore, no deduction
was made for External Obsolescence.
Our physical inspection of the subject indicated that the personal property,
i.e. furniture, fixtures and equipment, is generally in good condition relative
to its age. We have assumed an average useful life of ten years and an effective
age of 7 years, indicating depreciation of 70% (7 years -- 10 years).
Depreciation on the personal property is estimated as follows:
FF&E COST NEW X % DEPRECIATED = DEPRECIATION
------------- ------------- ------------
$416,500 X 70% = $291,550
Following is a component breakdown of Replacement Costs for the improvements and
depreciation:
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The Cambridge Nursing Home, Cambridge, Massachusetts
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OCCUPANCY: CONVALESCENT HOSPITAL
CLASS: C Masonry COST RANK: 2.0 Average
EFFECTIVE AGE: 25 YEARS CONDITION: 3.0 Average
NUMBER OF STORIES: 3.0 AVERAGE STORY HEIGHT: 10.0
FLOOR AREA: 24,700 Sq. Ft. COST AS OF: 4/97
<TABLE>
<CAPTION>
REPLACEMENT COST
COMPONENT UNITS COST NEW DEPR
<S> <C> <C> <C> <C>
EXCAVATION & SITE PREPARATION:
Site Preparation ............ 8,151 0.25 2,038 1,162
FRAME:
Concrete, Reinforced ........ 8,151 11.38 92,758 52,872
FLOOR STRUCTURE:
Concrete on Ground .......... 8,151 3.54 28,855 16,447
Concrete, Elevated Slab ..... 16,549 10.17 168,303 95,933
SUBTOTAL .................... 197,158 112,380
FLOOR COVER:
Carpet and Pad .............. 9,880 3.68 36,358 20,724
Vinyl Composition Tile ...... 14,820 1.83 27,121 15,459
SUBTOTAL .................... 63,479 36,183
CEILING:
Acoustical, Mineral Fiber ... 24,700 1.84 45,448 25,905
PLUMBING:
Plumbing .................... 24,700 7.73 190,931 108,831
FIRE PROTECTION:
Sprinklers .................. 24,700 2.09 51,623 29,425
HEATING AND COOLING:
Hot Water ................... 24,700 6.72 165,984 94,611
Window Heat Pump ............ 5 1,197 5,985 3,411
SUBTOTAL ..................... 171,969 98,022
ELECTRICAL ...................
Electrical .................. 24,700 9.14 225,758 128,682
EXTERIOR WALL:
Brick, Block Back-Up ........ 17,290 22.67 391,964 223,420
Insulation .................. 17,290 0.87 15,042 8,574
SUBTOTAL .................... 407,006 231,994
WALL ORNAMENTATION:
Brick, Face ................. 17,290 10.10 174,629 99,539
ROOF STRUCTURE:
Wood joists, Wood deck ...... 8,151 4.80 39,125 22,301
ROOF COVER:
Built-Up Composition ........ 8,151 1.76 14,346 8,177
ELEVATORS:
Elevator ( 4 Stops) ......... 1 68,509 68,509 39,050
SUBTOTAL SUPERSTRUCTURE ...... 24,700 70.64 1,744,777 994,523
</TABLE>
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<TABLE>
<CAPTION>
REPLACEMENT COST
COMPONENT UNITS COST NEW DEPR
<S> <C> <C> <C> <C>
BASEMENT:
Brick Masonry Wall ............ 8,151 20.21 164,732 93,897
Interior Const., Part Finished 8,151 11.19 91,210 51,990
Electrical, Finished .......... 8,151 8.68 70,751 40,328
SUBTOTAL ...................... 326,693 186,215
YARD IMPROVEMENTS:
Paving, Asphalt ............... 12,350 2.10 25,935 14,783
TOTAL .......................... 2,097,405 1,195,521
ARCHITECT'S FEES ............... 7.0% 147,517 84,085
REPLACEMENT COST NEW ........... 24,700 90.89 2,244,922
DEPRECIATION ................... (43.0%) (965,316)
DEPRECIATED COST ............... 1,279,606
ROUNDED TO NEAREST ............$100 2,244,900 1,279,600
Cost Data by MARSHALL & SWIFT
</TABLE>
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SUMMARY OF COST APPROACH
<TABLE>
<S> <C> <C>
Bldg. Improvements-Replacement Cost $2,244,900
Indirect Costs 385,368
Developer's Profit & Overhead @ 15% 481,710
Total Costs: $3,111,978
---------
Less Depreciation:
Physical Deterioration - Curable $25,000
Physical Deterioration - Incurable -
Replacement Costs 940,316
Physical Deterioration - Incurable -
Indirect Costs 161,418
Physical Deterioration - Incurable -
Devel. Profit & Overhead 201,773
Functional Obsolescence 0
External Obsolescence 891,736
-------
Total Depreciation 2,220,242
---------
Depreciated Value $891,736
Land Value $550,000
---------
Market Value--Real Estate $1,441,736
Add Furniture, Fixtures, Equipment $416,500
Less Depreciation 291,550
-------
Depreciated Value of FF&E $124,950
---------
MARKET VALUE OF REAL & PERSONAL
PROPERTY By Cost Approach - "As Is" $1,566,686
(R) $1,570,000
---------
---------
MARKET VALUE OF REAL & PERSONAL
PROPERTY By Cost Approach $1,591,686
AFTER ANY NEEDED CONSTRUCTION (R) $1,590,000
---------
---------
</TABLE>
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INCOME CAPITALIZATION APPROACH TO VALUE
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INCOME CAPITALIZATION APPROACH TO VALUE
To estimate The Cambridge Nursing Home's Market Value through the Income
Capitalization Approach, the appraiser estimated the total gross income the
project will generate by: (a) studying local and regional markets, (b)
considering the economic feasibility of the project itself, and (c) considering
competing projects and the underlying demand for this type facility.
From the total Gross Income estimate was deducted an estimate for Vacancy and
Credit Loss. Even developments with extremely heavy demand usually experience
some loss of rent due to "down time," when living units are re-decorated between
residents. In addition, there are generally some bad debt losses in most
projects. The appraiser also deducted an estimate of all Expenses the typical
property owner might expect to incur. From this Net Operating Income estimate,
the appraiser processed an estimate of the property's Market Value. This process
is known as Capitalization and is simply a conversion of Net Operating Income
into Market Value.
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GROSS INCOME
A nursing home's Effective Gross Income is determined by three factors: (a)
various daily charge rates, (b) payor type mix or census and (c) occupancy rate.
Daily charge rates vary significantly from property to property, reflecting the
services offered and the various payor sources. To develop an accurate estimate
of revenue, the appraiser studied industry statistics, competing facilities, and
all financial information available on the subject property itself.
SUBJECT
The Cambridge Nursing Home is licensed by the state for 119 Skilled Care (SNF)
and Intermediate Care (ICF) beds. The subject property is certified in
accordance with federal regulations pursuant to the Social Security Act as a
provider of Medicaid (Title XIX) Services for 119 beds and is certified for 41
Medicare beds. It is currently configured and operated with 119 beds, with a
maximum physical potential of 120 beds. The subject can potentially operate with
1 private bed, 64 semiprivate beds and 54 beds in three bed wards.
The actual unit mix is subject to periodic change as it is affected by numerous
limiting factors. In estimating the stabilized unit mix, the appraiser
considered: (a) the structure's physical capacity, (b) governmental licensing,
certification, or regulatory limitations on specific wings, sections, or the
structure as a whole or on distribution between skill or service levels, (c)
market demands for private versus semiprivate or multi-resident space, (d) the
current and historical unit mix actually experienced in the subject facility
and/or competitors, and (e) management's philosophy on unit mix, marketing and
operation.
After considering these factors, we projected a unit count and mix that we
believe might be projected by a potential purchaser. Our economic projections
are based upon a total of 119 beds, including 1 private bed, 14 semiprivate beds
and 54 beds in three-bed wards. The actual unit mix at any specific point in
time could be more or less than the number utilized in our
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economic projections, which recognized the subject's physical and licensing
limitations and marketplace demands.
The subject's current rate structure is:
<TABLE>
<CAPTION>
TYPE BEDS $/Dav
<S> <C>
SELF PAY REVENUE
Skilled I - Private $188.00
Skilled I - Semi-Private $175.00
Skilled 11 - Semi-Private $156.00
Skilled - Ward $171.00
Intermediate - Ward $152.00
GOVERNMENT PROGRAMS
MEDICAID
Type H $61.37
Type J $71.48
Type K $77.41
Type L $84.07
Type M $90.49
Type N $98.13
Type P $104.53
Type R $110.22
Type S $115.15
Type T $126.49
MEDICARE $229.00
</TABLE>
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COMPARABLE DATA
Self-Pay Rates
Self-pay rates fluctuate depending upon general regional economics and state
medicaid reimbursement programs. Although most state regulations do not control
self-pay rates, there is usually some correlation between self-pay rates and
medicaid rates.
To estimate the subject property's income stream, the appraiser studied the
market for a nursing home in this location, including:
- Seventy-five and over age group in the middle-income and above
qualified household.
- Service area definition.
- Nursing home bed population ratio, occupancy rates and private
pay percentages.
- Competitors' rates, quantity and quality.
- Official bed need statistics by state/local health planners.
- Availability of alternatives to nursing home care in the
service area.
- Access to other quality, long-term care facilities of
complementary skill level for transfer reciprocation.
This appraiser typically prepares a market survey of competing long-term care
facilities serving the immediate area and performs a walk-through inspection of
most of them. We interview facility administrators, social services personnel,
community hospital social workers, personnel of government agencies that
administer nursing home reimbursement programs, and area physicians. We also do
an in-depth interview with the subject's administrator and comptroller
concerning the history of daily charge rates, occupancy, census mix, and
competition. Due to the confidential nature of this assignment we were unable to
conduct such an analysis in this appraisal. We have reviewed historical profit
and loss statements and current bed and rate data as provided by the facility
and have assumed future potential income will not differ significantly from
historical income.
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Self-Pay Rate Conclusions
Its physical plant, amenities and services available suggested the operator's
rate schedule to be appropriate. After considering the subject's physical plant,
the quality and level of care provided, and its self pay census, we believe the
subject's rate structure to be at market level and have adopted those rates with
no adjustment.
Massachusetts Medicaid Reimbursement Rates
Following extensive discussions between the state and the Massachusetts Extended
Care Federation, the Division of Medical Assistance approved a Medicaid rate
formula for 1996 that included only two significant changes from the 1995
formula. First, nursing, variable, and Director of Nurses costs, which
constitute approximately 80 percent of the average nursing facility's total
costs were increased by a one-year cost-adjustment factor of 2.52 percent.
Second, a flat capital allowance limit will be imposed on all replacement and
renovation projects that did not hold an approved Determination of Need (DON) as
of December 31, 1995, but become operational over the next year. All other major
elements of the reimbursement formula, including the cost and acuity base year
(1993), and cost centers and ceilings, remained the same as in 1996.
Approximately 72 percent of all nursing home residents in Massachusetts have
their care financed by the Medicaid program.
Certificate of Need
Approval from the Massachusetts DON Office of the Department of Public Health is
required for any substantial capital investment, substantial change in service,
or change in ownership. However, existing homes can add up to 12 beds once
during the life of a facility without a DON if spending thresholds are not
exceeded.
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The Cambridge Nursing Home, Cambridge, Massachusetts
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Bed Need Methodology
As of May, 1996, about 2,800 new nursing home beds had been approved but not yet
licensed, and it was estimated that there was a growing surplus of beds.
Therefore, the state has adopted a regulation imposing a moratorium on
applications for new nursing facility beds until May 1, 2000. Providers with
existing DONs for beds that have been approved but not yet licensed have until
January 1, 2000 to complete construction and fully license the facility or they
will lose their DONs. With very few exceptions, new applications for replacement
and renovation projects will not be accepted until January 1, 1998. Holders of
existing DONs for replacement and renovation projects have three years from the
date of approval to complete construction. The average occupancy rate for
nursing facilities in Massachusetts is currently 94%.
Medicaid
Massachusetts revised its Medicaid reimbursement methodology in 1990 and 1991,
from a retrospective to a prospective case mix system, and then further modified
and simplified the system effective January 1, 1994, and January 1, 1995. The
methodology bases Medicaid payments on several cost components including
variable costs, an administrative and general (A&G) allowance, nursing costs, an
equity allowance for proprietary facilities, a use and an occupancy allowance
for certain non-profit facilities, and a fixed cost pass-through of interest and
depreciation for all facilities that were licensed or received a DON before the
end of 1995. Most of the cost centers are subject to a minimum base year
occupancy rate of 96 percent. Rates for calendar year 1996 are based on data
from 1993 cost and case mix acuity reports. Allowable 1993 costs for nursing,
variable, and Director of Nurses cost centers are inflated by a
three-year-cost-adjustment factor of approximately 8.18 percent.
The variable cost portion of the rate is facility-specific. Ceilings are set for
four peer groups constructed on the basis of two average case mix groupings
(light and heavy care) and two geographic divisions (metropolitan Boston and the
remainder of the state). The two case mix score groupings are determined using
1993 acuity data. Ceilings for each peer group are set equal to the
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median cost of each group plus 8 percent. The ceilings for 1996 range from
$34.12 to $37.76. Allowable 1993 variable costs are inflated by the three-year
cost-adjustment factor of 8.18 percent.
The A&G allowance is based on a median 1993 A&G cost of $9.74 per day for all
nursing facilities. Facilities with 1993 base year costs at or above the median
receive $9.74 pr day adjusted by a two-year cost-adjustment factor of 5.52
percent. Facilities with a 1993 base year A&G costs below the median receive
their actual 1993 base year A&G costs adjusted by the two-year cost-adjustment
factor and an efficiency incentive equal to 25 percent of the difference between
their actual costs and the $9.74 median. The A&G portion of the Medicaid rate
has been frozen in 1996 at 1995 levels.
The state calculates facility-specific per diem nursing rates for each of the 10
case mix categories within three nursing home reimbursement regions. Case
mix-adjusted per diem rates for the 10 categories are calculated for each
facility on the basis of the individual nursing home's 1993 nursing costs, case
mix, and number of management minutes. If a facility did not have any residents
in some category in 1993, then the 1993 industrywide median number of management
minutes is used. Nursing costs per management minute are subject to a ceiling
equal to the median for the facility's region plus 10 percent. The ceilings for
1996 range from $0.260967 to $0.280735 per management minute. Allowable 1993
nursing costs are also inflated by a three-year cost-adjustment factor of 8.18
percent.
The nursing component is combined with the other rate components to generate 10
facility-specific per diem rates. Providers bill for each resident at one of
these rates. A resident's case mix billing group can be updated every three
months if his or her acuity changes. Payments for prescriptions, physician
services, and all therapies are billed separately. Interim rate adjustments are
available for increased capital expenses and increased government requirements.
Additionally, in 1996, a fiscal hardship petition process was developed to
assist facilities negatively impacted by the decision to maintain 1993 as the
base year for costs and case mix acuity.
Self pay rates are subject to market competition while non-self pay (i.e.,
government funded) rates are set by state or federal government agencies.
Governmental rates are dictated by the respective
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health care program and are based upon a cost of services reimbursement system,
capital requirements, and profit. Because non-self pay rates often fluctuate
widely between similar properties in the same general location, the best
indicator of government support program rates is the historical experience of
the subject itself or a cost reimbursement rate analysis prepared by a
knowledgeable cost reimbursement accountant.
Current Medicaid Rate: $61.37 to $126.49
For our income projections, we have recognized the subject's actual rates for
medicaid and medicare.
OCCUPANCY
The appraiser researched occupancy of this type facility on a national, state
and local basis. National statistics indicate long-term care facilities are
experiencing a nationwide occupancy of 91.0%. Massachusetts's Department of
Human Resources' most recent survey indicated a statewide occupancy of 94%.
We believe a potential purchaser would likely project a stabilized occupancy
of 97.0% for the foreseeable future. Accordingly, we have used that occupancy
rate in our projections.
CENSUS or PATIENT/RESIDENT MIX
The appraiser researched census-mix (the ratio of various payor types) in the
market area. Patient distribution between government reimbursed programs and
privately funded sources varies from state to state and facility to facility.
Statewide factors contributing to a high self-pay census-mix include the
existence of a Certificate of Need "CON" program, social factors, the state's
restrictiveness on qualifying residents, statewide occupancy, and the
adequacy of the state's reimbursement program. Massachusetts is considered
low in these areas. Factors contributing to a high, self-pay census-mix in an
individual facility in Massachusetts include reputation, quality of care,
facility's age,
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participation in the Medicare program, competitiveness of rate structure, and
therapeutic programs offered. The subject rates low in these areas.
The subject is currently experiencing the following census breakdown by payor:
<TABLE>
<CAPTION>
Medicaid + Medicare + Self-Pay = Total
<S> <C> <C> <C> <C>
Current
Census 74% + 13% + 13% = 100%
Breakdown
</TABLE>
We believe a potential purchaser would project a stabilized nonmedicaid (self
pay, medicare) ratio of 24% for the immediately foreseeable future.
Accordingly, we have used that nonmedicaid rate in our projections.
Ancillary/Miscellaneous Income
Ancillary income generally refers to revenue generated from profit centers
other than room, board and basic healthcare (i.e., occupational, physical or
speech therapy). These additional services typically will average $1.00 to
$3.00 per patient day in an average facility and $5.00 to $15.00 in a
facility with a large high skilled census and substantial therapy programs.
The subject's ancillary charges have historically been between $15 and $20
per day. In our income projections, we have utilized $17 per patient day.
REVENUE SUMMARY
The appraiser reviewed the subject's historical operating statements to compare
the reasonableness of our projections. Management's operating statements
indicated an Effective Gross Revenue of:
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1997 $5,282,784
After studying actual historical financial statements, the operator's
projections, comparable rates, occupancy and census-mix, the appraiser projected
the subject's Effective Gross Revenue. The appraiser (utilizing market rates, a
nonmedicaid ratio of 24% and stabilized occupancy of 97.0%) estimated an
Effective Gross Revenue of.
Appraiser's Effective Gross Revenue: $5,391,066
The following information recapitulates our stabilized Gross Income, Vacancy,
and Effective Gross Revenue (expressed in current dollars):
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GROSS INCOME
<TABLE>
<CAPTION>
TYPE BEDS $/Day X # Beds = Income
- --------- ----- ------
SELF PAY REVENUE
<S> <C> <C> <C>
Skilled I - Private $188.00 1 $188
Skilled I - Semi-Private $175.00 2 $350
Skilled II - Semi-Private $156.00 1 $156
Skilled - Ward $171.00 6 $1,026
Intermediate - Ward $152.00 6 $912
------- --- ----------
Self Pay Patient Revenue $164.50 16 $2,632
GOVERNMENT PROGRAMS
MEDICAID
Type H $61.37 10 $614
Type J $71.48 19 $1,358
Type K $77.41 14 $1,084
Type L $84.07 5 $420
Type M $90.49 12 $1,086
Type N $98.13 8 $785
Type P $104.53 12 $1,254
Type R $110.22 6 $661
Type S $115.15 4 $461
Type T $126.49 1 $126
MEDICARE $229.00 12 $2,748
------- --- ----------
Government Support Revenue $102.89 103 $10,598
------- --- ----------
Self Pay & Govt. Revenue $111.17 119 $13,230
Ancillary Income $17.00 119 $2,023
Contrct. Adjtds. & Bad Debt $0.25 103 ($26)
----------
Gross Daily Income $15,227
x 365
----------
Gross Income $5,557,800
Less Vacancy: at 3% ($166,734)
----------
EFFECTIVE GROSS INCOME $5,391,066
-------------
-------------
</TABLE>
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EXPENSES
To estimate expenses for the subject, the appraiser reviewed operating
statements from several properties with similar economic characteristics, and
considered the reasons for variation in expense ratios. These variations often
result from changes in patient acuity level. Other factors which may increase
the expense ratio include a low private self-pay patient census, low occupancy,
the age of the facility, urban vs. rural location, the presence of a labor
contract, or the presence of a special unit (e.g., a designated medicare wing).
Conversely, a rest home or any type census that requires fewer or less highly
skilled staff would generally have a lower expense ratio. The self pay homes
generally have a lower expense ratio as their daily revenue rates are higher
than medicaid rates although their expenses are not proportionately higher.
Healthcare Department expenses include all those services required to provide
nursing and/or personal care and all ancillary and therapy services. Stabilized
staffing includes: directors of nursing (DON) 1.0 FTE (full-time equivalent),
ward clerks 1.0 FTE, therapists 0.0 FTE, social services FTE, in-service
coordinator 1.0 FTE, activities director 1.0 FTE, activities staff 2.0 FTE,
registered nurses 19.0 FTE, licensed practical nurses 23.0 FTE, and certified
nursing assistants 53.0 FTE. We also estimated pharmacy and drug costs of
$269,553; nursing supplies of $126,396; and ancillary-miscellaneous expenses of
$673,883 per year.
Total healthcare department expenses are stabilized at $2,891,728 or $68.64 per
patient day, which is 53.6% of effective gross income. The subject's 1997 (6
Months Annualized) expenses for this department total $67.98 per patient day.
The comparables' expenses for this category were $63.80, $60.49, and $79.83 per
patient day for Expense Comparables A, B, and C, respectively.
The appraiser placed the most emphasis on the historical data when stabilizing
for the subject property. Healthcare Department expenses for the comparable
facilities, the subject in 1997 (6 Months Annualized), and the appraiser's
stabilized amount are presented below.
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Healthcare Expenses
<TABLE>
<CAPTION>
$ $ %
Comparables Annual PPD EGI
- ----------- ------- ---- -----
<S> <C> <C> <C>
COMP A N/A $63.80 41.8%
COMP B N/A $60.49 50.6%
COMP C N/A $79.83 54.8%
Subject
- -------
1997 (6 Mos Anlzd) $2,841,636 $67.98 53.8%
Appraiser's Stabilized $2,891,728 $68.64 53.6%
</TABLE>
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Administrative and general expenses include salaries for administrators 1.0 FTE
and bookkeepers 6.3 FTE. Expenses also include payroll benefits, taxes,
insurance, state provider or licensure fees (if applicable), phone, legal,
accounting management, transportation, miscellaneous and supplies. Taxes were
based upon a conversation with the tax collector and projected at $126,000.
Insurance was estimated at $37,737.
Total administrative department expenses are stabilized at $1,302,760 or
$30.92 per patient day, which is 24.2% of effective gross income. The subject's
1997 (6 Months Annualized) expenses for this department total $31.07 per patient
day. The comparables' expenses for this category were $33.82, $24.83, and $26.12
per patient day for Expense Comparables A, B, and C, respectively.
The appraiser placed the most emphasis on the historical data when stabilizing
for the subject property. Administrative expenses for the comparable facilities,
the subject in 1997 (6 Months Annualized), and the appraiser's estimate for a
stabilized year are shown below.
Administrative Expenses
<TABLE>
<CAPTION>
$ $ %
Comparables Annual PPD EGI
- ----------- ------ --- ---
<S> <C> <C> <C>
COMP A N/A $33.82 22.2%
COMP B N/A $24.83 20.8%
COMP C N/A $26.12 17.9%
Subject
- -------
1997 (6 Mos Anlzd) $1,298,635 $31.07 24.6%
Appraiser's Stabilized $1,302,760 $30.92 24.2%
</TABLE>
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The Dietary Department provides food service for patient/residents and staff and
is an important ingredient in the subject's overall marketing package. The
facility provides three meals a day, seven days a week. Stabilized staffing
includes: dietician/food service managers 1.0 FTE, cooks 5.2 FTE, and
server/helpers 10.6 FTE. Raw food has been estimated at $5.50 per patient day.
Total dietary expenses are stabilized at $477,254 or $11.33 per patient day,
which is 8.9% of effective gross income. The subject's 1997 (6 Months
Annualized) expenses for this category total $11.25 per patient day. The
comparables' expenses were $9.25, $10.51, and $11.14 per patient day for
Expense Comparables A, B, and C, respectively.
The appraiser placed the most emphasis on the historical data when stabilizing
for the subject property. Dietary department expenses for the comparable
facilities, for the subject in 1997 (6 Months Annualized), and the appraiser's
estimate for a stabilized year are shown below.
The Dietary Department
<TABLE>
<CAPTION>
$ $ %
Comparables Annual PPD EGI
- ----------- ------ --- ---
<S> <C> <C> <C>
COMP A N/A $9.25 6.1%
COMP B N/A $10.51 8.8%
COMP C N/A $11.14 7.6%
Subject
- -------
1997 (6 Mos Anlzd) $470,278 $11.25 8.9%
Appraiser's Stabilized $477,254 $11.33 8.9%
</TABLE>
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Housekeeping and Laundry expenses include salaries for: directors of
housekeeping and laundry 1.0 FTE, housekeepers 10.O FTE, and laundry workers
6.O FTE. These expenses also include the cost of cleaning supplies, estimated at
$64,693 or $15.99 per patient day, which is 1.2% of effective gross income.
Total housekeeping and laundry expenses are stabilized at $274,693 or $6.52 per
patient day, which is 5.1% of effective gross income. The subject's 1997 (6
Months Annualized) expenses for this department total $6.37 per patient day. The
comparables' expenses were $7.79, $8.10, and $4.72 per patient day for Expense
Comparables A, B, and C, respectively.
The appraiser placed the most emphasis on the historical data when stabilizing
for the subject property. Housekeeping and laundry department expenses for the
comparable facilities, the subject in 1997 (6 Months Annualized), and the
appraiser's estimate for a stabilized year are shown below.
Housekeeping Department
<TABLE>
<CAPTION>
$ $ %
Comparables Annual PPD EGI
- ----------- ------ --- ---
<S> <C> <C> <C>
COMP A N/A $7.79 5.1%
COMP B N/A $8.10 6.8%
COMP C N/A $4.72 3.2%
Subject
- -------
1997 (6 Mos Anlzd) $266,106 $6.37 5.0%
Appraiser's Stabilized $274,693 $6.52 5.1%
</TABLE>
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Maintenance expenses include all those necessary to operate and maintain the
physical plant. Staffing includes: maintenance manager 1.0 FTE and skilled
maintenance personnel 1.0 FTE. This category covers all day-to-day repairs,
periodic repainting and cosmetic work, and lawn and service contracts. Utility
expenses are estimated at $125,000 or $2.97 per patient day, which is 2.3% of
effective gross income.
Total maintenance expenses are stabilized at $276,884 or $6.57 per patient day,
which is 5.1% of effective gross income. The subject's 1997 (6 Months
Annualized) expenses for this department total $5.94 per patient day. The
comparables' expenses for plant operation and maintenance were $12.00, $6.92,
and $7.04 per patient day for Expense Comparables A, B, and C, respectively.
The appraiser placed the most emphasis on the historical data when stabilizing
for the subject property. These expenses for the comparables, for the subject in
1997 (6 Months Annualized) as well as the appraiser's estimate for a stabilized
year are shown below.
Maintenance Department
<TABLE>
<CAPTION>
$ $ %
Comparables Annual PPD EGI
- ----------- ------ --- ---
<S> <C> <C> <C>
COMP A N/A $12.00 7.9%
COMP B N/A $6.92 5.8%
COMP C N/A $7.04 4.8%
Subject
- -------
1997 (6 Mos Anlzd) $248,150 $5.94 4.7%
Appraiser's Stabilized $276,884 $6.57 5.1%
</TABLE>
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[CHART]
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Reserves for Replacement are not included in many operator's financial
statements. Management companies that do estimate replacement reserves generally
allocate $200 to $300 per bed annually for personal property, but rarely make
allocation for replacement of short-life realty items (e.g., roofing or parking
lot repair). For the purposes of our analysis, we are projected a personal
property reserve of $200 per bed and a reserve for short life realty items of
0.5% of Effective Gross Income.
Total Expenses are stabilized at $5,223,318 or $123.98 per patient day, which is
96.9% of effective gross income. The subject's 1997 (6 Months Annualized)
expenses total $122.60 per patient day, or 97.0% of effective gross income.
Based upon our analysis of management's financial statements and the
comparables, we believe our stabilized expenses to be reasonable and well
supported.
Total Expenses for the comparable facilities, for the subject in 1997 (6 Months
Annualized), and the appraiser's estimate for a stabilized year are shown below.
Total Expenses
<TABLE>
<CAPTION>
$ $ %
Comparables Annual PPD EGI
- ----------- ------ --- ---
<S> <C> <C> <C>
COMP A N/A $126.67 83.1%
COMP B N/A $110.84 92.7%
COMP C N/A $128.85 88.4%
Subject
- -------
1997 (6 Mos Anlzd) $5,124,805 $122.60 97.0%
Appraiser's Stabilized $5,223,318 $123.98 96.9%
</TABLE>
Following is the appraiser's reconstructed pro forma. operating statement with
stabilized income and expenses for subject property:
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PERSONNEL STAFFING
<TABLE>
<CAPTION>
Full Time Annual Total
Equivalents Salary Staff
(FTEs) (Per Person) Payroll
----------- ------------ --------
<S> <C> <C> <C>
Administration
Administrator 1.0 $53,000 $53,000
Staff 6.3 $18,000 $112,858
----- ----------
7.3 $165,858
Housekeeping
Director 1.0 $18,000 $18,000
Housekeepers 10.0 $12,000 $120,000
Laundry/Linen 6.0 $12,000 $72,000
----- ----------
17.0 $210,000
Maintenance
Manager 1.0 $34,000 $34,000
Skilled 1.0 $24,000 $24,000
----- ----------
2.0 $58,000
Dietary
Director/Dietician 1.0 $29,000 $29,000
Supervisor 1.5 $19,500
Cooks 5.2 $15,000 $78,682
Staff 10.6 $13,000 $137,846
----- ----------
18.3 $245,528
Healthcare Unit
Director of Nursing 1.0 $52,000 $52,000
Medical Records/Ward Clerk 1.0 $23,000 $23,000
Pharmacy 0.0 $20,000 $0
Social Services 1.0 $36,000 $36,000
Inservice Coordinator 1.0 $37,000 $37,000
Activities Director 1.0 $30,000 $30,000
Activities Staff 2.0 $19,198 $38,396
RN's 19.0 $25,000 $475,000
LPN's 23.0 $21,500 $494,500
CNA's 53.0 $12,000 $636,000
----- ----------
102.0 $1,821,896
----------
Nursing Hours Per Patient: 6.58
TOTAL FACILITY PAYROLL $2,501,282
</TABLE>
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EXPENSE SUMMARY
<TABLE>
<S> <C> <C> <C>
Effective Gross Income 100.0% $5,391,066
Patient Days: 42,132
PPD EGI
------- ----
Healthcare
Salaries $43.24 33.8% $1,821,896
Pharmacy & Drugs $6.40 5.0% $269,553
Nursing Supplies $3.00 2.3% $126,396
Ancillary & Misc. $15.99 12.5% $673,883
------- ---- ----------
Total Nursing $68.64 53.6% $2,891,728
Administrative
Taxes $2.99 2.3% $126,000
Group & Gen. Insurance $1.28 1.0% $53,911
Fire Ins. & Ext. Cvrg. $0.90 0.7% $37,737
Payroll $3.94 3.1% $165,858
Employee Benefits $10.69 8.4% $450,231
Telephone $0.51 0.4% $21,564
Legal & Audit $0.64 0.5% $26,955
Management--Off Site $6.40 5.0% $269,553
Transportation $0.38 0.3% $16,173
Miscellaneous $0.64 0.5% $26,955
Office Supplies $1.28 1.0% $53,911
Miscellaneous Supplies $1.28 1.0% $53,911
------- ---- ----------
Total Administrative $30.92 24.2% $1,302,760
Dietary
Salaries $5.83 4.6% $245,528
Raw Food & Supplies $5.50 4.3% $231,726
------- ---- ----------
Total Dietary $11.33 8.9% $477,254
Housekeeping & Laundry
Salaries $4.98 3.9% $210,000
Supplies $1.54 1.2% $64,693
------- ---- ----------
Housekeeping & Laundry $6.52 5.1% $274,693
Maintenance
Salaries $1.38 1.1% $58,000
Repairs $0.51 0.4% $21,564
Supplies & Misc. $0.51 0.4% $21,564
Reserve Furn., Fix., Eqpt. $0.56 0.4% $23,800
Reserve Short Life Realty $0.64 0.5% $26,955
Utilities $2.97 2.3% $125,000
------- ---- ----------
Total Maintenance $6.57 5.1% $276,884
------- ---- ----------
FIXED & OPERATING EXPENSES $123.98 96.9% $5,223,318
------- ---- ----------
------- ---- ----------
</TABLE>
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RECAPITULATION OF INCOME & EXPENSES
<TABLE>
<S> <C> <C> <C>
Effective Gross Income 100.0% $5,391,066
Less Expenses
PPD EGI
------ ------
Healthcare $68.64 53.6% ($2,891,728)
Administration $30.92 24.2% ($1,302,760)
Dietary $11.33 8.9% ($477,254)
Housekeeping & Laundry $6.52 5.1% ($274,693)
Maintenance $6.57 5.1% ($276,884)
------- ------ ------------
Fixed & Operating Expenses $123.98 96.9% ($5,223,318)
NET INCOME TO ENTIRE GOING CONCERN $167,748
------------
------------
</TABLE>
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RECAP OF HISTORICAL VS STABILIZED INCOME
<TABLE>
<CAPTION>
6
MOS
1997 APPRAISER'S
ANNUALIZED STABILIZED
---------- -----------
<S> <C> <C>
Patient Days 41,802 42,132
Occupancy 96% 97.0%
Eff. Gross Income $5,282,784 $5,391,066
---------- ----------
Less Expenses*
Healthcare Unit $2,841,636 $2,891,728
Administration $1,298,635 $1,302,760
Dietary $470,278 $477,254
Housekeeping/Laundry $266,106 $274,693
Maintenance $248,150 $276,884
---------- ----------
Fixed/Operating Exps $5,124,805 $5,223,318
---------- ----------
NET INCOME $157,979 $167,748
---------- ----------
---------- ----------
</TABLE>
*Some expenses may have been eliminated as non-recurring or reclassified to
facilitate comparison with the appraiser's estimates and may not match
historical statements.
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CAPITALIZATION
Most investors, in determining what price they would pay for The Cambridge
Nursing Home, begin with the net income (estimated in the preceding section).
This net income is converted into a value estimate by means of capitalization;
the overall capitalization rate is simply the ratio of net income to value.
The typical investor, when selecting his desired rate of return (or overall
capitalization rate), considers: (a) the term for which he will hold the
property and (b) his initial cash investment. The investor's initial equity is
his actual downpayment at the time of purchase. His return is considered to be
all of the income stream during the holding period and the cash he receives when
he sells the property. The investor's equity may increase due to loan
amortization and is further affected by appreciation or depreciation in property
value.
Most investors consider the actual yield on equity more important than yield on
purchase price. Today's market requires an after tax yield of 10% to 25%,
depending upon the property type and the degree of risk.
The appraiser developed a Capitalization Rate using both a Direct Capitalization
method and a Yield Capitalization method.
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DIRECT CAPITALIZATION
Long Term Care Facility Sales
Capitalization rates on typical investment type real estate currently range from
8% to 10%. Historically, properties like subject, with some Going Concern Value
or Special Use characteristics, have commanded an increase in capitalization
rate of 1% to 3% over typical investment type property.
Summary nursing home Facility Sales
<TABLE>
<CAPTION>
UNITS AGE OCCUPANCY PRVT PAY SF/UNIT SP/SF SP/UNIT EGIM CAPT RATE
----- --- --------- -------- ------- ----- ------- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Averages 122 24 94% 29% 362 $125 $44173 0.99 11.2%
Total 18
Facilities
</TABLE>
The data suggests a current rate of 11.2% to 11.9% (adjusted for today's
market).
YIELD CAPITALIZATION
Mortgage Equity Analysis
The appraiser prepared a Mortgage Equity Analysis and developed a Weighted
Average Capitalization Rate sufficient to service the mortgage debt and equity
position. The Appraisal Foundation publishes a monthly of mortgage interest
rates derived from a survey of major institutional investors in the U.S.
Although interest rates for nursing homes are not included in the survey,
lenders advise that a premium of 1% to 3% should be added to the general
apartment rate to reflect the increased risk for any property containing some
Going Concern Value.
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<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
To develop an Overall Capitalization Rate by Band of Investment, Mortgage -
Equity, we assumed a first mortgage of 75% loan to value and 10% interest
rate, amortized over 20 years. nursing home lenders confirm this criteria would
be currently acceptable. The Equity Yield Rate was estimated at 20%. The
appraiser consulted with two major purchasers of this type property, who
reported that this return is sufficient to attract equity capital.
The weighted average does not reflect equity buildup from mortgage amortization
during the holding period. Mortgage amortization would accrue to the equity
position and satisfy part of the owner's yield requirements. To reflect this,
the appraiser deducted an appropriate rate from the weighted average. The
mortgage amortization rate is calculated by multiplying the loan to value ratio,
times the portion of the loan that will be paid off at the end of the holding
period; this product is multiplied by the Sinking Fund Factor at the equity
yield rate.
The weighted average rate does not incorporate the value appreciation or
depreciation that can be anticipated for this type property in this location
over the investment period. Studies show that well located real estate will
appreciate in value at a rate at least equal to the inflation rate. We believe
it is reasonable to anticipate the subject property will appreciate 7.5% to
over a 5-year period. To adjust the weighted average for this anticipated
change, we multiplied the anticipated rate of change by the Sinking Fund
Factor at the equity yield rate and adjusted the weighted average accordingly.
- --------------------------------------------------------------------------------
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<PAGE>
NATIONAL MARKET INDICATORS
<TABLE>
<CAPTION>
REGIONAL MALL CBD OFFICE INDUSTRIAL
---------------------------- ------------------------- --------------------------
3rd Qtr Prior Qtr 3rd Qtr Prior Qtr 3rd Qtr Prior Qtr
-------------- -------------- ------------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Discount Rate
(IRR)(4)
Range 10.00% - 14.00% 10.00% - 14.00% 10.00% - 15.00% 10.00% - 15.00% 8.50% - 14.00% 9.00% - 14.00%
Average 11.56% 11.50% 11.93% 11.99% 11.19% 11.22%
Change (b.p.) -- +6 -- -6 -- -3
Overall Cap Rate
(OAR)(a)
Range 6.25% - 11.00% 6.25% - 11.00% 7.00% - 12.00% 8.00% - 12.00% 7.25% - 13.00% 7.25% - 13.00%
Average 8.33% 8.17% 9.47% 9.53% 9.23% 9.23%
Change (b.p.) -- +16 -- -6 -- 0
Residual Cap Rate
Range 7.50% - 11.00% 7.00% - 11.00% 8.25% - 12.00% 8.25% - 12.00% 8.00% - 11.00% 8.00% - 11.00%
Average 8.71% 8.56% 9.67% 9.67% 9.55% 9.51%
Change (b.p.) -- +15 -- 0 -- +4
</TABLE>
<TABLE>
<CAPTION>
APARTMENT
---------------------------
3rd Qtr Prior Qtr
-------------- --------------
<S> <C> <C>
Discount Rate (IRR)(4)
Range 10.00% - 12.50% 10.00% - 12.50%
Average 11.30% 11.35%
Change (b.p.) -- -5
Overall Cap Rate (OAR)(a)
Range 8.00% - 10.50% 7.50% - 10.50%
Average 9.03% 8.98%
Change (b.p.) -- +5
Residual Cap Rate
Range 8.50% - 10.50% 8.00% - 10.50%
Average 9.32% 9.29%
Change (b.p.) -- +3
</TABLE>
a. Rate on unleveraged, all-cash transactions
- ---------------
Definitions:
b.p.: Basis Points
Discount Rate (IRR): Internal rate of return on equity in
an all-cash transaction, based on annual year-end compounding; formerly
termed the Free and Clear Equity IRR in the Korpacz Survey.
Overall Capitalization Rate: Initial cash-on-cash rate of return on the equity
investment in an all-cash transaction; formerly termed the Free and Clear Equity
Cap Rate in the Korpacz Survey.
Residual Cap Rate: Overall capitalization rate used in calculation of
residual price at conclusion of forecast period.
Source: Korpscz Real Estate Investor Survey. Personal survey of a cross
section of major institutional equity real estate market participants
conducted in October 1995 by Peter F. Korpacz & Associates, Inc. Published
Fall 1996 in Valuation Rights & Perspectives.
95
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
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<TABLE>
<CAPTION>
REQUIRED
AS % X ANNUAL = CAPT.
OF TOTAL RETURN RATE
---------- -- ---------- -- --------
<S> <C> <C> <C> <C> <C>
First Mortgage 75.00% x 11.58% = 8.69%
Equity 25.00% x 20.00% = 5.00%
------
Weighted Average 13.69%
</TABLE>
LESS CREDIT FOR EQUITY BUILDUP:
<TABLE>
<CAPTION>
PART SINKING
LOAN RATIO X LOAN X FUND FACTOR =
PAID OFF
----------- --- --------- -- -------------
<S> <C> <C> <C> <C> <C> <C>
75.0% X 10.20% X 0.13440 = 1.03%
</TABLE>
ADJUSTMENT FOR DEPRECIATION/APPRECIATION:
<TABLE>
<CAPTION>
PLUS DEPRECIATION
(OR MINUS SINKING FUND
APPRECIATION) X FACTOR =
- ------------------ --- -------------- --
<S> <C> <C> <C> <C>
7.5% x 0.13440 = 1.01%
</TABLE>
OVERALL CAPITALIZATION RATE:
<TABLE>
<CAPTION>
<S> <C>
TOTAL 11.65%
</TABLE>
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The Cambridge Nursing Home, Cambridge, Massachusetts
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Discounted Cash Flow
HealthCare Property Appraisers of America, Inc.'s Discounted Cash Flow (DCF)
program generates a "Going In" Capitalization Rate and a value estimate using
mortgage and equity requirements, selected by the appraiser, . This value is
(1) the present value of any mortgage and (2) the present value of the equity
position (i.e., the sum of all cash flow from operations--after debt
service and resale of the property, discounted by the equity yield rate).
The appraiser used the same mortgage input requirements in this method as in
the Mortgage Equity Analysis. The Equity Yield was estimated at 20.0%, which
approximates the return from stock investment (a more similar risk). The DCF
program also considers: (a) anticipated changes in income, (b) appreciation
or depreciation of the residual property or (c) selection of a Terminal
Capitalization Rate. We have estimated an annual increase in income of 2%.
This analysis developed a "Going In" Overall Capitalization Rate of 11.6%,
which will give an equity dividend (cash on cash) of approximately 11.7% and
a projected equity yield over the five-year holding period of 20.0%.
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<PAGE>
<TABLE>
<CAPTION>
DATA INPUT DATA OUTPUT
- ----------------- ----------------
<S> <C> <C> <C>
EQUITY YIELD RATE 20.00000 BEFORE TAX YIELD 20.00000
HOLDING PERIOD 5 OVERALL RATE 0.11598
LOAN NUMBER 1 MORTGAGE CONSTANT 0.11580
INTEREST RATE 0.10000 MORTGAGE VALUE $1,084,773
LOAN TERM 20.00000
PAYMENTS PER YEAR 12 EQUITY VALUE $361,591
LOANVALUE RATIO 0.75000 EQUITY DIVIDEND 0.11651
CHANGE IN VALUE 0.05000
LAND VALUE $0
DEPRECIATION METHOD NONE
COST RECOVERY PERIOD 0
NET OPERATING INCOME $167,750 VALUE $1,446,364
CHANGE IN NOI 0.08243
INCOME ADJUSTMENT FACTOR G1 .02
</TABLE>
CASH FLOW SUMMARY
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NOI $167,750 $ 171,105 $174,527 $178,018 $181,578
DEBT SER#I -$125,619 -$ 125,619 -$125,619 -$125,619 -$125,619
BTCF $42,131 $ 45,486 $48,908 $52,398 $55,959
RESALE PRICE $1,518,682
LOAN BALANCE # 1 -$ 974,153
BEFORE TAX PROCEEDS $ 544,529
</TABLE>
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The Cambridge Nursing Home, Cambridge, Massachusetts
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CAPITALIZATION RATE SUMMARY
- --------------------------
Our analyses indicate capitalization rates of:
<TABLE>
<CAPTION>
<S> <C>
Direct Capitalization (Sales Data) 11% to 12%
Mortgage Equity 11.650%
Discounted Cash Flow 11.651%
</TABLE>
An overall capitalization rate of 11.6% was selected for our
analysis, indicating a value by the Income Capitalization Approach of:
<TABLE>
<CAPTION>
NET INCOME DIVIDED BY CAPT.RATE = VALUE
<S> <C> <C> <C> <C>
$167,748 DIVIDED BY 11.6% = $1,446,101
</TABLE>
MARKET VALUE OF REAL PROPERTY, PERSONAL (R) $1,450,000
PROPERTY & BUSINESS VALUE
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<PAGE>
SALES COMPARISON APPROACH TO VALUE
- -------------------------------------------------------------------------------
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
SALES COMPARISON APPROACH TO VALUE
The sales comparison approach is defined as "a set of procedures in which an
appraiser derives a value indication by comparing the property being
appraised to similar properties that have been sold recently, applying
appropriate units of comparison, and making adjustments, based on the
elements of comparison, to the sales prices of the comparables. " (This
information taken from The Dictionary of Real Estate Appraisal, American
Institute of Real Estate Appraisers, second edition.)
In this approach, the market value of the subject is estimated by comparing
it to similar properties that have sold recently. This approach is predicated
on the direct relationship between subject property's market value and the
sale prices of comparable properties. In the case of a nursing home, such as
the subject, these properties are sold and purchased by investors on a
regional and national basis. For selection of comparable properties, we
sought recent sales first within Massachusetts and then in the United States.
The accurate application of this approach is based, in part, on the choice of
an appropriate unit of comparison, as shown on the summary grid. We extracted
from each comparable two physical indicators and one economic indicator. The
physical indicators included sales price per revenue-generating unit (beds or
apartments) and sales price per square foot. The economic indicator used was
an effective gross income multiplier (EGIM). The following section presents
information on the sales analysis of comparables for an indicated value of
the subject property.
This appraiser interviewed Ms. Joyce James in the Department of Public
Health, Division of Health Care Quality concerning whether the property owner
could operate the subject facility and participate in the state nursing home
reimbursement program, in the event the current lessee does not extend the
lease. It was the opinion of Ms. James that there are no legal or regulatory
requirements that would prohibit the property owner from obtaining a new
tenant or management company to operate the nursing home facility. The reader
is cautioned that the appraiser is not an expert on nursing home or medicaid
matters and this critical assumption
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<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
should be confirmed by legal counsel. If this assumption is not accurate it
could have a dramatic impact on the property's value.
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The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
Regional Facilities
<TABLE>
<CAPTION>
COMP OCCU- PRIV. SF/ SP/ SP/ CAPT
# STATE DATE BEDS AGE PANCY PAY BED SF BED GIM RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1572 MA Jan 94 129 25 .23 268 95 25349 0.77 .090
1584 MA Feb 95 123 32 .98 .10 412 108 44715 0.90 .097
1585 MA Dec 93 120 31 .97 .04 292 33 9573
1770 MA Jan 97 91 28 .98 .20 242 89 21429 0.55 .075
1781 MA MAR 96 120 10 .98 .15 363 104 37917 1.08 .140
1782 MA JUN 96 58 30 .97 .15 281 118 33276 0.81 .108
1783 MA OCT 95 100 20 .97 .18 237 139 33007 0.99 .148
1609 MD Mar 95 162 35 .85 1.00 252 297 74753
1610 MD Mar 95 102 35 .85 1.00 568 145 82353
1611 MD Oct 94 91 .97 .31 47527 1.31 .058
1601 PA May 94 180 16 .99 .10 389 86 33292 0.83 .151
1602 PA Jun 94 120 11 .90 .10 301 295 88700 1.50 .105
1603 PA Jan 95 121 23 .90 .27 504 73 36884 1.01 .136
1604 PA Nov 94 148 30 .93 .12 287 120 34459 0.88 .137
1605 PA May 94 180 18 .98 .08 380 85 32431 0.89 .132
1618 PA Oct 95 111 70 .95 .06 468 101 47297 1.36 .177
1675 PA JAN 95 121 5 .98 .17 354 117 41322 1.07 .022
1676 PA SEP 94 120 5 .89 1.00 567 125 70833
Averages: 122 24 .94 .29 362 125 44173 0.99 .112
Total Facilities: 18
</TABLE>
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The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
Facilities Within State
<TABLE>
<CAPTION>
COMP OCCU- PRIV. SF/ SP/ SP/ CAPT
# STATE DATE BEDS AGE PANCY PAY BED SF BED GIM RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1240 MA Feb 91 123 .58 .18 502 146 73171 1.64 .228
1262 MA Mar 91 70 25 .98 .37 240 173 41429 1.17 .137
1402 MA Nov 92 120 17 .99 .05 296 85 25000 0.64 .296
1570 MA Feb 93 110 31 .96 316 251 79455 0.91 .364
1571 MA Jun 93 218 .97 1.00 66514 0.90 .383
1572 MA Jan 94 129 25 .23 268 95 25349 0.77 .090
1584 MA Feb 95 123 32 .98 .10 412 108 44715 0.90 .097
1585 MA Dec 93 120 31 .97 .04 292 33 9573
1770 MA Jan 97 91 28 .98 .20 242 89 21429 0.55 .075
1781 MA MAR 96 120 10 .98 .15 363 104 37917 1.08 .140
1782 MA JUN 96 58 30 .97 .15 281 118 33276 0.81 .108
1783 MA OCT 95 100 20 .97 .18 237 139 33007 0.99 .148
Averages: 115 24 .93 .24 313 121 40902 0.94 .187
Total Facilities: 12
</TABLE>
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HealthCare Property Appraisers of America, Inc.
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<PAGE>
IMPROVED SALE #5 (continued)
Income Data
<TABLE>
<CAPTION>
(Projected)
-----------
<S> <C>
Effective Gross Income: $3,880,653
Expenses: $3,523,683
-----------
Net Income: $ 356,970
Effective Gross Income Multiplier: 50%
Operating Expense Ratio: 91%
Overall Cap Rate: 18.3%
</TABLE>
<PAGE>
IMPROVED SALE #5
[PICTURE]
GOVERNOR WINTHROP NURSING HOME
<TABLE>
<S> <C>
Location: 142 Pleasant Street
Winthrop, Mssachusetts
Sales Data
Grantor: Robert D. Wilkins dba Governor Winthrop Nursing Home
Grantee: H/P Properties, Inc.
Date of Sale: November 1997 (Contract)
Sale Price/Cash Equivalent Price: $1,950,000
Price per sf Gross Building Area: $88,63/sf
Price Per Bed: $22,941/bed
Sales Terms: Cash to Seller
Rights Conveyed Going Concern
</TABLE>
Site & Building Desciption
- ----------------------------
<TABLE>
<S> <C>
Land Area: .772 acre
Present Use: SNF
Gross Building Area: 22,000 sf
Average SF/Bed: 259 sf
Improvement Description: 2-story brick on frame
Year Built: 1969
Condition: Average
Resident Beds: 85
Confirmed with: Grantee
</TABLE>
<PAGE>
IMPROVED SALE #4 (continued)
Income Data (First Forecasted Year)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Projected) Per Bed
----------- -------
<S> <C> <C>
Effective Gross Income $3,329,840 $59,461
Expenses: 2,841,253 $50,737
--------- -------
Net Operating Income: $488,587 $8,725
Effective Gross Inc. .99
Multiplier:
Operating Expense Ratio: 85.3%
Overall Cap Rate: 14.67%
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
IMPROVED SALE #4
[PICTURE]
Governor's House
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Location: 66 Broad Street
Westfield, Massachusetts
Sales Data
- ------------------------------------------------------------------------------
Grantor: Governor's House Nursing Home
Grantee: Age Institute of Massachusetts, Inc.
Date of Sale: October 2, 1995
Sale Price/Cash Equivalent Price: $3,300,650
Price per sf Gross Building Area: $139.33/sf
Price Per Bed: $14,400
Sales Terms: Cash to seller
Rights Conveyed: Going concern
</TABLE>
Site & Building Desciption
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Land Size: .88 acres
Present Use: Nursing Home
Gross Building Area: 23,690
Average SF/bed: 237sf
Improvement Description: Two story jumbo brick and dryvit on block
Number of Licensed Beds: 100 beds
Year Built: 1977
Condition: Average
Confirmed with: Sarah Harding
</TABLE>
<PAGE>
IMPROVED SALE #3 (continued)
Site & Building Description, continued
Resident Beds: 58 beds
Confirmed with: M. Burger
Income Data (First Forecasted Year)
<TABLE>
<CAPTION>
(Projected) Per Bed
----------- -------
<S> <C> <C>
Effective Gross Income $2,392,670 $42,726
Expenses: 2,184,307 $39,005
--------- -------
Net Operating Income: $208,363 $3,721
Effective Gross Inc. .81
Multiplier:
Operating Expense Ratio: 91.3%
Overall Cap Rate: 10.8%
</TABLE>
<PAGE>
[PICTURE]
Sharon Manor
<TABLE>
<S> <C>
Location: 259 Norwood Street
Sharon, MA
Sales Data
Grantor: Sharon Manor RT, John Ribeiro Trustees
Grantee: Nationwide Health Properties, Inc.
Date of Sale: June 14, 1996
Sale Price/Cash Equivalent Price $1,930,000
Price per sf of Gross Building Area: $118.25/sf
Price Per Bed: $33,276/bed
Deed Book Book 11395, page 646
Sales Terms: Cash to Seller
Rights Conveyed Going Concern
</TABLE>
Site & Building Desciption
- ----------------------------
<TABLE>
<S> <C>
Land Area: 3.85 acres
Utilities: All available
Present Use: Skilled and Intermediate Care Nursing Home
Gross Building Area: 16,322 sf
Average SF/Bed: 281 sf
Improvement Description: One story brick on block w/daylight basement
Year Built: 1967
Condition: Average
</TABLE>
<PAGE>
IMPROVED SALE #2 (continued)
Comments: The facility has Skilled care, ICF, and Alzheimer's patients.
Payer mix for the facility is 85% Medicaid, and 15% Private
pay.
Income Data (First Forecasted Year)
<TABLE>
<CAPTION>
(Projected) Per Bed
----------- -------
<S> <C> <C>
Effective Gross Income $4,212,487 $75,223
Expenses: 3,577,187 $63,878
--------- -------
Net Operating Income: $635,300 $11,345
Effective Gross Inc. 1.08
Multiplier:
Operating Expense Ratio: 84.9%
Overall Cap Rate: 13.9%
</TABLE>
<PAGE>
IMPROVED SALE #2
[PICTURE]
Littleton House
<TABLE>
<S> <C>
Location: 191 Foster Street
Littleton, Massachusetts
Sales Data
Grantor: Littleton Medical Investors L.P.
Grantee: Life Care Centers of America
Date of Sale: March 29, 1996
Sale Price/Cash Equivalent Price: $4,550,000
Price per sf Gross Building Area: $104.42/sf
Area:
Price Per Bed: $37,917/bed
Sales Terms: Cash to seller
Rights Conveyed: Going concern
</TABLE>
Site & Building Desciption
<TABLE>
<S> <C>
Land Area: 42.70 acres
Present Use: Nursing home
Gross Building Area: 43,576sf
Average SF/Bed: 363sf
Improvement Description: One story wood frame with brick veneer
Year Built: 1977
Condition: Average
Resident Beds: 120 beds
Confirmed with: Phil Harrison, LCCA
</TABLE>
<PAGE>
IMPROVED SALE #1 (continued)
Comments: Land area is 1.521 acres which includes a two and one-half
story, wood frame duplex of 3300 s.f., built circa 1920.
Building s.f. listed does not include the duplex. Occupancy
at time of sale was 98% and 10% Self-pay. Currently known as
Lighthouse Nursing Care Center.
Income Data
<TABLE>
<CAPTION>
(Projected)
-----------
<S> <C>
Effective Gross Income $6,110,334
Expenses: $5,574,470
Net Income: $ 535,864
Effective Gross Income Multiplier: 90%
Operating Expense Ratio: 91%
Overall Cap Rate: 9.7%
</TABLE>
<PAGE>
Atlanticare Nursing Home
<TABLE>
<S> <C>
Location: 204 Proctor Avenue
Revere, Massachusetts
Sales Data
Grantor: Revere Geriatric Center, Inc.
Grantee: G.F./Revere, Inc.
Date of Sale: February 1995
Sale Price/Cash Equivalent Price: $5,500,000
Price per sf of Gross Building Area: $108/sf
Price Per Bed: $44,715/bed
Sales Terms: Cash to Seller
Rights Conveyed: Going Concern
</TABLE>
Site & Building Desciption
<TABLE>
<S> <C>
Land Area: 1.521 acres
Present Use: SNF
Gross Building Area: 50,700 sf
Average SF / Bed: 412 sf
Improvement Description: 3-story plus basement and subbasement, Class A and C,
masonry and steel framed nursing home.
Year Built: 1963
Condition: Fair
Resident Beds: 123
</TABLE>
<PAGE>
[MAP]
<PAGE>
SALES COMPARISON SUMMARY GRID
<TABLE>
<CAPTION>
Comp# Subject #1584 #1781 #1782 #1783 #1770
Name Cambridge Atlantic Life Care Sharon Governor's Governor
Nursing Care Centers Manor House Winthrop
City Cambridge Revere Littleton Sharon Westfield Boston
State MA MA MA MA MA MA
- ---------- ----------- --------- --------- ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Property Data
Year Built 1967 1963 1977 1967 1977 1969
# Beds 119 123 120 58 100 91
GDA (sf) 24,700 50700 43576 16322 23690 22000
SF Per Bed/Apt 208 412 363 281 237 242
Non-medicaid % 24% 10% 15% 15% 18% 20%
Occupancy % 97% 98% 98% 97% 97% 98%
NOI $167,750 $ 535,864 $635,300 $208,363 $488,587 $145,212
Expense % 96.9% 91% 85% 91% 85% 96%
Sale Data
Sale Date --- 2/95 3/96 6/96 10/95 1/97
Sale Price --- 5500000 4550000 1930000 3300650 1950000
Price Per Bed/Apt --- $44,715 $37,917 $33,276 $33,007 $21,429
Price / SF --- $108.48 $104.42 $118.25 $139.33 $88.64
EGIM --- 0.90 1.08 0.81 0.85 0.55
OAR --- 9.74% 13.96% 10.80% 14.80% 7.45%
Adjustments
NOI Per Bed/Apt $1,410 $4,357 $5,294 $3,592 $4,886 $1,596
Adjustment --- 0.32 0.27 0.39 0.29 0.88
Adjusted $ Per Bed/Apt --- $14,469 $10,096 $13,057 $9,523 $18,930
Average - Mean $13,215
NOI / SF $6.79 $10.57 $14.58 $12.77 $20.62 $6.60
Adjustment --- 0.64 0.47 0.53 0.33 1.03
Adjusted $ / SF --- $69.71 $48.64 $62.91 $45.88 $91.20
Average - Mean $64
EGIM --- 0.90 1.08 0.81 0.85 0.55
Adjustment --- -0.28 -0.57 -0.28 -0.57 -0.04
Adjusted EGIM --- 0.62 0.51 0.53 0.28 0.51
Average - Mean 0.49
</TABLE>
<PAGE>
ADJUSTED SALES COMPARISONS
GROSS INCOME MULTIPLIER
[GRAPH]
<PAGE>
ADJUSTED SALES COMPARISONS
SALE PRICE PER SQUARE FOOT
[GRAPH]
<PAGE>
ADJUSTED SALES COMPARISONS
SALE PRICE PER BED
[GRAPH]
<PAGE>
The Cambridge Nursing Home, Cambridge, Massachusetts
- --------------------------------------------------------------------------------
Adjustments to Comparable Sales
Since investment grade properties are bought for their income producing
capabilities, investors will pay more for a property with a higher income. To
adjust for this economic difference in the sales comparables, we used a net
income differential multiplier, which recognizes any percentage change
between the comparables' and the subject's net income on a per bed or per
square foot basis. For example, the subject's net income on a per bed basis
was 32% of Comparable Number # 1584's net operating income. Accordingly, an
economic multiplier of 0.32 was applied to that comparable's sales indicator.
This analysis was used for all of the comparables, on both a per square foot
basis and per revenue generating unit (bed or apartment) basis. Since the
economics of a property are a direct reflection of the physical features,
amenities, and location, no further adjustments for these items was
considered necessary.
Sales Price Per Bed
HealthCare Property Appraisers maintains a nationwide data bank on long term
health care facilities, which currently includes sales of over 1,800
facilities. Facilities which are of good quality but predominantly medicaid
funded are selling on a nationwide basis for approximately $25,000 to $50,000
per bed. Higher quality homes, which offer better services, amenities, and
therapy areas, or homes with unusual profit potential, generally sell for
$45,000 to $75,000 per bed.
The comparables selected for close analysis have an unadjusted sales price per
bed ranging from $21,429 to $44,715, with an average of $34,069. Factors which
affect the sales price per bed include unit mix, number of residents per room,
project amenities, and average area per bed. A property which has a larger
average area per bed will typically sell at a higher unit price.
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After adjusting the comparables to the subject using the net income differential
multiplier, the sales price per bed formed a range of $9,523 to $18,930, with an
average of $13,215. Giving further consideration to subject's average bed area
and other physical characteristics, the value range on a per bed basis is
estimated at $13,000 to $14,000. Applying this range to the subject's 119 units
indicates a value range of $1,550,000 to $1,670,000.
<TABLE>
<CAPTION>
# BEDS X SALE PRICE PER BED = INDICATED VALUE
------ ------------------ ---------------
<S> <C> <C> <C> <C>
119 units X $13,000 to $14,000 = $1,550,000 to $1,670,000
</TABLE>
Sales Price Per Square Foot
The unadjusted comparables formed a sales price range from $89 to $139 per
square foot, with an average of $112. An inverse relationship usually exists
between the sales price per square foot and the average area per bed, assuming
all amenities and services are similar (i.e., a smaller unit usually generates
more income on a per square foot basis than a larger unit). This relationship
is reflective of staffing costs because per resident day costs are typically
not directly influenced by unit size. It is also reflective of the fixed costs
of furniture, fixtures, and equipment, which are spread over the total square
footage. After economic adjustments, the comparables formed a sales price per
square foot range of $46 to $91, with an average of $64.
Considering the subject's functional utility, area per resident, quality and
condition, we believe a value range of $63.00 to $65.00 per square foot to be
indicated. Applying the unit values to the subject's 24,700 Sq Ft of gross
building area indicates a value range of $1,556,100 to $1,605,500.
<TABLE>
<CAPTION>
BUILDING SIZE X SALE PRICE PER SF = INDICATED VALUE
------------- ----------------- ---------------
<S> <C> <C> <C> <C>
24,700 Sq Ft X $63.00 to $65.00 = $1,556,100 to $1,605,500
</TABLE>
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Effective Gross Income Multiplier
The most common method of developing an Income Multiplier is derivation from
sales data. In the case of a Special Use property with highly variable income
and expense characteristics, however, this can be misleading. It is also
possible to develop an Income Multiplier by mathematical calculation using
expense and capitalization rate data: the Profit Ratio (Net Income as a
percentage of Effective Gross Income) divided by the Capitalization Rate equals
the Income Multiplier.
1-ExpenseRatio
-------------- = IncomeMultiplier
Capt.Rate
In the Income Approach, we estimated that the subject property could reasonably
be expected to experience an expense ratio of 96.9% in a stabilized year. In our
Capitalization Analysis, we estimated the appropriate capitalization rate in
today's market to be 11.60%. These figures produce an Income Multiplier as
follows:
100% - 96.9% = 0.27X
--------------
11.60%
The effective gross income multiplier (EGIM) is an extracted indication of value
based upon the property's effective gross income. Key items affecting the EGIM
include the expense ratio percentage, census mix, occupancy and rate schedule.
Typically, the expense ratio percentage and EGIM have an inverse relationship
(i.e., a higher expense ratio percentage generates a lower EGIM).
The appraiser carefully evaluated the comparables and eliminated those on the
extreme end of the range from consideration. The unadjusted comparables form a
wide range of EGIMs, between 0.55 to 1.08, with an average of 0.84. The
subject's expense ratio percentage is 96.9%, which falls near the very high end
of the range of the comparables. Accordingly, the indicated
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EGIM for the subject property is near the very low end of the range. To help
quantify the EGIM mathematically, we calculated the percentage change between
the highest and lowest EGIM divided by the high and low ends of the expense
percentage. Using this methodology, a percentage change of 0.0482 is
calculated for each change of 1 % between the comparables and the subject's
expense percentage, as shown below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Change in Y 1.08-0.55 .53 4.82 0.0482
----------- = ---------- = --- = ---- + 100 = ------
Change in X .96-.85 .11 100% 1%
</TABLE>
After adjustments, the EGIMs formed a tighter range of 0.28 to 0.62, with an
average of 0.49. After considering the EGIMs indicated by: (a) the
comparable data and (b) the subject's own expense ratio and capitalization
rate analysis, we believe the indicated EGIM range for the subject property
is 0.27 to 0.30. Applying these multipliers to the subject's effective gross
income of $5,391,066 yields a value range of $1,460,000 to $1,620,000.
<TABLE>
<CAPTION>
EFFECTIVE GROSS X INCOME = INDICATED
INCOME MULTIPLIER VALUE
--------------- ---- ----------- --- ------------------------
<S> <C> <C> <C> <C>
$5,391,066 X 0.27 to 0.30 = $1,460,000 to $1,620,000
</TABLE>
Reconciliation of Sales Comparison Indicators
The value ranges developed by the indicators are summarized below:
<TABLE>
<CAPTION>
INDICATORS OF VALUE VALUE RANGE
<S> <C>
SALES PRICE PER BED $1,550,000 to $1,670,000
SALES PRICE PER SQUARE FOOT $1,556,100 to $1,605,500
EFFECTIVE GROSS INCOME MULTIPLIER $1,460,000 to $1,620,000
</TABLE>
The effective gross income multiplier is usually a more reliable indicator of
the subject's market value because it automatically adjusts for any
differences between the comparables caused by rate fluctuations or occupancy
and self pay ratio differences. The sales price per bed tends to
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be a good indicator if the comparables have similar rates, per patient day
occupancy, and self pay ratios. The sales price per square foot can be a good
indicator, if all the comparables happen to be similar to size. The flaws or
deficiencies of the physical indicators have been tempered with economic
adjustment. Accordingly, we believe all indicators provided a meaningful, but
limited, indication of value. Giving consideration to current market conditions
and the subject's physical and economic characteristics, the sales comparison
approach is best represented by a narrower range of $1,500,000 to $1,650,000.
The usefulness of the Sales Comparison Approach in providing a value range is
limited by differences in location, services and many other variables. A precise
comparison between the comparable sales and the subject property is extremely
difficult. We made economic adjustments to lessen these differences somewhat.
Moreover, there is no accurate way to determine whether the sales prices
actually paid represent fair market values, due to the unknown variables of
buyers' and sellers' exact motivations or any special conditions that may have
influenced the sales. We believe the sales comparison approach has limited
application for indicating an exact value estimate. Accordingly, the reconciled
range is intended primarily to test the reasonableness of the Cost and Income
Capitalization Approaches.
<TABLE>
<CAPTION>
<S> <C>
INDICATED MARKET VALUE $1,500,000 to $1,650,000
</TABLE>
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RECONCILIATION AND FINAL VALUE ESTIMATE
<TABLE>
<CAPTION>
<S> <C>
INDICATED VALUE BY COST APPROACH $1,590,000
INDICATED VALUE BY INCOME APPROACH $1,450,000
INDICATED VALUE BY SALES COMPARISON $1,50000
APPROACH to $1,650,000
</TABLE>
To estimate the final Market Value for The Cambridge Nursing Home, it is
necessary to reconsider all three approaches, correlate the data, and decide
how much emphasis to give each approach.
The Cost Approach was based upon a component cost breakdown prepared by a
computer utilizing the Marshall and Swift Valuation Service Cost Data Bank.
This nationally recognized building costs service prepares a very accurate
estimate of replacement costs for subject's improvements. From that was
deducted depreciation based upon observation and age of the improvements,
sales data, and consideration of Functional and Economic Obsolescence.
Subject's 21,600 sf of land were valued at $25.46 sf or $550,000. This
approach indicated a market value for the real estate and the Furniture,
Fixtures, and Equipment in The Cambridge Nursing Home of $1,590,000, which
includes an estimated $124,950 for FF&E.
The Cost Approach is considered to be the weakest of the three approaches for
this type property. It did not address the issue of business value that might
be contained within the subject.
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Under the Income Approach to value, the appraiser analyzed the subject
property from the standpoint of a potential investor who would be most
interested in its income stream. After reviewing the owner's operating
statements for the subject property as well as other comparable properties,
the appraiser believes we have been able to estimate a reasonable expectation
of subject's income stream. Our stabilized income stream was based upon an
anticipated Gross Income of $5,557,800, Occupancy of 97.0%, a non-government
funded ratio of 24%, and Expenses of $5,223,318 (or 96.9% of Effective Gross
Income). The projected Net Income to Real Estate of $167,748 was capitalized
at 11.6%. Based upon a consideration of current financing, available
alternatives, and equity demands, the Market Value of The Cambridge Nursing
Home was indicated by the Income Approach to be $1,450,000 which includes
$124,950 for Furniture, Fixtures, and Equipment.
Under the Sales Comparison Approach, the appraiser reviewed approximately a
dozen sales of nursing homes. Analysis of this data after adjustments for
differences between properties, indicated a Market Value for The Cambridge
Nursing Home of $1,500,000 to $1,650,000 based on a Gross Income Multiplier
of 0.30 to 0.50 and $13,800 to $14,500 per unit. The $1,500,000 to $1,650,000
value includes Furniture, Fixtures, and Equipment estimated at $124,950.
We believe considerable emphasis can be placed on the Sales Comparison
Approach. Based on the enclosed data and analyses, it is my opinion that the
Subject Property described herein, has the following Final Market Value as of
April 1, 1997 at Stabilized Census, Occupancy, and Rates:
<TABLE>
<CAPTION>
<S> <C>
FINAL MARKET VALUE OF SUBJECT PROPERTY: $1,650,000
</TABLE>
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Special Condition
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have
a dramatic impact on the property's value.
MARKETING PERIOD
The Cambridge Nursing Home should be readily saleable. There is a fairly
strong market and demand for nursing homes. The market is not as strong today
as it was a few years ago. However, there are a number of buyers in the
marketplace looking for this type property. In fact, the market for this type
property is strong enough that they generally are not listed with real estate
brokers, but are usually sold "off the market." The appraiser is familiar
with the sale of approximately a dozen nursing homes that have taken place
over the past year. The average sales time for those properties was
approximately six months. If the subject property were fairly priced and
adequately marketed, we believe it could be sold at our appraised value
within approximately 12 months.
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ALLOCATION OF VALUE BETWEEN REAL PROPERTY, PERSONAL PROPERTY AND
BUSINESS ENTERPRISE
The total value of a real estate property frequently consists of only land
and improvements. However, in the case of a "Going Concern" property in which
a business is operated, such as a nursing home, the total value may also
contain personal property and/or intangible assets (i.e., "Business Value")
consisting of business enterprise, goodwill, and going-concern value). Income
generated from the property is derived from tangible real and personal
property and intangible assets.
Both the real estate and the business enterprise are required to generate
income. To estimate the value of the real estate, the appraiser must divide
the net operating income between the two components of real estate and
business enterprise. In the case of a nursing home, the intangible assets
(i.e., in-place management, staff, operations, stabilized occupancy, good
will, percentage of nonsubsidized residents and general reputation of the
property) are difficult to relocate. Consequently, the value attributable to
them is considered to be tied to the real estate.
The operation of a nursing home is a highly specialized business enterprise,
requiring extensive knowledge of national and state health care systems, over
and above a knowledge of health care and the business acumen required to
operate any business. This is evidenced by the fact that the State Department
of Public Health requires very specific licensing of the professionals and
real estate that provide these services.
Management of this specialized business can be contracted out to a
professional management firm for a specified fee arrangement (typically 3% to
6% of effective gross income). The management firm will provide the business
acumen to operate the business enterprise. However, the management company,
while operating this business on behalf of an owner, will not assume the
ownership risk of that business. Any liability risk, entrepreneurship risk,
and/or losses to be covered are the responsibility of the owner of the
business enterprise. Accordingly,
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the real estate interest and the operating business enterprise interest are
two separate components that are frequently bought, sold, and leased
independently from each other.
To study the value of the real estate separate from the value of the business
enterprise, the appraiser first examined leases of various facilities. Our
study of nursing home leases did not develop a consistent pattern of rental
rates per bed or any other common denominator that could be applied to the
subject appraisal assignment. The lease rate paid on a nursing home is
affected by a large number of variables (e.g., the funding program for
government subsidized residents, accounting methods used, occupancy and
census ratio) in addition to the usual array of variables found in any real
estate. These factors vary to such an extent that analysis of other leases in
comparison to the subject property did not develop any meaningful or helpful
data.
Analysis of leases on a specific subject property may also be less than
helpful in estimating the value of the fee simple estate. An old lease may
have a contract rental different from the market rental rate, developing some
leasehold estate value. The leased fee value and the leasehold value can be
ascertained by studying the fair market rental or economic rental of the
subject property. However, it is not necessary to consider an old lease to
develop a value for the fee simple estate.
The appraiser considered several methods for studying the Business Value by
investigating the relationship between: (a) the cost of tangible assets
versus the total value of all assets, (b) capitalization rates of typical
investment properties versus Going Concern properties and (c) the debt
coverage ratio required for Going Concern type real property.
Cost Analysis
Under the Cost Approach to Value, we estimated the replacement cost of all
tangible components, such as land and direct and indirect construction costs.
The difference between the reproduction costs of the tangible assets and the
Final Market Value of the total subject property was considered to be an
indication of Business Value.
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<TABLE>
<S> <C>
Final Market Value $1,650,000
Less Cost Approach $1,590,000
----------
Indicated Business Value $ 60,000
</TABLE>
Capitalization Rate Analysis
Properties which include intangibles like Going Concern Value, normally have
a higher Overall Capitalization Rate than properties without any Business
Value. The higher Overall Capitalization Rate recognizes, in part, the
greater risk of owning a business versus owning real estate or other tangible
assets. Comparison of the subject's Capitalization Rate to the Capitalization
Rate for properties not having any Business Value (but having similar age,
construction, location and value) indicates the portion of the total value
attributable to the business enterprise. The higher Capitalization Rate of
nursing homes includes the return necessary on the real estate, the business
portion, and furniture, fixtures and equipment. In our subject study we
developed an Overall Capitalization Rate of 11.6% for the subject property. A
fair market Capitalization Rate for a comparable property without any
Business Value is considered to be 9.00%. Dividing the real estate
Capitalization Rate of 9.00% by subject's Capitalization Rate of 11.99%
indicates the portion of subject's value representing tangible real property
and business value to be:
<TABLE>
<CAPTION>
REAL PROPERTY DIVIDED BY SUBJECT = % TANGIBLE
CAPT.RATE CAPT.RATE REAL ESTATE
--------- --------- -----------
<S> <C> <C> <C>
9.00% 11.99% = 75.0% (R)
FINAL X % TANGIBLE = VALUE OF
MARKET VALUE REAL ESTATE REAL PROPERTY
------------ ----------- -------------
<S> <C> <C> <C> <C>
$1,650,000 X 75.0% (R) = $1,237,500
</TABLE>
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<TABLE>
<S> <C>
Final Market Value (Total Property) $1,650,000
Less Value Of Real Property $1,237,500
----------
Business Value and Furniture, Fixtures And Equipment $ 412,500
Less Furniture, Fixtures And Equipment $ 124,950
-----------
Indicated Business Value $ 287,550
</TABLE>
Debt Coverage Ratio Analysis
An indication of the subject property's Business Value can be developed by
separating net income into real estate and business components. (Personal
property is handled in our income model with a replacement reserve.)
Investors in nursing home real estate and nursing home business enterprises
have specific income rate of return and "debt coverage" requirements. The
relationship between the "debt coverage" requirements of a real estate
investor and the requirements of a business enterprise investor can be
ascertained mathematically.
Real Estate Investor
There are several investors for real estate entities that do not contain the
business enterprise component. Many investors want to be passive real estate
investors, without the management problems or risk associated with operating
a nursing home. The typical investor is a health-care oriented, real estate
investment trust (REIT) who purchases 100% of a nursing home's real estate.
The appraiser surveyed acquisition officers of several REITs to ascertain
their rate of return and "debt coverage" (i.e., rent coverage) requirements:
Omega Healthcare is currently seeking 11.8% on a variable
return and underwrites debt coverage with a minimum of 1.25X.
Healthcare REIT's current yield requirement is based on 500
points over the 10 year T bill rate. Today, this is a total
return of 11.84%. Their minimum debt coverage ratio is 1.25X.
Health Equity Properties' current return requirement is 12% to
12.5%. Their minimum debt coverage ratio is 1.25X to 1.4X,
depending on the credit.
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From the above data, it appears that the real estate in a nursing home like
the subject property can be sold and leased back, giving a return to the
passive real estate investor of approximately 11.8% to 12.5%, or an
average (mode) of 12 %. The most common "debt coverage" factor is 1.20X to
1.50X, or an average of 1.35X.
Business Enterprise Investors
Many nursing home operators and individual investors will purchase the
business enterprise operating within a nursing home property. Consequently,
the real estate in a nursing home is frequently sold to a real estate
investor, such as a REIT. The new real estate owner will then lease it to a
management company who will own and operate the business enterprise.
Management companies and individual investors try to group their property
operations within a specific state for obvious reasons; however, they will
usually consider an individual acquisition within any state that has a viable
government assistance program. We surveyed companies and individuals who
invest in nursing home businesses to determine their requirements for
investing in a nursing home business enterprise. The results of this survey
include:
- Health Prime, Inc., an active purchaser of nursing home going
concerns and business enterprises, reported they would acquire a
health care business (without the underlying real estate) if the
investment would provide a return of 15% to 17%. This assumes
they had no other facilities within the area, were not attempting
to fill out their management team, and had no other ulterior
motives.
- Life Care Affiliates reported that their investors require a
15% return on cash invested, assuming the real estate is owned by
another entity and the investors are strictly buying the business
operation with no interest in the underlying real or personal
property assets.
- Regency Health Care reported that they would be willing to
consider purchasing a leasehold estate or the business interest
in a going concern property, assuming a cash-on-cash return of
15% to 18%
There are many potential purchasers actively seeking the acquisition of
nursing homes either as "going concerns" (i.e., containing both real estate
and the business enterprise) or as the
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operating business enterprise only. As evident from the above, the business
enterprise operating within the subject real estate can probably be sold to
an investor who would require a 15% cash-on-cash return after satisfying all
requirements of real estate, personal property and management.
Distribution of Income Between Real Estate and Business Enterprise
The subject property's Economic Rental is the amount of net operating income
available to satisfy a potential purchaser of the real estate and his
requirements for rate of return and "debt coverage." Conversely, the income
available to an investor in the business enterprise is the income available
after satisfying the priority claim on income by ownership of the real and
personal property. The division of income (and value) between the various
components of the total going concern entity (i.e., real property, personal
property and business enterprise) can be developed by studying their
mathematical relationship.
Debt coverage ratios for this type property range from 1.1OX to 3.OOX,
depending on the quality of the property and dependability of its income
stream. We believe the subject ranks average in credit risk and estimate a
debt coverage ratio of 1.35X to be appropriate.
When a potential purchaser of real estate requires a "debt coverage" factor
of 1.35, he is requiring that a minimum of 26% of the net operating income be
available to compensate the business enterprise owner. Without that minimum
return, no one will provide the requirements of business enterprise ownership
for this facility. This is demonstrated mathematically as follows:
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<TABLE>
<CAPTION>
MAXIMUM INCOME
DEBT AVAILABLE TO
FACILITY'S NET COVERAGE REAL
OPERATING INCOME DIVIDED BY RATIO = ESTATE OWNER
- ---------------- ------------- ----- - ------------
<S> <C> <C> <C> <C>
100% DIVIDED BY 1.35X = 74%
</TABLE>
<TABLE>
<CAPTION>
INCOME
ALLOWABLE INCOME REQUIRED
FACILITY'S TO REAL FOR BUSINESS
OPERATING INCOME DIVIDED BY ESTATE OWNER = OWNER
- ---------------- ------------ ------------ -------
<S> <C> <C> <C> <C>
100% DIVIDED BY 74% = 26%
</TABLE>
This analysis of the capital requirements of purchasers of nursing home real
estate demonstrates that a minimum of 26% of the net operating income must be
allocated to the business enterprise component. Conversely, a maximum of 74%
of the property's net operating income is available for economic rental to
the owner of the underlying real estate. Accordingly, the appraiser allocated
26% of net operating income to provide the necessary compensation for the
required business enterprise ownership.
Distribution of Value Between Real, Personal and Business Property
The personal property component has already been estimated and its respective
capital requirement previously deducted. The remaining net income can be
distributed between real property and business enterprise as shown above. By
studying the capital return requirements of real property versus a business
enterprise, a mathematical relationship between the value of those two
components can be established.
Ownership of the real estate component requires a 10% return, according to
the typical REIT investors in real estate. Ownership of the business
enterprise component requires a 15% return on investment, according to
typical purchasers of business property. A distribution of income and related
values for the two property components is shown below. Assuming a $100,000
net
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operating income, and the required rate of return and debt coverage factors
previously discussed, the "Going Concern" value of a nursing home would be
distributed between real estate and business enterprise as follows:
<TABLE>
<CAPTION>
Distribution of Income
Between Real Estate
Ownership & Business
Enterprise Ownership Distribution of Percentage Distribution
(Assumes 1.35 X Debt Required Rate Value Between of Value Between
Coverage & $100K NOI) Divided By of Return = Components Real Estate & Business
----------------------------- ---------- ------------- -- ---------------- -------------------------
<S> <C> <C> <C> <C> <C>
Real Estate =$ 74,000
(74%) / 10% = $740,000 81%
Business Enterprise =$26,000
(26%) / 15% = $173,333 19%
Total Property = $100,000
(100%) $913,333 100%
</TABLE>
Indicated Business Value: $1,650,OOOX 19% = $313,500
Summary
The two methods of estimating Business Value have indicated values as follows:
<TABLE>
<S> <C>
Cost Analysis $60,000
Capitalization Rate Analysis $287,550
Debt Coverage Ratio Analysis $313,500
</TABLE>
After considering all methods, it was our opinion that the subject property's
final Market Value of $1,650,000 included a Business Value of:
<TABLE>
<S> <C>
BUSINESS VALUE $250,000
</TABLE>
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SUMMARY OF VALUES
It was our opinion that the Subject Property described herein had the
following Market Value, as of April 1, 1997, at current occupancy and in its
present physical condition, subject to the Underlying Assumptions and
Limiting Conditions contained in this report:
<TABLE>
<S> <C>
Land $ 550,000
Building Improvements $ 725,050
-----------
Total Real Estate $1,275,050
Personal Property $ 124,950
Business Value $ 250,000
-----------
Total Property $1,650,000
</TABLE>
The above Value Estimate was predicated upon the assumption that the new air
conditioners have already been installed at a cost of $25,000. To estimate the
current "as is" value of the subject property at initial occupancy and in its
present physical condition, a deduction was made for the cost of air
conditioners. The "as is" value of the subject property was:
<TABLE>
<S> <C>
Total Real Estate $1,275,000
Personal Property $ 100,000
Business Value $ 250,000
-----------
Total Property $1,625,000
</TABLE>
Special Condition
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have
a dramatic impact on the property's value.
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UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS
1. The Appraiser assumes no responsibility for legal matters nor renders
an opinion of title. Good title to The Cambridge Nursing Home is
assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to appear
in court, commission, or in any other capacity without prior
arrangements and additional compensation.
This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report without the preparer's written consent is an
unintended user, and does so at his own risk.
3. The separate values for land, equipment, business value and/or
buildings must not be used in reference to any other appraisal and are
invalid if so used. The distribution of total value applies only to
existing utilization.
4. The factual information in this report--furnished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
5. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each
appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared. However, selected portions of
this appraisal report shall not be given to third parties without prior
written consent of the signatories of this appraisal report. Further,
neither all nor any part of this appraisal report shall be disseminated
to the general public by use of advertising, public relations, news,
sales, or other media for public communication without the prior
written consent of the signatories of this appraisal report.
6. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not responsible
for any adverse condition that may be found in these matters.
7. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters (including
but not limited to termites, dry rot, wet rot, and other
wood-destroying organisms) are not present or have been detected and
properly corrected.
8. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations and mechanical, plumbing,
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electrical, heating, ventilation, air conditioning, and roof systems
are assumed to be adequate, in good working order and capable of
performing the function for which they were designed. The appraiser has
no expertise in this area and cannot certify the condition or
functional adequacy of these items. A qualified inspector should be
utilized for that purpose. The appraiser assumes no responsibility for
any hidden or unapparent conditions of the property, soil, subsoil, or
structures that would affect its value.
9. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
10. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
11. The appraiser has not researched the subject property for liens nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value. The property is therefore appraised as though it were free and
clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
12. The value estimate and estimated income and expenses assume responsible
ownership and typical, competent management.
13. Gross area of land and improvements is estimated by methods and from
sources considered reliable and the data is believed to be accurate.
However, no responsibility is assumed for its accuracy and it is
recommended that a licensed surveyor be employed for that purpose. The
appraiser's Final Market Value estimate is primarily predicated upon
the economic viability of the project itself and its projected income
stream. Any minor difference in the subject's actual land or
improvement size would have little or no effect on its true market
value. Any statement by the appraiser contained herein as to the size
of land or building improvements is for descriptive purposes and is a
statement of the appraiser's opinion as to the property's functional
utility and not a statement of fact as to its physical size.
14. The subject property is subject to licensing and certification by
several regulatory agencies. Our value estimate is predicated upon the
subject property maintaining its Certificate Of Need and/or License and
Certification to Operate as a nursing home. The loss of either one of
those items could affect the value of the subject property.
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15. In the event that any residents are funded by public or third party
payors, we have assumed that all payments will be made promptly.
16. The Market Value estimate is predicated upon an assumption of
stabilized occupancy, rates and census.
17. The appraiser's projections of income and expenses are not predictions
of the future. They are our best estimates of current market thinking
about what future income and expenses might be. We make no warranty or
representations that these projections will materialize.
18. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale. There may
have been transactions of this type, but the relevant details were not
available. While any present or past listing, option or sales data on
the subject available to the appraiser have been considered in this
analysis, the Final Market Value was estimated as though subject were
available for sale on the open market.
19. To the best of the Appraiser's knowledge, this report conforms to the
current requirements prescribed by the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation as required by the Financial Institutions Reform,
Recovery and Enforcement Act (FIRREA) and the Appraisal Institute.
20. The Americans with Disabilities Act "ADA" became effective January 26,
1992. We have 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
we have no direct evidence relating to this issue, I (we) did not
consider possible noncompliance with the requirements of ADA in
estimating the value of the property. Based on our personal inspection,
we are not aware of any irregular or apparent non-compliant handicap
items.
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21. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
Special Condition
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have a
dramatic impact on the property's value.
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APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- The statements of fact contained in this appraisal report are true
and correct.
- The reported appraisal 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 personal interest or bias with
respect to the parties involved.
- My compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event.
- My analyses, opinions and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of
the Appraisal Foundation as required by the Financial Institutions
Reform, Recovery and Enforcement Act (FIRREA) and the Code of
Professional Ethics and Standards of Professional Appraisal Practice
of the Appraisal Institute.
- As of the date of this report, J. Michael Burroughs, MAI, SRA has
completed the requirements of the continuing education program 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.
- The subject property was inspected by Franklin M. Ramsey and was not
inspected by J. Michael Burroughs.
- Eve L. Burroughs and Bonny J. Sinclair provided valuable assistance
in compiling data for this report. No one else provided significant
professional assistance to the undersigned. The appraiser gratefully
acknowledges the contribution of data from several sources.
- The appraiser has complied with the USPAP competency provision.
- The USPAP departure provision does not apply.
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- This appraisal assignment was not based on a requested minimum or
maximum valuation, a specific valuation, or the approval of a loan.
I do not authorize the out-of-context quoting from or partial reprinting of this
appraisal report. Further, neither all nor any part of this appraisal report
shall be disseminated to the general public by the use of media for public
communication without the prior written consent of the appraiser(s) signing this
appraisal report.
/s/ J. MICHAEL BURROUGHS
------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
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REFERENCES
The appraiser would like to acknowledge the following resources:
1. Laventhol & Horwath, Retirement Housing Industry 1989 (Laventhol &
Horwath, Philadelphia, PA 1990).
2. Laventhol & Horwath, Nursing Home Industry 1988 (Laventhol & Horwath,
Philadelphia, PA 1989).
3. Marshall and Swift Computerized Services, Los Angeles, CA.
4. National Planning Data Corporation, Ithaca, NY.
5. SMG Marketing Group, Inc. -C-1993.
6. Ernst & Young and American Association of Homes for the Aging Study.
Continuing Care Retirement Communities: An Industry in Action, Analysis
and Developing Trends, 1989.
7. The Dictionary of Real Estate Appraisal, American Institute of Real
Estate Appraisers, second edition.
8. The Appraisal of Real Estate, ninth edition.
9. The Guide to the Nursing Home Industry, 1993. A joint publication of
Health Care Investment Analysts, Inc. and Arthur Andersen & Co.
10. U. S. Bureau of Census.
11. Marion MerrellDow Managed Care DigestLong Term Care Edition 1993.
Marion Merrell Dow, Inc.
12. An Overview of The Assisted Living Industry, October 1993, Coopers &
Lybrand and The Assisted Living Facilities Association of America.
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QUALIFICATIONS OF APPRAISER
J. MICHAEL BURROUGHS, MAI & SRA
POST OFFICE BOX 2227
HWY 64 EAST, LAUREL TERRACE, 2ND FLOOR
CASHIERS, NORTH CAROLINA 28717
BUSINESS EXPERIENCE
J. Michael Burroughs has been engaged in the preparation of appraisals,
feasibility studies, economic analyses, and general consulting on all types of
properties for various clients. In the mid-1970s, Mr. Burroughs began
specializing in the appraisal of long-term health care facilities and housing
for the elderly. Since 1985, Mr. Burroughs has worked exclusively with long-term
health care and housing for the elderly in the areas of appraising, brokerage,
and finance.
Assignments have been in more than 44 of the 50 United States. Current
assignments include all types of healthcare and senior housing real estate:
Nursing Homes
Continuing Care Retirement Communities (Both Rental and Endowment)
Assisted Living Facilities
Acute Care Hospitals
Psychiatric Hospitals
Congregate Living Facilities
Properties appraised total approximately 3,000 in number and exceed $7 Billion
in appraised value. Mr. Burroughs has also been active as a general partner in
five successful apartment to condominium conversion projects and is actively
engaged in the buying and selling of investment real estate for his own account
and for clients. He is a nationally recognized convention speaker and published
author on healthcare appraising and financing.
EMPLOYMENT
HealthCare Property Appraisers of America, Inc. -- President
June, 1973 to Present
Atlantic Mortgage and Investment Company -- First Vice President
January, 1972 to July, 1973, Winston-Salem, NC
Wachovia Mortgage Company -- Asst. VP and Manager of the Charlotte Income
Property Loan Department
May, 1970 to January, 1972, Charlotte, NC
Prudential Insurance Company -- Real Estate and Mortgage Loan Department
Regional Appraiser December, 1964 to April, 1969, Montgomery, Alabama
May 1969 to May, 1970, Charlotte, N. C.
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GENERAL EDUCATION
Mars Hill College--Associate of Arts--1962
University of North Carolina at Chapel Hil--B.S. in Business Administration
(Major: Banking and Finance) 1964
REAL ESTATE EDUCATION
American Institute of Real Estate Appraisers--Real Estate Valuation--Course
I--University of Mississippi, 1966.
American Institute of Real Estate Appraisers--Real Estate Valuation--Course
II--Tulane University, 1967.
Various Seminars in Tax Deferred Exchanging and Computer Applications for
Real Estate Analysis.
PROFESSIONAL CONTRIBUTIONS
Mr. Burroughs has authored articles for national industry periodicals and is a
nationally recognized speaker on the valuation of healthcare and senior living
properties.
MEMBERSHIPS AND PROFESSIONAL DESIGNATIONS
The Appraisal Institute--MAI, SRA
Licensed Real Estate Broker
The Academy of Real Estate Exchangers
State Certified General Appraiser
AREA OF SPECIALTY--LONG-TERM HEALTH CARE
Healthcare and Nursing Home Facilities
--------------------------------------
Facilities Appraised: 2500
Location: Located in 44 States
Type: Skilled, ICF, Personal Care, Head Trauma, Long-Term
Pediatric Care, Substance Abuse, Mentally Retarded
(MR), Rehabilitation, Alzheimer's,
Acute, Sub-Acute, Rehab, and Psychiatric Hospitals
Retirement Housing
------------------
Facilities Appraised: 60+
Location: Located in over 14 States
Type: Lease Rental, Condo Ownership, Retirement Apartments
with or without Nursing Home, Assisted Living, and
Luxurious Hotel-type for the well elderly. Housing
for the elderly requiring some personal care and
services.
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TYPICAL NURSING HOME CLIENTS (Partial List)
Mortgage/Bond Lenders
- ---------------------
Bank One, Indianapolis, IN
Bear Stems Investment Bankers, New York, NY
Dominion Bank, Richmond, VA
First American National Bank, Nashville, TN
First National of Maryland, Baltimore, MD
Grove Capital, Atlanta, GA
Healthcare REIT, Toledo, OH
Hibernia National Bank, New Orleans, LA
J. C. Bradford, Nashville TN and Pensacola, FL
Maryland National Bank, Baltimore, MD
Society Bank, Dayton, Ohio
Southtrust Bank, N.A., Birmingham, AL
Van Kampen Merritt, Philadelphia, PA
Wachovia Bank & Trust, Raleigh, NC
Wright One Financial, Dayton, OH
Healthcare Management Companies
- -------------------------------
American Retirement Corporation, Nashville, TN
The Angell Group, Winston-Salem, NC
Asheville Psychiatric Hospital, Asheville, NC
Beverly Enterprises, Ft. Smith, AR
Brian Management Group, Hickory, NC
The Brunner Companies, Dayton, OH
Charlotte Memorial Hospital, Charlotte, NC
Convalescent Services, Atlanta, GA
Cumberland Health Systems, Nashville, TN
Denver Health Group, Denver, CO
Diversicare Corporation of America, Franklin, TN
Elmhurst Psychiatric Hospital, Portland, CT
Genesis Health, West Point, PA
Health Care Capital, Atlanta, GA
Health Care Concepts, Atlanta, GA
Health Prime, Atlanta, GA
Meridian Healthcare, Towson, MD
Multicare Management, Inc., Hackensack, NJ
National Health Corporation, Murfreesboro, TN
Nomura, New York, NY
Quest Rescue, Atlanta, GA
Quorum Health Services, Inc., Wellesley, MA
Regency Health Care, Ormond Beach, FL
Resource Housing of America, Atlanta, GA
Royal Care, Inc., Cleveland, TN
Southern Care Enterprises, Atlanta, GA
TheraTx, Baltimore, MD
Total Care Systems, Inc., West Point, PA
WellCare, Inc., Atlanta, GA
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ADDENDA
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<PAGE>
CAMBRIDGE NURSING HOME LLC
Income Statement
For the period January 1, 1997 to January 31, 1997
<TABLE>
<CAPTION>
CURRENT PERIOD RATIO YEAR TO DATE RATIO
INCOME
<S> <C> <C> <C> <C>
RENTAL INCOME
Patient Income 24,742.50 5.69 178,247.89 6.75
Patient Income - SNF 56,305.00 12.96 349,261.00 13.22
Medicare-Distinct Unit 51,180.00 11.78 313,764.00 11.88
Medicare Contractual Allowance 20,268.00 4.66 110,025.64 4.17
Medicaid 319,067.00 73.43 1,921,348.00 72.74
Medicaid-SNF 68,727.00 15.82 426,190.00 16.14
Medicaid Contractual Allowance (169,125.54) (38.92) (1,012,883.61) (38.35)
Medicaid Adjustment/Settlement .00 .00 (818.51) (.03)
---------- ------ ------------ --------
Total Rental, Income 371,163.96 85.42 2,285,134.41 86.51
OTHER INCOME
Central Supply-Part A 1,772.91 .41 28,199.37 1.07
Central Supply-Part 8 .00 .00 98.22 .00
Meals - Guests Employees 180.00 .04 925.00 .04
Pharmacy Income - Part A 12,617.70 2.90 54,549.16 2.07
Pharmacy Income - Part B 247.06 .06 1,689.22 .06
Therapy Income-Physical 100.00 .02 100.00 .00
Therapy Income-Physical Part A 10,300.00 2.37 67,200.00 2.54
Therapy Income-Physical Part B 5,750.00 1.32 100,350.00 3.80
Therapy Income-Speech Part A 500.00 .12 18,750.00 .71
Therapy Income-Speech Part B 7,550.00 1.74 52,300.00 1.98
Therapy Income-Occupational A 25,550.00 5.88 190,150.00 7.20
Therapy Income-Occupational B 67,850.00 15.62 403,450.00 15.27
Anc Part A Cont Allowance (50,740.61) (11.68) (358,848.53) (13.59)
Anc Part 3 Cont Allowance (18,519.56) 4.26) (203,897.44) 7.72)
Other Income 177.69 .04 1,242.16 .05
---------- ------ ------------ --------
Total Other Income 63,335.19 14.58 356,257.16 13.49
---------- ------ ------------ --------
Total Operating income 434,499.15 100.00 2,641,391.57 100.00
---------- ------ ------------ --------
OPERATING EXPENSES
Nursing
Direct Labor-Dir. of Nursing 4,050.00 .93 26,000.00 .98
Direct Labor-Adm. Coordinator 3,321.42 .76 18,534.85 .70
Direct Labor-RN 23,381.50 5.38 121,377.03 4.60
Direct Labor-LVN/LPN 26,002.21 5.98 155,036.58 5.87
Direct Labor-CMA 40,461.75 9.31 241,226.55 9.13
</TABLE>
Data Provided
By Owner
<PAGE>
CAMBRIDGE NURSING HOME LLC
Income Statement
For the period January 1, 1997 to January 31, 1997
<TABLE>
<CAPTION>
CURRENT PERIOD RATIO YEAR TO DATE RATIO
<S> <C> <C> <C> <C>
Direct Labor-Clerical 1,810.72 .42 11,820.93 .45
Vacation .00 .00 16,545.40 .63
Consultant-Dietary 2,520.00 .58 14,595.00 .55
Consultant-Pharmaceutical 350.00 .08 2,100.00 .08
Payroll Taxes-FICA 7,475.25 1.72 43,261.00 1.64
Payroll Taxes-FUTA 781.78 .18 3,101.99 .12
Payroll Taxes-SUTA 4,299.47 .99 12,645.03 .48
Employee Benefits-W/C 3,902.46 .90 15,968.46 .60
Supplies 1,283.60 .30 9,662.50 .37
Supplies-Nursing 6,245.39 1.44 33,941.67 1.28
Supplies-Oxygen 933.00 .21 3,151.30 .12
Pharmacy - Medicaid 268.89 .06 1,809.27 .07
Purchased Services-Medical Dir 500.00 .12 3,261.10 .12
Therapy-Occupational 37,360.00 8.60 236,260.00 8.94
Therapy-Physical 5,812.65 1.34 54,682.22 2.07
Therapy-Speech 3,220.00 .74 28,419.98 1.08
---------- -------- ------------ --------
Total Nursing 173,980.09 40.04 1,053,400.86 39.88
Distinct Unit
Direct Labor-RN 18,913.73 4.35 112,112.59 4.24
Direct Labor-LVN/LPN 18,179.82 4.18 92,930.40 3.52
Direct Labor-OMA 2,130.00 .49 12,174.73 .46
Direct Labor-CNA 24,930.46 5.74 144,035.13 5.45
Vacation .00 .00 7,291.24 .28
Payroll Taxes-FICA 4,867.87 1.12 27,340.53 1.04
Payroll Taxes-FUTA 508.27 .12 1,088.25 .04
Payroll Taxes-SUTA 2,799.85 .64 6,867.88 .26
Employee Benefits-W/C 2,572.66 .59 13,052.65 .49
Employee Benefits-Health Ins. 362.00 .08 2,534.00 .10
Equipment-Rental .00 .00 1,795.50 .07
Pharmacy - Medicare 5,093.73 1.17 29,010.84 1.10
Supplies-Therapy 195.31 .04 2,928.02 .11
---------- -------- ------------ --------
Total Distinct Unit 80,553.70 18.54 453,161.76 17.16
Activities
Direct Labor-Director 2,557.50 .59 15,207.20 .58
Direct Labor-Assistants 2,849.45 .66 19,198.97 .73
Vacation .00 .00 1,197.60 .05
Contract Labor 180.00 .04 1,035.77 .04
Payroll Taxes-FICA 404.06 .09 2,576.31 .10
Payroll Taxes-FUTA 42.27 .01 110.06 .00
Payroll Taxes-SUTA 232.40 .05 663.17 .03
Employee Benefits-W/C 216.83 .05 1,128.35 .04
</TABLE>
Data Provided
By Owner
<PAGE>
CAMBRIDGE NURSING HOME LLC
Income Statement
For the period January 1, 1997 to January 31, 1997
<TABLE>
<CAPTION>
CURRENT PERIOD RATIO YEAR TO DATE RATIO
<S> <C> <C> <C> <C>
Supplies 580.95 .13 1,416.66 .05
---------- ------ ------------ --------
Total Activities 7,063.46 1.63 42,534.09 1.61
Social Services
Direct Labor-Social Worker 3,154.00 .73 18,434.00 .70
Payroll Taxes-FICA 223.46 .05 1,310.21 .05
Payroll Taxes-FUTA 23.36 .01 30.76 .00
Payroll Taxes-SUTA 128.54 .03 225.38 .01
Employee Benefits-W/C 126.47 .03 683.06 .03
---------- ------ ------------ --------
Total Social Services 3,655.83 .84 20,683.41 .78
Ancillary
Supplies-Nursing .00 .00 164.93 .01
---------- ------ ------------ --------
Total Ancillary .00 .00 164.93 .01
Beauty & Barber
---------- ------ ------------ --------
Total Beauty & Barber .00 .00 .00 .00
Dietary
Direct Labor-Supervision 2,000.00 .46 14,702.00 .56
Direct Labor-Cooks 6,639.34 1.53 39,341.22 1.49
Direct Labor-Cooks Helper 12,208.39 2.81 68,923.87 2.61
Vacation .00 .00 3,371.20 .13
Payroll Taxes-FICA 1,580.47 .36 9,334.29 .35
Payroll Taxes-FUTA 165.31 .04 383.81 .01
Payroll Taxes-SUTA 909.07 .21 3,035.56 .11
Employee Benefits-W/C 835.98 .19 4,818.12 .18
Food 17,498.13 4.03 100,117.97 3.79
Food-Staples 177.26 .04 210.20 .01
Supplies 1,764.26 .41 11,841.26 .45
---------- ------ ------------ --------
Total Notary 43,778.21 10.08 256,079.50 9.69
Housekeeping
Direct Labor-Housekeeper 12,247.95 2.82 74,156.61 2.81
Vacation .00 .00 4,325.60 .16
Payroll Taxes-FICA 918.25 .21 5,545.67 .21
Payroll Taxes-FUTA 95.81 .02 404.96 .02
Payroll Taxes-SUTA 526.90 .12 1,958.04 .07
Employee Benefits-W/C 491.12 .11 2,289.26 .09
Supplies 277.09 .06 8,665.16 .33
</TABLE>
Data Provided
By Owner
<PAGE>
CAMBRIDGE NURSING HOME LLC
Income Statement
For the period January 1, 1997 to January 31, 1997
<TABLE>
<CAPTION>
CURRENT PERIOD RATIO YEAR TO DATE RATIO
-------------- ----- ------------ -----
<S> <C> <C> <C> <C>
---------- ------ ------------ --------
Total Housekeeping 14,555.12 3.35 97.345.30 3.69
Laundry
Direct Labor-Laundry 8,104.39 1.87 41,519.87 1.57
Vacation .00 .00 3,320.00 .13
Payroll Taxes-FICA 610.45 .14 3,120.76 .12
Payroll Taxes-FUTA 63.82 .01 157.05 .01
Payroll Taxes-SUTA 351.11 .08 955.46 .04
Employee Benefits-W/C 324.97 .07 1,526.88 .06
Linen .00 .00 6,034.82 .23
Supplies 756.47 17 2,672.81 .10
---------- ------ ------------ --------
Total Laundry 10,211.21 2.35 59,307.65 2.25
Maintenance
Direct Labor-Supervision 2,856.42 .66 17,196.45 .65
Direct Labor 2,317.70 .53 12,881.30 .49
Vacation .00 .00 2,863.20 .11
Payroll Taxes-FICA 373.22 .09 2,171.47 .08
Payroll Taxes-FUTA 39.04 .01 71.93 .00
Payroll Taxes-SUTA 214.68 .05 562.74 .02
Employee Benefits-W/C 207.46 .05 1,206.04 .05
Plant R & M-Common 2,257.81 .52 17,496.51 .66
Plant R & M-Elevator 389.80 .09 4,317.03 .16
Plant R & M-Extermination 180.00 .04 1,950.00 .07
Plant Repairs & Maint-Grounds .00 .00 1,187.87 .04
Plant R & M-Painting .00 .00 1,247.13 .05
Plant R & M-Roof .00 .00 495.00 .02
Plant R & M-Salt 211.93 .05 1,651.73 .06
Plant R & M-Sprinkler .00 .00 175.00 .01
Supplies-Maintenance 607.46 .14 3,251.34 .12
---------- ------ ------------ --------
Total Maintenance Expenses 9,655.52 2.22 68,724.74 2.60
Utilities
Utilities-Electricity (7,514.01) (1.73) 14,639.09 .55
Utilities-Gas/Heating 1,399.02 .32 12,640.30 .48
Utilities-Water, Sewer, Trash 7,011.22 1.61 34,945.94 1.32
---------- ------ ------------ --------
Total Utility Expense 896.23 .21 62,225.33 2.36
Security Expense
---------- ------ ------------ --------
Total Security Expense .00 .00 .00 .00
</TABLE>
Data Provided
By Owner
<PAGE>
CAMBRIDGE NURSING HOME LLC
Income Statement
For the period January 1, 1997 to January 31, 1997
<TABLE>
<CAPTION>
CURRENT PERIOD RATIO YEAR TO DATE RATIO
<S> <C> <C> <C> <C>
General/Administrative
Direct Labor-Administrator 4,428.56 1.02 26,257.14 .99
Direct Labor-Clerical 9,592.73 2.21 56,429.57 2.14
Indirect Labor 9,394.70 2.16 25,730.45 .97
Vacation .00 .00 5,262.40 .20
Payroll Taxes-FICA 1,035.75 .24 6,128.07 .23
Payroll Taxes-FUTA 108.36 .02 169.69 .01
Payroll Taxes-SUTA 595.75 .14 1,100.22 .04
Employee Benefits-W/C 28.03 .01 148.08 .01
Employee Benefits-Health Ins 4,078.09 .94 41,400.54 1.57
Advertising-Employment 335.70 .08 1,206.77 .05
Bad Debt Expense 5,000.00 1.15 65,000.00 2.46
Banking Charges .00 .00 189.19 .01
Data Processing-Payroll 1,196.29 .28 5,372.73 .20
Dues & Subscriptions 5,093.92 1.17 5,849.92 .22
Entertainment 544.83 .13 2,064.20 .08
Equipment-Lease 209.00 .05 1,225.56 .05
Equipment-Rental .00 .00 74.60 .00
Fees-Management 30,414.94 7.00 184,897.41 7.00
Fees-Accounting 134.70 .03 23,513.06 .89
Fees-Professional .00 .00 10,494.65 .40
Home Office Allocation 42.41 .01 1,056.77 .04
Home Office Allocation-Postage (29.86) (.01) 84.66 .00
Home Office Allocation-Printing 113.93 .03 656.33 .02
Home Office Allocation-Telephn 180.05 .04 712.36 .03
Home Office Allocation-Travel 274.04 .06 2,771.12 .10
Postage/Delivery 972.20 .22 3,222.84 .12
Promotion-Materials 61.89 .01 214.36 .01
Purchased Services-Misc. 117.70 .03 736.96 .03
Supplies-Offices 670.04 .15 3,397.72 .13
Training .00 .00 680.00 .03
Telephone 1,449.11 .33 7,279.03 .28
Travel 68.51 .02 1,162.11 .04
---------- ------ ------------ -------
Total General/Administrative 76,111.37 17.52 484,488.51 18.34
Marketing/Leasing
Promotion-Materials 84.09 .02 498.60 .02
---------- ------ ------------ -------
Total Marketing/Leasing 84.09 .02 498.60 .02
---------- ------ ------------ -------
Total Operating Expenses 420,544.83 96.79 2,598,614.68 98.38
---------- ------ ------------ -------
Net Income (Loss) From
</TABLE>
Data Provided
By Owner
<PAGE>
CAMBRIDGE NURSING HOME LLC
Income Statement
For the period January 1, 1997 to January 31, 1997
<TABLE>
<CAPTION>
CURRENT PERIOD RATIO YEAR TO DATE RATIO
<S> <C> <C> <C> <C>
Operations 13,954.32 3.21 42,776.89 1.62
---------- ------ ------------ -------
OTHER INCOME AND EXPENSE
Taxes-Franchise, Sales 550.00
Taxes-Real Estate 10,704.18 .13 550.00 .02
Insurance 3,120.33 2.46 62,893.83 2.38
---------- ------ ------------ -------
Total Other (Income) Expense 14,374.51 .72 18,721.96 .71
---------- ------ ------------ -------
Net Income (Loss) Before 3.31 82,165.79 3.11
Depreciation (420.19) ( .10) (39,388.90) 1.49)
Depreciation-Building 12.44 .00 69.96 .00
Depreciation-Equip 45.79 .01 164.51 .01
---------- ------ ------------ -------
Net Income (Loss) (478.42) (.11) (39,623.37) 1.50)
---------- ------ ------------ -------
---------- ------ ------------ -------
</TABLE>
Data Provided
By Owner
<PAGE>
The Trinity Hills Manor
1000 McKinley Street
Benbrook, Texas
<PAGE>
APPRAISAL REPORT
ON
THE TRINITY
HILLS MANOR
1000 MCKINLEY STREET
BENBROOK, TEXAS
PREPARED BY:
HealthCare Property Appraisers of America, Inc.
Hwy 64 East, Laurel Terrace, 2nd Floor
Post Office Box 2227
Cashiers, North Carolina 28717
Copyright 1997, HealthCare Property Appraisers of America, Inc.
<PAGE>
SUBJECT
[PHOTO]
<PAGE>
HEALTHCARE PROPERTY APPRAISERS J. MICHAEL BURROUGHS, MAI, SRA
OF AMERICA, INC. PRESIDENT
Post Office Box 2227 [SEAL]
Hwy. 64 E., Laurel Terrace, 2nd Floor
Cashiers, North Carolina 28717
Phone: 704-743-5204
Fax: 704-743-1730
April 21, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
14160 Dallas Parkway
Dallas, TX 75240
Re: The Trinity Hills Manor
Benbrook, Texas
Dear Mr. Brickman:
HealthCare Property Appraisers of America, Inc. has inspected The Trinity Hills
Manor for the purpose of estimating the Market Value of its fee simple estate as
a Going Concern. All factors which might influence the value of this property
were investigated and fully considered to the best of our ability. We have
performed a Complete Appraisal and report our findings here in the form of a
Self-Contained Appraisal Report, which describes the appraisal method and
contains the information necessary for forming realistic conclusions. The
supporting data analyses and conclusions are an integral part of this report.
The maps, sketches, and statistics are included to aid the reader in visualizing
the property. Your attention is directed to the section entitled: "Underlying
Assumptions and Limiting Conditions Section" which provides the basis for all
conclusions and the Final Value Estimate.
Based on the enclosed data and analyses, we believe the Subject Property
described herein had a Market Value, as of March 21, 1997, at current occupancy
and in its present physical condition of:
$2,400,000
This value estimate included all real and personal property, as well as the
business value as a Going Concern. Furniture, fixtures and equipment were
estimated to have a contributory value of approximately $199,500 and intangible
business assets were estimated to contribute $500,000 to the total value. The
real estate alone was estimated to contribute $1,700,500. These estimated
contributory values are allocations of the Going Concern and may not represent
the amount that would be realized if components were sold separately.
The value conclusions in this report assume that this property is not subject to
any existing leases or management contracts. We have assumed that any new owner
would be free to negotiate a new lease or management contract if they so
desired.
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
After studying the sales history of similar properties, the Appraiser estimates
a reasonable marketing period for the subject property to be twelve months.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by the Uniform Standards of
Professional Appraisal Practice (USPAP).
SPECIAL CONDITION
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have a
dramatic impact on the property's value.
I appreciate the opportunity to provide these appraisal services to you. If you
have any questions on this report or any other matters, please do not hesitate
to call.
Respectfully submitted,
HealthCare Property Appraisers of America, Inc.
/s/ J. Michael Burroughs
- ----------------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
State Certified General Appraiser, #A218
President
JMB:ela
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 3
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
SUMMARY OF IMPORTANT CONCLUSIONS
SELF-CONTAINED REPORT OF A COMPLETE APPRAISAL
<TABLE>
<S> <C>
Subject Property: The Trinity Hills Manor
Property Location: 1000 McKinley Street
Benbrook, Texas
Effective Date: March 21, 1997
Report Date: April 21, 1997
Purpose of Appraisal: Market Value
Area of Site: 80,586 sf (approx.)
Highest and Best Use: For Nursing Home Use
Improvements:
Number of Units: 114 Beds
Building Size: 31,750 sf (approx.)
Building Date: 1971
Economics:
Effective Gross Income: $3,402,876
Expenses: (3,062,588)
-----------
Net Income: $ 340,288
Indicated Values:
Cost Approach: $2,240,000
Income Capitalization Approach: $2,430,000
Sales Comparison Approach: $2,150,000 to $2,350,000
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 4
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Final Estimated Market Value:
- -----------------------------
Land $ 125,000
Building Improvements $1,575,500
-----------
Total Real Estate $1,700,500
Personal Property $ 199,500
Business Value $ 500,000
-----------
Total Property $2,400,000
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 5
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
TRANSMITTAL LETTER....................................................2
SUMMARY OF IMPORTANT CONCLUSIONS......................................4
TABLE OF CONTENTS.....................................................6
GENERAL IDENTIFICATION OF PROPERTY....................................7
PROPERTY RIGHTS APPRAISED.............................................7
SCOPE OF APPRAISAL....................................................7
HISTORY OF PROPERTY...................................................8
THE PURPOSE OF THE APPRAISAL..........................................9
METHOD OF APPRAISAL...................................................13
REGIONAL ANALYSIS.....................................................15
MARKET AREA AND NEIGHBORHOOD..........................................37
SITE DATA.............................................................42
DESCRIPTION OF IMPROVEMENTS...........................................48
COST APPROACH TO VALUE................................................54
INCOME CAPITALIZATION APPROACH TO VALUE...............................72
SALES COMPARISON APPROACH TO VALUE....................................92
RECONCILIATION AND FINAL VALUE ESTIMATE...............................110
ALLOCATION OF VALUE BETWEEN REAL PROPERTY, PERSONAL PROPERTY
AND BUSINESS ENTERPRISE...............................................113
SUMMARY OF VALUES.....................................................121
UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS........................122
APPRAISER'S CERTIFICATION.............................................126
QUALIFICATIONS OF APPRAISER...........................................129
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 6
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
GENERAL IDENTIFICATION OF PROPERTY
The subject property, known as The Trinity Hills Manor, is located at 1000
McKinley Street, Benbrook, Texas. The subject site and improvements are
described further in subsequent sections of this report. The subject of this
analysis includes all real, personal and business property necessary to operate
as a Nursing Home.
PROPERTY RIGHTS APPRAISED
The appraiser, in completing this appraisal assignment, considered the subject
property to include all of those rights that may be lawfully owned and are
legally referred to as being held in "fee simple".
DEFINITION OF FEE SIMPLE ESTATE
Absolute ownership unencumbered by any other interest or estate; subject
only to the limitations of eminent domain, escheat, police power, and
taxation. ("THE DICTIONARY OF REAL ESTATE APPRAISAL", American Institute of
Real Estate Appraisers, Third Printing, October, 1987)
SCOPE OF APPRAISAL
In conducting this appraisal, our staff
- Inspected the subject property.
- Developed and analyzed significant data from primary and secondary
sources, confirming that data where possible.
- Analyzed sales, income and expense data and projected a reasonable cash
flow for the subject.
- Completed Income Capitalization, Cost and Sales Comparison Approaches
To Value and reached a Final Market Value conclusion as reported
herein.
This appraisal constitutes a Complete Appraisal and this report is a
Self-Contained Appraisal Report as defined by USPAP.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 7
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
HISTORY OF PROPERTY
To the best of the appraiser's knowledge, the complete subject property (land,
building, equipment and business) has not been sold, listed or placed under
contract within the past three years.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 8
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
THE PURPOSE OF THE APPRAISAL
The purpose of the Complete Appraisal contained in this Self-Contained Appraisal
Report is to estimate the Market Value of The Trinity Hills Manor. This report
is intended for the internal use of the property owner.
DEFINITION OF MARKET VALUE
The most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
(1) Buyer and seller are typically motivated.
(2) Both parties are well informed or well advised, and acting in what they
consider their own best interests.
(3) A reasonable time is allowed for exposure in the open market.
(4) Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto.
(5) The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.*
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 9
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
DEFINITION OF GOING CONCERN VALUE
As most properties of subject's type are usually owned, operated, and sold
as one entity including the real estate, personal property, and business, in
this report Market Value is considered to be synonymous with the Going
Concern Value, which includes any intangible enhancement attributable to the
operation of the property. The physical real estate assets are such integral
parts of the business that the market values for the land and building or
the business aspects are difficult, if not impossible, to segregate from the
total value of the property.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 10
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
COMPETENCY
The Office of the Comptroller of the Currency has issued the following Final
Rule, which requires lenders to evaluate appraiser competency for each specific
appraisal assignment:
"Not all appraisers are competent to perform every type of appraisal that
will be needed in connection with federally related transactions. For
instance, an appraiser who is experienced in appraising shopping centers may
not possess sufficient expertise to appraise a golf course. A financial
institution should look beyond an individual's title to determine if he or
she has the experience and training needed to perform the appraisal. This
provision is not intended to prohibit, in every circumstance, an individual
from appraising a type of property with which he or she is not familiar.
However in such instances, an appraiser may perform the appraisal only in
accordance with the Competency Provision in the USPAP. "
HealthCare Property Appraisers of America, Inc. is a national appraisal firm
limiting its appraisal practice to Health Care and Senior Housing properties.
HealthCare Property Appraisers of America, Inc. has prepared over 3,000
appraisal reports in 42 states on a wide variety of health care-oriented
facilities and housing for the elderly. Property types encompass the complete
continuum of health care facilities including:
- General and Acute Care Hospitals
- Psychiatric Hospitals
- Substance Abuse Facilities
- Skilled Nursing Homes
- Assisted Living Homes
- Rest Homes, Personal Care and Homes for the Aged
- Facilities for the Developmentally Disabled
- Independent Living Apartments for Retirees
- Continuing Care Retirement Communities
Our office maintains a constant dialogue with public health departments,
medicaid reimbursement officials and healthcare licensing agencies in all 50
states. We constantly update our data bank in accordance with changes within the
various state health care programs.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 11
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. maintains an in-house database
which currently contains in excess of 1,300 sales of health care-related and
senior housing properties.
SOURCE OF DEFINITIONS
- Title XI, Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 (FIRREA), [Pub. L. No. 101-73,103 Stat. 183 (1989)], 12 U.S.C.
3310, 3331-3351, and section 5(b) of the Bank Holding Company Act, 12
U.S.C. 1844(b); Part 225, Subpart G: Appraisals Paragraph 225.62(f).
- Uniform Standards of Professional Appraisal Practice, Page I-7.
- Federal Reserve System, 12 CFR Parts 208 and 225, Sec. 225.62.
- Office of the Comptroller of the Currency, 12 CFR part 34, Sec. 34.42.
- FDIC, 12 CFR Part 323, Sec. 323.2.
- Office of Thrift Supervision, 12 CFR Part 564, Sec. 564.2.
- NCUA, 12 CFR Part 722, Sec. 722.2.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 12
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
METHOD OF APPRAISAL
The Appraisal Profession generally recognizes three approaches to value:
1. COST APPROACH TO VALUE: The appraiser: (a) estimates the land value as
though the site were vacant and available for development and (b)
estimates the cost to replace subject's improvements (at their same
stage of depreciation). The depreciated Replacement Cost is usually
based upon consultation with local contractors and construction cost
data services.
2. INCOME CAPITALIZATION APPROACH TO VALUE: The Appraiser compiles and
analyzes market data to estimate subject property's economic rental and
expenses. The net income thus derived is capitalized into a value
estimate. This indicates the property's value to an investor receiving
this income stream and develops the present value of perceived future
benefits and property reversion.
3. SALES COMPARISON APPROACH TO VALUE (also known as the Comparative
Approach or Market Data Method): The Appraiser researches sales of
Nursing Homes in this market area and developes units of comparison
which are adjusted and applied to the subject property.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 13
<PAGE>
REGIONAL ANALYSIS
- --------------------------------------------------------------------------------
<PAGE>
[BENBROOK CITY MAP]
<PAGE>
[TEXAS STATE MAP]
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
REGIONAL ANALYSIS
OVERVIEW
The subject property is located in the city of Benbrook, Tarrant County, Texas.
Located in the north central region of the state, the site is located at the
southwest outskirts of Forth Worth, Texas. Benbrook is considered to be a
bedroom community of Forth Worth.
Tarrant County rests in the northwestern section of the Fort Worth-Arlington,
Texas Metropolitan Statistical Area (hereafter referred to as the Forth Worth
MSA), which is composed of the following counties: Hood, Johnson, Parker and
Tarrant.
TERRAIN AND CLIMATE
The Tarrant County area is primarily level to low hills, with elevations from
580-865 feet, typical of north central Texas. This hilly area marks the upper
boundary of the Coastal Plain. The humid, subtropical climate is moderated by
the continental air masses from the northwest producing hot humid summers with a
variety of year-round temperatures. Annual precipitation averages 30 inches of
rain with minimal amounts of snowfall. Average temperatures of a low of 34
degrees in January and a high of 96 degrees in August, have encouraged growth in
the Tarrant County area.
POPULATION AND DEMOGRAPHICS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE PROJECTED CHANGE
1990-1996 1996-2001
---------------------------------------------------------
<S> <C> <C>
UNITED STATES 6.5% 4.9%
STATE 11.5% 8.5%
MSA 10.7% 8.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 15
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
The area enjoys a broadly diversified economic base, including the aerospace
industry, education, retail outlet, health care and manufacturing, which
contribute to the growth of the area. According to Claritas, Inc., a
demographics survey firm, the estimated 1996 population of the United States has
increased 6.5% since 1990, and an additional 4.9% increase can be expected by
2001.
According to the 1990 Census, Texas's population totaled 16,986,510 residents.
Claritas estimates the current population at 18,942,934,representing an increase
of 11.5%. By 2001, the population is projected to reach 20,555,216 residents,
an increase of 8.5%.
The 1990 Census indicates Fort Worth MSA's population totaled 1, 361,034
residents. Claritas estimates the current population at 1,506,678,
representing an increase of 10.7%. By 2001, the population is projected to
reach 1,626,963 residents, an increase of 8.0%.
DEMOGRAPHICS OF THE ELDERLY POPULATION
Percentage of Change - Elderly Population
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
1990-1996 1996-2001
--------------- ----------------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
----- ----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
U. S. 14.4% 21.0% 32.9% 11.3% 12.4% 19.0%
STATE 17.9% 23.5% 38.5% 18.3% 11.5% 21.9%
MSA 26.2% 26.6% 41.9% 21.2% 21.4% 23.4%
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
The market segments of primary interest in this demographics study are the
age groups: (a) 75 to 79, (b) 80 to 84, and (c) 85 and over. Between 1990 and
1996, the estimated increase nationally in the 75 to 79 year old age bracket
was 14.4%. In the 80 to 84 age group the change was 21.0% and the change in
the 85 and over age group was 32.9%. By 2001, the 75 to 79 age group is
projected to increase by an additional 11.3%, the 80 to 84 group by 12.4% and
the age group 85 and over by 19.0%.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 16
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
In the state of Texas, the 75 to 79 age group is currently estimated at 392,973
which is an increase of 17.9% since the last census. The age group 80 to 84 has
shown an increase of 23.5% in that same time period and the 85 and over age
group has shown an increase of 38.5%. It is estimated that by 2001, there will
be 11.7, 7.8 and 7.2 residents in these age groups or a change of 18.3%, 11.5%,
and 21.9% respectively.
In the Fort Worth MSA, the 75 to 79 age group is currently estimated at
27,655 which is an increase of 26.2% since the last census. The age group 80
to 84 has shown an increase of 26.6% in the time period between 1990 and 1996
and the 85 and over age group has shown an increase of 41.9%. It is estimated
that by 2001, there will be 11.0, 7.2 and 6.6 residents in these age groups
or a change of 21.2%, 21.4%, and 23.4% respectively.
Median Household Income - Ages 75+
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
1990-1996 1996-2001
--------------- ----------------
75-79 80-84 85 & Over 75-79 80-84 85 & Over
----- ----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
U. S. +$3,462 +$3,355 +$3,233 +$3,344 +$3,359 +$3,357
STATE +$3,752 +$3,675 +$3,446 +$3,790 +$3,785 +$3,813
MSA +$5,237 +$5,164 +$4,560 +$4,325 +$4,062 +$4,328
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
Nationally, the 75 to 79 age group median household income increased $3,462
between 1990 and 1996 and is projected to increase an additional $3,344 by
2001. The 80 to 84 age group showed an increase nationally in median
household income of $3,355 between 1990 and 1996 and is projected to increase
an additional $3,359 by 2001. The age group 85 and over showed an increase
between 1990 and 1996 of $3,233 and is projected increase an additional
$3,357 by 2001.
In the state of Texas, the median household income for the 75-79 age group
increased $3,752 between 1990 and 1996, and is projected to reach $20,326 or
increase an additional $3,790 by 2001. The median household income for the 80 to
84 age group during the time period 1990
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 17
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
to 1996 increased $3,675 and is expected to reach $19,925 or increase an
additional $3,785 by 2001. The age group 85 and over showed an increase of
$3,446 between 1990 and current estimates and is projected to reach $19,392 or
increase an additional $3,813 by 2001.
In the Fort Worth MSA, median household income for the 75-79 age group increased
$5,237 between 1990 and 1996, and is projected to reach $24,764 or increase an
additional $4,325 by 2001. The median household income for the 80 to 84 age
group during the 1990-1996 time period increased $5,164 and is expected to reach
$23,848 or increase an additional $4,062 by 2001. The age group 85 and over
showed an increase of $4,560 between 1990 and current estimates and is projected
to reach $22,826 or an additional increase of $4,328 by 2001.
Elderly Households With Income $35,000+
(As a % of Total Household Income For 55+ population)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1990 1996 2001
ESTIMATED PROJECTED
-----------------------------------------------
<S> <C> <C> <C>
UNITED STATES 42.4% 52.0% 58.3%
STATE 38.0% 50.0% 42.2%
MSA 45.8% 59.0% 57.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
One of the best indicators of the ability of the subject's residents to be self
supporting (rather than government funded) is their level of affluence. The
appraiser compared the subject's potential local market with that of Texas and
the USA as a whole. The comparison was based upon the percentage of population
aged 55+ with an annual household income exceeding $35,000.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 18
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
GOVERNMENT AND SERVICES
The subject property falls within the jurisdiction of the city of Benbrook which
has a Council Manager form of government, with seven member elected council, and
there are zoning ordinances in place. Police protection is provided by the
Benbrook Police Department with 40 officers. Fire protection is provided by the
Benbrook Fire Department (in conjunction with the Forth Worth Fire Department
for a portion of the city) with 4 full-time personnel and 30 volunteers.
UTILITIES
Water and sewer service are provided by the Benbrook Water and Sewer Authority.
Electricity is supplied by TU Electric Company, gas service is provided by Lone
Star Gas Company, and telephone service by Southwestern Bell.
EDUCATION
The Benbrook School System, part of the Forth Worth Independent School District,
has two elementary, two middle and one high schools and an enrollment of 4,314.
Vocational and Technical training is available through the Forth Worth
Independent School District and Tarrant County Junior College systems. Among the
area's facilities for higher education are the University of Texas at Arlington,
Texas Christian University and Texan Wesleyan University.
TRANSPORTATION
The area's principal highways include Interstates 20 and 820 and U.S. Highway
377, along with U.S. Highways 80 and State Highway 183. There is no current
construction underway and none is scheduled for the foreseeable future.
Local airports, such as the new Alliance Airport providing industrial services,
along with the general aviation facilities at Bourland, Meacham and Spinks
Fields, are located throughout the
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 19
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
area with the major commercial airport being the Dallas-Forth Worth
International Airport, with 2,000 daily flights. Airlines serving that airport
include American, Delta, Northwest, United/Southwest.
Passenger rail service is provided by AMTRAK, out of Ft. Worth, freight rail
service by Union Pacific and Burlington Northern and Santa Fe and Southern
Pacific out of Ft. Worth. Trucking companies serving the area include Roadway
Express, Yellow Freight, Red Arrow Freight Lines and Brown Express.
HEALTHCARE
There are two hospitals in the county serving the Benbrook area, All Saints
Hospital (71 beds) and Harris Methodist (88 beds). Medical assistance is
provided by 11 physicians and 7 dentists. The immediate area has two nursing
homes, Renaissance Park (120 beds) and Trinity Hills Manor (114 beds). There
numerous facilities throughout the Ft. Worth MSA.
ECONOMY
Financial institutions in the area include Citizens National Bank, Heritage
National Bank, Bank of America-Benbrook and BenbrookBank with combined assets
exceeding $143 million. According to the 1995 SURVEY OF BUYING POWER, by Sales &
Marketing Management, the per household retail sales for the Fort Worth MSA,
ranking 211th in the nation, was $23,130 (compared to the national average of
$23,209). The median household effective buying income, ranking 47th in the
nation, was $41,869 ($37,070). Household expenditures for health care ranked
33rd in the nation with $1.1 billion.
According to the PLACES RATED ALMANAC, the Fort Worth MSA ranks l8th of the
nation's 343 MSAs in the area of employment opportunity. The area is projected
to show a growth rate of 8.91 % in new jobs, with an increase of 42,768 white
collar and 20,231 blue collar positions expected. Distribution by sector and
percentage of employees is as follows:
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 20
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sector Percentage
- ------ ----------
<S> <C>
Services 28.8%
Manufacturing 20.1%
Wholesale/Retail Trade 22.3%
Construction 6.4%
Transportation/Communications/Utilities 10.0%
Finance/Insurance/Real Estate 7.0%
Government 3.5%
Agriculture/Forestry/Fishing 1.3%
Mining 0.6%
</TABLE>
The area's major employers are:
<TABLE>
<CAPTION>
Company Name # Employees Product/Service
- ------------ ----------- ---------------
<S> <C> <C>
Lockheed-Fort Worth 150 Aerospace
Computalog Wireline 140 Geophysical Equipment
Western Hills H. S. 102 Primary Education
Career Transition Center 100 Employment Training
Renaissance Park 92 Health Care
City of Benbrook 81 Government
Oak Park Retirement Home 66 Retirement/HealthCare
Food Lion 50 Grocery Store
Sutherland 50 Building Materials
Winn-Dixie 50 Grocery Store
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 21
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
UNITED STATES/STATE/MSA HOUSEHOLD INCOME
(GENERAL POPULATION)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
% OF CHANGE
----------------------------------------------------
1990-1996 1996-2001
----------------------------------------------------
<S> <C> <C>
UNITED STATES 21.7% 15.4%
STATE 29.1% 19.9%
MSA 30.9% 21.7%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
An important indicator of economic health is growth in Median Household Income.
The national increase in Median Household Income between 1990 and 1996 was
21.7%. Claritas projects the National Median Household Income will reach $42,259
(i.e. increase by 15.4 %)by 2001.
Median Household Income for Texas in 1996 is estimated at $34,943, or an
increase of 29. 1 % since 1989. It is projected that by 2001 the Median
Household Income will reach $41,899, or increase by 19.9
Median Household Income for the Fort Worth MSA in 1996 has increased to $42,086,
or 30.9%, since 1989. It is projected that by 2001 the Median Household Income
will reach $51,223,or increase 21.7%.
NUMBER OF HOUSING UNITS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
% OF CHANGE
----------------------------------------------------
1990-1996 1996-2001
----------------------------------------------------
<S> <C> <C>
UNITED STATES 7.6% 5.5%
STATE 8.5% 8.8%
MSA 8.0% 8.5%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 22
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
Growth in the number of housing units in a specified area is another good
indication of economic health. Housing units increased 7.6% nationally between
1990 and 1996. By 2001, it is projected that total housing units nationally will
have increased by an additional 5.5 %.
The number of housing units in Texas is currently estimated at 7,604,503,which
is an increase of 8.5 % since the 1990 Census. It is estimated that by 2001,
this figure will reach 8,272,049,or increase by 8.8%.
The number of housing units in the Fort Worth MSA is currently estimated at
614,729, which is an increase of 8.0% since the 1990 Census. It is estimated
that by 2001, this figure will reach 666,737, or increase by 8.5 %.
METROPOLITAN STATISTICAL AREA(MSA) DATA
The economy of Benbrook and Tarrant County are strongly effected by the Fort
Worth Arlington, Texas Metropolitan Statistical Area.
The appraiser considered the cost of living in Benbrook, as this factor affects
The Trinity Hills Manor in two ways: (a) the likelihood of retirees remaining in
the area or being attracted to it and (b) payroll costs. The PLACES RATED
ALMANAC Cost of Living Index ranks the subject MSA 198th of the 343 MSAs
nationwide (with the first place MSA having the lowest cost of living). Ranked
against the national average of 100, the Fort Worth MSA indexes are:
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 23
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Housing:
Median Price: 90
Utilities: 89
Property Taxes: 179
Miscellaneous Living Cost Indexes:
College Tuition: 55
Food: 104
Health Care: 108
Transportation: 104
</TABLE>
The PLACES RATED ALMANAC rates and ranks 343 metropolitan areas on ten factors
that greatly influence the quality of an area: costs of living, job outlook,
housing, transportation, education, health care, crime, the arts, recreation,
and climate. The Fort Worth MSA is ranked as follows:
<TABLE>
<S> <C>
Costs of Living 198
Job Outlook 18
Housing 201
Transportation 126
Education 44
Health Care 250
Crime 328
The Arts 74
Recreation 83
Climate 193
</TABLE>
Based on these factors, the Fort Worth MSA had an overall rank of 108th of the
343 Metropolitan Statistical Areas.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 24
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
TRENDS, FUTURE OUTLOOK, CONCLUSIONS
The Benbrook area offers the residents the advantages of suburban life with the
underlying economic support of a major metropolitan area within a short commute.
The population is growing at rates above national averages as are incomes and
indications that this trend will continue. Housing increases predicted over the
next five year period supports the conclusion of a positive growth rate for the
area.
The Dallas-Fort Worth economy should continue to draw industry and population
and, coupled with the moderate, varied climate, should remain in a growth
posture, providing a positive climate for the senior health care industry.
- ----------
*All population and household income figures were taken from the most recent U.
S. Census (if actual numbers) or were provided to the appraiser by Claritas,
Inc. (if projected numbers) or by the local Chamber of Commerce.
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 25
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
(MSA 2800) Fort Worth et al. TX
(Weight: 100.0%)
Household Trend Report
<TABLE>
<CAPTION>
1980 1990 %Chg 1996 %Chg 2001 % Chg
Universe Census Census 80-9 (Est.) 90-96 (Proj.) 96-01
- -------------------- ------- ------- ----- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Population.......... 990849 1361034 37.4 1506678 10.7 1626963 8.0
Households.......... 355787 506281 42.3 565283 11.7 613084 8.5
Families............ 268115 360454 34.4 397405 10.3 426482 7.3
Housing Units....... 389185 569183 46.2 614729 8.0 666737 8.5
Grp Qrt. Pop........ 17417 22438 28.8 22069 -1.6 22181 0.5
Household Size...... 2.74 2.64 -3.4 2.63 -0.7 2.62 -0.3
</TABLE>
<TABLE>
<CAPTION>
1979 1989 % Chg 1996 % Chg 2001 % Chg
Income (Census) (Census) 79-89 (Est.) 89-96 (Proj.) 96-01
- -------------------- ------- ------- ----- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate($MM)...... 7788 20174 159.0 30535 51.4 42310 38.6
Per Capita.......... 7860 14823 88.6 20267 36.7 26006 28.3
Avg. Household...... 21747 39595 82.1 53742 35.7 68643 27.7
Median Hhold........ 18561 32161 73.3 42086 30.9 51223 21.7
Avg. Family HH...... 24601 45608 85.4 61942 35.8 78331 26.5
Med. Family HH...... 21409 38440 79.6 49842 29.7 59487 19.4
Avg. HH Wealth...... 129493 153185 18.3
Med. HH Wealth...... 55427 68817 24.2
</TABLE>
<TABLE>
<CAPTION>
-------------------- Households --------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
- ---------------------------- ------------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Total...................... 506281 565283 613084
Less than $5,000...... 25747 5.1% 19495 3.4% 16189 2.3%
$5,000 to $9 999...... 34722 6.9% 31235 5.5% 28678 4.7%
$10,000 to $14,999...... 40401 8.0% 30888 5.5% 27887 4.5%
$15,000 to $19,999...... 44196 8.7% 34864 6.2% 27752 4.5%
$20,000 to $24,999...... 44867 8.9% 40095 7.1% 32908 5.4%
$25,000 to $29,999...... 42275 8.4% 38148 6.7% 34743 5.7%
$30,000 to $34,999...... 41621 8.2% 37003 6.5% 34477 5.6%
$35,000 to $39,999...... 36509 7.2% 34431 6.1% 32419 5.3%
$40,000 to $44,999...... 33210 6.6% 37389 6.6% 32279 5.3%
$45,000 to $49,999...... 27621 5.5% 30929 5.5% 31034 5.1%
$50,000 to $59,999...... 44453 8.8% 59127 10.5% 63527 10.4%
$60,000 to $74,999...... 41902 8.3% 62898 11.1% 74784 12.2%
$75,000 to $99,999...... 28245 5.6% 59199 10.5% 83343 13.6%
$100,000 to $124,999...... 10116 2.0% 24584 4.3% 46586 7.6%
$125,000 to $149,999...... 3845 0.8% 11993 2.1% 20516 3.3%
$150,000 to $249,999...... 4398 0.9% 8982 1.6% 18841 3.1%
$250,000 to $499,999...... 1584 0.3% 2900 0.5% 5219 0.9%
$500,000 or More........... 569 0.1% 1123 0.2% 1902 0.3%
</TABLE>
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 26
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
(MSA 2800) Fort Worth et al. TX
(Weight: 100.0%)
Senior Life Report (Page 1 of 7)
<TABLE>
<CAPTION>
--------------------Population Age 55 Years and Over--------------------
Population by Age and Sex 1990 Census 1996 Estimate 2001 Proj.
- --------------------------------- ------------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Population Age 55+............... 216968 100.0% 260014 100.0% 305915 100.0%
55 to 59...................... 51583 23.8% 61889 23.8% 77987 25.5%
60 to 64...................... 46148 21.3% 51740 19.9% 60809 19.9%
65 to 69...................... 41488 19.1% 45411 17.5% 49676 16.2%
70 to 74...................... 29891 13.8% 38718 14.9% 41592 13.6%
75 to 79...................... 21911 10.1% 27655 10.6% 33520 11.0%
80 to 84...................... 14415 6.6% 18243 7.0% 22140 7.2%
85+........................... 11532 5.3% 16358 6.3% 20191 6.6%
Males Age 55+.................... 93942 43.3% 114279 44.0% 135884 44.4%
55 to 59...................... 25251 11.6% 30448 11.7% 38160 12.5%
60 to 64...................... 21714 10.0% 24934 9.6% 29454 9.6%
65 to 69...................... 18508 8.5% 21096 8.1% 23290 7.6%
70 to 74...................... 12829 5.9% 16503 6.3% 18584 6.1%
75 to 79...................... 82011 3.8% 11093 4.3% 13240 4.3%
80 to 84...................... 4659 2.1% 6114 2.4% 7934 2.6%
85+........................... 2780 1.3% 4091 1.6% 5222 1.7%
Females Age 55+.................. 123026 56.7% 145735 56.0% 170031 55.6%
55 to 59...................... 26332 12.1% 31441 12.1% 39827 13.0%
60 to 64...................... 24434 11.3% 26806 10.3% 31355 10.2%
65 to 69...................... 22980 10.6% 24315 9.4% 26386 8.6%
70 to 74...................... 17062 7.9% 22215 8.5% 23008 7.5%
75 to 79...................... 13710 6.3% 16562 6.4% 20280 6.6%
80 to 84...................... 9756 4.5% 12129 4.7% 14206 4.6%
85+........................... 8752 4.0% 12267 4.7% 14969 4.9%
</TABLE>
<TABLE>
<CAPTION>
--------------------Population--------------------
Population by Age and Sex 1990 Census 1996 Estimate 2001 Proj.
- ---------------------------------- -------------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Total Population ................ 1361034 100.0% 1506678 100.0% 1626963 100.0%
White Population.............. 1177220 86.5% 1286035 85.4% 1374001 84.5%
Age 65 and Over............. 109111 8.0% 134388 8.9% 152584 9.4%
Black Population.............. 145419 10.7% 168871 11.2% 188706 11.6%
Age 65 and Over............. 9162 0.7% 10508 0.7% 12103 0.7%
Asian Population.............. 31408 2.3% 44060 2.9% 55905 3.4%
Age 65 and Over............. 649 0.0% 1058 0.1% 1806 0.1%
Am. Indian Population......... 6987 0.5% 7712 0.5% 8351 0.5%
Age 65 and Over............. 315 0.0% 431 0.0% 626 0.0%
Hispanic Population........... 151320 11.1% 210999 14.0% 270162 16.6%
Age 65 and Over............. 4276 0.3% 6224 0.4% 9821 0.6%
</TABLE>
1996 Estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 27
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
(MSA 2800) Fort Worth et al. TX
(Weight: 100.0%)
Senior Life Report (Page 2 of 7)
<TABLE>
<CAPTION>
-----------------Households with Householder Age 55 Over----------------
Household Income by
Age of Householder 1990 Census 1996 Estimate 2001 Proj.
- ----------------------------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 55 to 64......... 58381 100.0% 60676 100.0% 71582 100.0%
Under $5,000.................. 2960 5.1% 2013 3.3% 1800 2.5%
$5,000 - $9,999............... 3606 6.2% 2844 4.7% 2855 4.0%
$10,000 - $14,999............. 3962 6.8% 2742 4.5% 2760 3.9%
$15,000 - $24,999............. 9114 15.6% 6914 11.4% 6137 8.6%
$25,000 - $34,999............. 8755 15.0% 7141 11.8% 7202 10.1%
$35,000 - $49,999............. 11316 19.4% 10648 17.5% 10572 14.8%
$50,000 - $74,999............. 10956 18.8% 13792 22.7% 16462 23.0%
$75,000 - $99,999............. 4149 7.1% 7264 12.0% 10433 14.6%
$100,000 - $149,999........... 2459 4.2% 5283 8.7% 9285 13.0%
$150,000 - $249,999........... 730 1.3% 1398 2.3% 2890 4.0%
$250,000 - $499,999........... 276 0.5% 459 0.8% 869 1.2%
$500,000 or More.............. 98 0.2% 178 0.3% 317 0.4%
Median Income.................... 36051 47233 56780
Householder Age 65 to 69......... 25573 100.0% 27000 100.0% 26175 100.0%
Under $5,000.................. 1675 6.5% 1201 4.4% 882 3.4%
$5,000 - $9,999............... 3231 12.6% 2667 9.9% 2101 8.0%
$10,000 - $14,999............. 3248 12.7% 2481 9.2% 2044 7.8%
$15,000 - $24,999............. 5431 21.2% 4823 17.9% 3778 14.4%
$25,000 - $34,999............. 3925 15.3% 3835 14.2% 3612 13.8%
$35,000 - $49,999............. 3695 14.4% 4245 15.7% 3966 15.2%
$50,000 - $74,999............. 2742 10.7% 4202 15.6% 4677 17.9%
$75,000 - $99,999............. 857 3.4% 1866 6.9% 2503 9.6%
$100,000 - $149,999........... 477 1.9% 1170 4.3% 1837 7.0%
$150,000 - $249,999........... 182 0.7% 331 1.2% 531 2.0%
$250,000 - $499,999........... 76 0.3% 119 0.4% 168 0.6%
$500,000 or More.............. 34 0.1% 60 0.2% 76 0.3%
Median Income.................... 23530 31070 37536
Householder Age 70 to 74......... 20302 100.0% 22651 100.0% 22912 100.0%
Under $5,000.................. 1425 7.0% 1097 4.8% 864 3.8%
$5,000 - $9,999............... 2771 13.6% 2448 10.8% 1985 8.7%
$10,000 - $14,999............. 2691 13.3% 2198 9.7% 1902 8.3%
$15,000 - $24,999............. 4298 21.2% 4120 18.2% 3393 14.8%
$25,000 - $34,999............. 3091 15.2% 3220 14.2% 3177 13.9%
$35,000 - $49,999............. 2828 13.9% 3472 15.3% 3470 15.1%
$50,000 - $74,999............. 2040 10.0% 3382 14.9% 3933 17.2%
$75,000 - $99,999............. 620 3.1% 1453 6.4% 2099 9.2%
$100,000 - $149,999........... 325 1.6% 876 3.9% 1495 6.5%
$150,000 - $249,999........... 126 0.6% 243 1.1% 399 1.7%
$250,000 - $499,999........... 63 0.3% 98 0.4% 129 0.6%
$500,000 or More.............. 24 0.1% 44 0.2% 66 0.3%
Median Income.................... 22594 29542 35584
</TABLE>
1996 Estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 28
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- --------------------------------------------------------------------------------
(MSA 2800) Fort Worth et al. TX
(Weight: 100.0%)
Senior Life Report (Page 3 of 7)
<TABLE>
<CAPTION>
-----------------Households with Householder Age 55 Over----------------
Household Income by
Age of Householder 1990 Census 1996 Estimate 2001 Proj.
- ----------------------------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Householder Age 75 to 79......... 14303 100.0% 17977 100.0% 21041 100.0%
Under $5,000.................. 1644 11.6% 1511 8.4% 1332 6.3%
$5,000 - $9,999............... 3276 22.9% 3406 18.9% 3216 15.3%
$10,000 - $14,999............. 2156 15.1% 2319 12.9% 2639 12.5%
$15,000 - $24,999............. 2753 19.2% 3222 17.9% 3414 16.2%
$25,000 - $34,999............. 1607 11.2% 2117 11.8% 2718 12.9%
$35,000 - $49,999............. 1367 9.6% 2066 11.5% 2518 12.0%
$50,000 - $74,999............. 882 6.2% 1781 9.9% 2559 12.2%
$75,000 - $99,999............. 255 1.8% 722 4.0% 1244 5.9%
$100,000 - $149,999........... 194 1.4% 517 2.9% 904 4.3%
$150,000 - $249,999........... 89 0.6% 190 1.1% 312 1.5%
$250,000 - $499,999........... 45 0.3% 89 0.5% 123 0.6%
$500,000 or More.............. 15 0.1% 37 0.2% 62 0.3%
Median Income.................... 15202 20439 24764
Householder Age 80 to 84......... 9416 100.0% 12567 100.0% 14433 100.0%
Under $5,000.................. 1184 12.6% 1136 9.0% 987 6.8%
$5,000 - $9,999............... 2252 23.9% 2476 19.7% 2310 16.0%
$10,000 - $14,999............. 1376 14.6% 1600 12.7% 1865 12.9%
$15,000 - $24,999............. 1790 19.0% 2239 17.8% 2322 16.1%
$25,000 - $34,999............. 1007 10.7% 1450 11.5% 1833 12.7%
$35,000 - $49,999............. 847 9.0% 1374 10.9% 1642 11.4%
$50,000 - $74,999............. 555 5.9% 1197 9.5% 1667 11.5%
$75,000 - $99,999............. 163 1.7% 480 3.8% 824 5.7%
$100,000 - $149,999........... 142 1.5% 388 3.1% 619 4.3%
$150,000 - $249,999........... 60 0.6% 136 1.1% 222 1.5%
$250,000 - $499,999........... 27 0.3% 58 0.5% 96 0.7%
$500,000 or More.............. 13 0.1% 33 0.3% 46 0.3%
Median Income.................... 14622 19786 23848
Householder Age 85+.............. 6034 100.0% 8279 100.0% 10422 100.0%
Under $5,000.................. 839 13.9% 830 10.0% 795 7.6%
$5,000 - $9,999............... 1455 24.1% 1669 20.2% 1689 16.2%
$10,000 - $14,999............. 918 15.2% 1126 13.6% 1388 13.3%
$15,000 - $24,999............. 1131 18.7% 1471 17.8% 1711 16.4%
$25,000 - $34,999............. 618 10.2% 941 11.4% 1297 12.4%
$35,000 - $49,999............. 514 8.5% 856 10.3% 1184 11.4%
$50,000 - $74,999............. 313 5.2% 726 8.8% 1166 11.2%
$75,000 - $99,999............. 106 1.8% 280 3.4% 535 5.1%
$100,000 - $149,999........... 74 1.2% 236 2.9% 405 3.9%
$150,000 - $249,999........... 38 0.6% 77 0.9% 152 1.5%
$250,000 - $499,999........... 15 0.2% 38 0.5% 61 0.6%
$500,000 or More.............. 13 0.2% 29 0.4% 39 0.4%
Median Income.................... 13938 18498 22826
</TABLE>
1996 Estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- --------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 29
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
(MSA 2800) Fort Worth et al. TX
(Weight: 100.0%)
(Page 4 of 7)
<TABLE>
<CAPTION>
Senior Life Report
------------------Total Households ------------------
Household Income 1990 Census 1996 Estimate 2001 Proj.
- --------------------------------- ------------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Total............................ 506281 100.0% 565283 100.0% 613084 100.0%
Under $5,000.................. 25747 5.1% 19495 3.4% 16189 2.6%
$5,000 - $9,999........... 34722 6.9% 31235 5.5% 28678 4.7%
$10,000 - $14,999........... 40401 8.0% 30888 5.5% 27887 4.5%
$15,000 - $24,999........... 89063 17.6% 74959 13.3% 60660 9.9%
$25,000 - $34,999........... 83896 16.6% 75151 13.3% 69220 11.3%
$35,000 - $49,999........... 97340 19.2% 102749 18.2% 95732 15.6%
$50,000 - $74,999........... 86355 17.1% 122025 21.6% 138311 22.6%
$75,000 - $99,999........... 28245 5.6% 59199 10.5% 83343 13.6%
$100,000 - $149,999........... 10116 2.0% 24584 4.3% 46586 7.6%
$125,000 - $149,999........... 3845 0.8% 11993 2.1% 20516 3.3%
$150,000 - $249,999........... 4398 0.9% 8982 1.6% 18841 3.1%
$250,000 - $499,999........... 1584 0.3% 2900 0.5% 5219 0.9%
$500,000 or More.............. 569 0.1% 1123 0.2% 1902 0.3%
Median Household Income.......... 32161 42086 51223
</TABLE>
<TABLE>
<CAPTION>
-------------- Total Specified Owner-Occupied Housing Units -------------
Housing Value 1990 Census 1996 Estimate 2001 Proj.
- --------------------------------- ------------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Total Units.................. 260516 294149 320834
Less than $15,000...... 3487 1.3% 3120 1.1% 2913 0.9%
$15,000 to $19,999...... 2906 1.1% 1938 0.7% 1534 0.5%
$20,000 to $24,999...... 4331 1.7% 3109 1.1% 2386 0.7%
$25,000 to $29,999...... 5814 2.2% 4197 1.4% 2205 1.0%
$30,000 to $34,999...... 8511 3.3% 5635 1.9% 4307 1.3%
$35,000 to $39,999...... 10630 4.1% 7639 2.6% 5586 1.7%
$40,000 to $44,999...... 12311 4.7% 9341 3.2% 7188 2.2%
$45,000 to $49,999...... 13312 5.1% 10564 3.6% 8558 2.7%
$50,000 to $59,999...... 30004 11.5% 24180 8.2% 20048 6.2%
$60,000 to $74,999...... 48889 18.8% 43288 14.7% 36560 11.4%
$75,000 to $99,999...... 58265 22.4% 67672 23.0% 65173 20.3%
$100,000 to $124,999...... 23749 9.1% 47167 16.0% 55859 17.4%
$125,000 to $149,999...... 14437 5.5% 22180 7.5% 39514 12.3%
$150,000 to $174,999...... 8360 3.2% 14440 4.9% 20477 6.4%
$175,000 to $199,999...... 4426 1.7% 9005 3.1% 13890 4.3%
$200,000 to $249,999...... 4565 1.8% 8489 2.9% 13824 4.3%
$250,000 to $299,999...... 2525 1.0% 4528 1.5% 7273 2.3%
$300,000 to $399,999...... 2209 0.8% 3985 1.4% 6123 1.9%
$400,000 to $499,999...... 774 0.3% 1877 0.6% 3018 0.9%
$500,000 or More.......... 1011 0.4% 1795 0.6% 3298 1.0%
Median Housing Value......... 71951 87584 101280
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 Estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc.
30
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
(MSA 640) Austin et al, TX
(Weight: 100.0%)
(Page 5 of 7)
Senior Life Report
<TABLE>
<CAPTION>
Household Household
Type and Relationship Population 65+ Type and Relationship Population 65+
- -------------------------------------- ------------------ ----------------------- -----------------
<S> <C> <C> <C> <C> <C>
Total ............................. 118932 100.0%
In Family Households............... 76731 64.5% In Nonfamily Hhlds..... 34665 29.1%
Householder....................... 41913 35.2% Male Householder....... 6313 5.3%
Spouse .......................... 26552 22.3% Living Alone......... 6016 5.1%
0ther Relative.................... 7971 6.7% Not Living Alone..... 297 0.2%
Nonrelative ..................... 295 0.2% Female Householder..... 27621 23.2%
Living Alone......... 26971 22.7%
In Group Quarters .................. 7536 6.3% Not Living Alone..... 650 0.5%
Institutionalized ................ 7468 6.3% Nonrelative............ 731 0.6%
Other ........................... 68 0.1%
</TABLE>
<TABLE>
<CAPTION>
----------Spec. Owner-Occ Units------------
Monthly Owner Costs as a by Age of Householder
Percent of 1989 HH Inc. Total Units 65 Yrs +
- ------------------------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Total .............................. 265533 100.0% 54523 100.0%
Less than 20% ..................... 142585 53.7% 36794 67.5%
20 - 24% .......................... 42457 16.0% 4691 8.6%
25 - 29% ......................... 29576 11.1% 3234 5.9%
30 - 34% ......................... 16459 6.2% 2312 4.2%
35% or More ...................... 32733 12.3% 6874 12.6%
Not computed ..................... 1723 0.6 618 1.1%
</TABLE>
<TABLE>
<CAPTION>
---------Spec. Renter-Occ Units------------
Gross Rent as Percent by Age of Householder
of 1989 HH Income Total Units 65 Yrs +
- ------------------------------------ ----------------- ----------------
<S> <C> <C> <C> <C>
Total .............................. 196952 100.0% 15331 100.0%
Less than 20%...................... 68657 34.9% 2501 16.3%
20 - 24% .......................... 32154 16.3% 1438 9.4%
25 - 29% .......................... 22700 11.5% 1610 10.5%
30 - 34% .......................... 15061 7.6% 1418 9.2%
35% or More ...................... 49972 25.4% 6821 44.5%
Not computed ..................... 8408 4.3% 1543 10.1%
</TABLE>
<TABLE>
<CAPTION>
---------- Occupied Housing Units ---------
Attribute Total Units 65 Yrs +
- ------------------------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Owner Occupied Units .............. 307407 60.7% 62673 80.0%
Renter Occupied Units .............. 198874 39.3% 15634 20.0%
Complete Plumbing Facil ............ 504727 99.7% 78080 99.7%
Lacking Plumbing Facil ............ 1554 0.3% 227 0.3%
With Telephone .................... 472743 93.4% 76638 97.9%
No Telephone ...................... 33538 6.6% 1669 2.1%
One or More Vehicles ............... 479818 94.8% 67305 86.0%
No Vehicles Available ............. 26463 5.2% 11002 14.0%
</TABLE>
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
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(MSA 2800) Fort Worth et al. TX
(Weight: 100.0%)
(Page 6 of 7)
Senior Life Report
<TABLE>
<CAPTION>
------------------1990 Households by Age of Householder------------------
Poverty Status by Household Type Total Age 65-74 Age 75 +
- ------------------------------------ ------------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total............................ 506663 100.0% 46697 100.0% 29150 100.0%
Married Couple Family......... 296992 58.6% 25057 53.7% 9600 32.9%
Other Family.................. 66328 13.1% 4470 9.6% 2786 9.6%
Male Householder............ 15772 3.1% 791 1.7% 590 2.0%
Female Householder.......... 50556 10.0% 3679 7.9% 2196 7.5%
Nonfamily..................... 143343 28.3% 17170 36.8% 16764 57.5%
HHer Living Alone........... 119548 23.6% 16587 35.5% 16400 56.3%
HHer Not Living Alone....... 23795 4.7% 583 1.2% 364 1.2%
Above Poverty................. 454006 89.6% 41305 88.5% 23216 79.6%
Married Couple Family....... 282026 55.7% 24090 51.6% 8883 30.5%
Other Family................ 51558 10.2% 3752 8.0% 2324 8.0%
Male Householder.......... 13757 2.7% 717 1.5% 497 1.7%
Female Householder........ 37801 7.5% 3035 6.5% 1827 6.3%
Nonfamily..................... 120422 23.8% 13463 28.8% 12009 41.2%
HHer Living Alone........... 100809 19.9% 13063 28.0% 11741 40.3%
HHer Not Living Alone....... 19613 3.9% 400 0.9% 268 0.9%
Below Poverty................. 52657 10.4% 5392 11.5% 5934 20.4%
Married Couple Family....... 14966 3.0% 967 2.1% 717 2.5%
Other Family................ 14770 2.9% 718 1.5% 462 1.6%
Male Householder.......... 2015 0.4% 74 0.2% 93 0.3%
Female Householder........ 12755 2.5% 644 1.4% 369 1.3%
Nonfamily..................... 22921 4.5% 3707 7.9% 4755 16.3%
HHer Living Alone........... 18739 3.7% 3524 7.5% 4659 16.0%
HHer Not Living Alone....... 4182 0.8% 183 0.4% 96 0.3%
</TABLE>
1996 Estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
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(MSA 2800) Fort Worth et al. TX
(Weight: 100.0%)
(Page 7 of 7)
Senior Life Report
<TABLE>
<CAPTION>
-------------Civilian Noninstitutionalized Persons Age 16+ ---------------
Mobility and Disability Total Age 65+ Age 75+
- ---------------------------------- -------------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Persons.......................... 1005642 100.0% 111464 100.0% 40400 100.0%
With Mblty or Care Lmts....... 55065 5.5% 22501 20.2% 13353 33.1%
Mobility Limits Only........ 18229 1.8% 9573 8.6% 6023 14.9%
Self Care Limits Only....... 21762 2.2% 4324 3.9% 1713 4.2%
Both Limits................. 15074 1.5% 8604 7.7% 5617 13.9%
No Mblty or Care Limits....... 950577 94.5% 88963 79.8% 27047 66.9%
With a Work Disability........ 101215 10.1% 38247 34.3%
In Labor Force.............. 31730 3.2% 2067 1.9%
Employed.................. 27524 2.7% 1814 1.6%
Unemployed................ 4206 0.4% 253 0.2%
Not in Labor Force.......... 69485 6.9% 36180 32.5%
Prevented from Working..... 59439 5.9% 31835 28.6%
Not Prevented from Wrk..... 10046 1.0% 4345 3.9%
No Work Disability............ 904427 89.9% 73217 65.7%
In Labor Force.............. 695970 69.2% 13756 12.3%
Employed.................. 657627 65.4% 13260 11.9%
Unemployed................ 38343 3.8% 496 0.4%
Not in Labor Force.......... 208457 20.7% 59461 53.3%
</TABLE>
1996 Estimates and 2001 projections produced by Claritas Inc.
Copyright 1996 Claritas Inc. Arlington, VA
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
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(MSA 640) Austin et al, TX
(Page 1 of 2)
(Weight: 100.0%)
1990 Demographic Overview Report
<TABLE>
<S> <C> <C> <C> <C> <C>
Population 1361034 Housing Units 569183 Median Age 30.9
Households 506663 Group Quarters 22323 Median HH Inc 32113
Families 363320 Avg. HH Size 2.64 Median Value 71390
Vehicles 913902
</TABLE>
<TABLE>
<CAPTION>
Income in 1989 Household Family Non-Family
- ------------------------------------- ---------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Less than $5,000 .................... 25906 5.1% 11902 3.3% 14842 10.4%
$5,000 to $9,999 ................. 34915 6.9% 15161 4.2% 20596 14.4%
$10,000 to $12,499 ................. 21179 4.2% 11943 3.3% 10033 7.0%
$12,500 to $14,999 ................. 19294 3.8% 11144 3.1% 8384 5.8%
$15,000 to $17,499 ................. 23404 4.6% 14135 3.9% 9669 6.7%
$17,500 to $19,999 ................. 20900 4.1% 13171 3.6% 7940 5.5%
$20,000 to $22,499 ................. 25015 4.9% 15835 4.4% 9384 6.5%
$22,500 to $24,999 ................. 19880 3.9% 13236 3.6% 6741 4.7%
$25,000 to $27,499 ................. 23130 4.6% 15293 4.2% 7773 5.4%
$27,500 to $29,999 ................. 19272 3.8% 13661 3.8% 5374 3.7%
$30,000 to $32,499 ................. 24178 4.8% 16986 4.7% 7235 5.0%
$32,500 to $34,999 ................. 17419 3.4% 12994 3.6% 4236 3.0%
$35,000 to $37,499 ................. 20784 4.1% 15852 4.4% 4772 3.3%
$37,500 to $39,999 ................. 15757 3.1% 12252 3.4% 3332 2.3%
$40,000 to $42,499 ................. 19545 3.9% 15229 4.2% 4096 2.9%
$42,500 to $44,999 ................. 13658 2.7% 11242 3.1% 2258 1.6%
$45,000 to $47,499 ................. 15325 3.0% 12852 3.5% 2289 1.6%
$47,500 to $49,999 ................. 12269 2.4% 10349 2.8% 1547 1.1%
$50,000 to $54,999 ................. 25195 5.0% 21692 6.0% 3190 2.2%
$55,000 to $59,999 ................. 19223 3.8% 16829 4.6% 2084 1.5%
$60,000 to $74,999 ................. 41843 8.3% 37676 10.4% 3540 2.5%
$75,000 to $99,999 ................. 28147 5.6% 25420 7.0% 2275 1.6%
$100,000 to $124,999 ................. 10056 2.0% 9164 2.5% 776 0.5%
$125,000 to $149,999 ................. 3810 0.8% 3454 1.0% 317 0.2%
$150,000 or More .................... 6559 1.3% 5848 1.6% 660 0.5%
Aggregate Income ($Mil).............. 20033 16292 3563
Median Income........................ 32113 37571 20055
Average Income....................... 39539 44844 24860
</TABLE>
<TABLE>
<CAPTION>
Persons Persons
Educational Attainment 25 Yrs & Over Employment Status 16 Yrs & Over
- ----------------------------- --------------- ---------------------- -------------------
<S> <C> <C> <C> <C> <C>
Less than 9th Grade 64521 7.6% In Labor Force 733793 71.5%
9th - 12th Grade, No Dip 113675 13.4% Civilian 727700 70.9%
High School Graduate 218889 25.9% Employed 685151 66.8%
Some College, No Degree 210166 24.8% Male 379127 36.9%
Associate Degree 49691 5.9% Female 306024 29.8%
Bachelor's Degree 137142 16.2% Unemployed 42549 4.1%
Graduate/Prof. Degree 52391 6.2% Not in Labor Force 292405 28.5%
- ------------------------------------------------------------------------------------------------------
</TABLE>
Source: 1990 Census of the Population and Housing Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
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The Trinity Hills Manor, Benbrook, Texas
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(MSA 640) Austin et al, TX
(Page 2 of 2)
(Weight: 100.0%)
<TABLE>
<CAPTION>
Employed Employed
Industry Persons 16+ Occupation Persons 16+
- ------------------------------------ --------------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
Agriculture/Forest/Fish ........... 8669 1.3% Managerial/Prof. Spec 185985 27.1%
Mining ............. ............. 4267 0.6% Exec/Admin/Managerial. 91348 13.3%
Construction....................... 43898 6.4% Prof. Specialty 94637 13.8%
Manufacture-Nondurable............. 37659 5.5% Tech./Sales/Admin. Sup 238180 34.8%
Manufacture-Durable ............... 100281 14.6% Technician and Related 29132 4.3%
Transportation ................... 48447 7.1% Sales 89080 13.0%
Communication/Pub. Util ........... 19630 2.9% Administration. Support 119968 17.5%
Wholesales Trade .................. 34931 5.1% Service Occupation 80269 11.7%
Retail Trade ...................... 118150 17.2% Private Household 2601 0.4%
Finance/Ins/Real Estate............ 47931 7.0% Protective Service 10731 1.6%
Business & Repair Serv............. 37879 5.5% Other Service 66937 9.8%
Personal Services ................ 20951 3.1% Farming/Forestry/Fish 7983 1.2%
Entertain/Recreation .............. 9655 1.4% Precision/Craft/Repair. 81188 11.8%
Professional & Related............. 128692 18.8% Operator/Fab./Laborer 91546 13.4%
Health Services .................. 44163 6.4% Mach.Op/Assem./Insect 43102 6.3%
Educational Services............... 44857 6.5% Trans. & Material Move 23754 3.5%
Other Professional ............... 39672 5.8% Laborers 24690 3.6%
Public Administration ............. 24111 3.5%
</TABLE>
<TABLE>
<CAPTION>
Transportation to Work Workers 16+ Travel Time to Work Workers 16+
- ------------------------------------ --------------- ---------------------- -------------------
<S> <C> <C> <C> <C> <C>
Drive Alone ...................... 546858 80.9% Less than 10 Minutes 92516 13.7%
Carpooled ........................ 91666 13.6% 10 to 19 Minutes 210318 31.1%
Public Transportation ............. 4297 0.6% 20 to 29 Minutes 155627 23.0%
All Other ......................... 33240 4.9% 30 Minutes or More 217600 32.2%
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Units In Structure Housing Units Year Structure Built Housing Units
- ----------------------------------- --------------- --------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
1-Detached ....................... 329006 65.0% 1989 To March 1990 6896 1.4%
1-Attached ....................... 14901 2.9% 1985 To 1988 77123 15.2%
2 ................................ 12375 2.4% 1980 To 1984 103557 20.5%
3 or 4 ............................ 19158 3.8% 1970 To 1979 117651 23.2%
5 to 9 ............................ 30203 6.0% 1960 To 1969 75692 15.0%
10 To 19 .......................... 35793 7.1% 1950 To 1959 68315 13.5%
20 to 49 ......................... 20664 4.1% 1940 To 1949 31234 6.2%
50 or More ....................... 14109 2.8% 1939 or before 25813 5.1%
Other ............................ 30073 5.9% Median Year Built 1974
</TABLE>
<TABLE>
<CAPTION>
Occupied Occupied
Year Hhlder Moved In Housing Units Vehicles Available: Housing Units
- ----------------------------------- --------------- -------------------- -----------------
<S> <C> <C> <C> <C> <C>
1989 To March 1990 ............... 147606 29.2% None 26463 5.2%
1985 To 1988 ..................... 153425 30.3% 1 168882 33.4%
1980 To 1984 ..................... 68667 13.6% 2 218940 43.2%
1970 To 1979 ..................... 73760 14.6% 3 68773 13.6%
1960 To 1969 ...................... 35609 7.0% 4 17675 3.5%
1959 or Before .................... 27214 5.4% 5 or More 5548 1.1%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: 1990 Census of the Population and Housing, Summary Tape File 3
Copyright 1996 Claritas Inc. Arlington, VA
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
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MARKET AREA AND NEIGHBORHOOD
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<PAGE>
NEIGHBORHOOD
[Picture]
[Picture]
<PAGE>
NEIGHBORHOOD
[Picture]
[Picture]
<PAGE>
NEIGHBORHOOD
[Picture]
[Picture]
<PAGE>
NEIGHBORHOOD MAP
[Map]
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
MARKET AREA and NEIGHBORHOOD
MARKET AREA
The overall market area served by The Trinity Hills Manor covers a wide
geographic range. The proximity of the subject facility to its supporting
population base (i.e., prospective residents and their families) is important to
its successful operation. Prospective residents consider the distance from their
homes and neighborhoods, but also the distance from their families and
established support services (e.g., doctors, therapists). Proximity to the
subject facility may be less important for government subsidized residents, who
often have fewer choices and limited input in the selection process. Financially
independent residents can afford to be selective about their living
accommodations, but are often more concerned about the availability and quality
of services. After considering a wide range of facts pertaining to the subject
market and neighborhood, we believe the subject property's market area to
include all of Southwest Fort Worth.
NEIGHBORHOOD
Most communities tend toward groupings of consistent land uses, with areas
devoted to the various uses termed "physical neighborhoods." Neighborhood use in
this context can be further defined as: "A portion of a larger community, or an
entire community, in which there is a homogeneous grouping of inhabitants,
buildings, or business enterprises. Inhabitants of a neighborhood usually have a
more than casual community of interests and a similarity of economic level or
cultural background. Neighborhood boundaries may consist of well defined
natural, political or man-made barriers, or they may be, more or less, defined
by distinct changes in land use or in the character of the inhabitants."
Frank Ramsey of HealthCare Property Appraisers of America, Inc. inspected the
subject property and its neighborhood on March 21, 1997; all comments should be
considered to be relative to the date of inspection.
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
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The subject neighborhood is located approximately one-half mile west from the
center of the Central Business District of Benbrook, Texas. All of the
neighborhood lies within the municipal limits of Benbrook. Benbrook is
considered to be a bedroom community of the Dallas/Fort Worth Metroplex. We
consider the subject neighborhood to include the area lying south of 1-20, north
of the Benbrook City Limits, east of the Benbrook City Limits, and west of Park
Center Street.
The area is mixed in nature. The various property types found in this
neighborhood are distributed approximately as follows:
<TABLE>
<S> <C>
Single-Family 30%
Multifamily 5%
Commercial/Retail 25%
Office 5%
Institutional 5%
Light Industrial 10%
Undeveloped 20%
----
Total 100%
</TABLE>
Single-family residential structures, which constitute approximately 30% of the
neighborhood, appear to be 5 to 35 years in age. Typical homes range in size
from 1,100 to 1,800 square feet with home values generally ranging from $55,000
to $90,000. Homes are well maintained and exhibit considerable pride of
ownership. Typical neighborhood residents are considered as being in a middle
income bracket. Owner occupancy in the neighborhood is considered to be
approximately 80%. Single family homes in the neighborhood were primarily one
story brick structures of average to slightly above average construction
situated on small city lots.
Multifamily properties, which make up approximately 5% of this neighborhood, are
approximately ten years in age and well maintained. They serve a part of the
multifamily market best described as lower medium income tenants. Multi-family
hosing in the immediate neighborhood was somewhat limited consisting of two
unnamed small two story frame complexes of average quality.
Retail structures constitute approximately 25% of the neighborhood and consist
of freestanding retail and strip shopping centers. They are well maintained and
occupancy appears to be full. Typical properties/tenants include Blockbuster
Video, Dairy Queen, Auto Zone and numerous small local
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The Trinity Hills Manor, Benbrook, Texas
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retail outlets located in small strip centers. Ample retail shopping with most
national chains represented is available a short drive time from the subject.
Office buildings represent approximately 5% of the neighborhood, typically
consist of single story structures. They are approximately 10 to 15 years in
age, and rated good in maintenance and condition. Typical office occupants
include local professional and business offices many located in nearby strip
centers.
Institutional structures comprise approximately 5% of the neighborhood. They
consist of the Benbrook City hall, Chamber of Commerce and police station. These
structures are approximately 25 to 35 years in age and well-maintained. Churches
of several denominations are within a five minute drive of subject. The nearest
hospitals are Charter Hospital, Oak Bend Hospital, All Saints Hospital and
Harris Methodist Hospital. All are located approximately three miles east from
the subject along Bryant Irvin Road.
Parks and recreational facilities consist of the Dutch Branch Park and Pelam
Valley Park, one mile south from the subject.
Industrial properties, include small auto repair shops and min-storage
facilities and represent approximately 10% of the neighborhood. They are
approximately five to ten years in age and well maintained. These properties for
the most part are warehouse facilities. They present no noise or odor problems
and are innocuous visually. These industrial properties do not have an adverse
influence on the neighborhood.
The subject property is joined by a Blockbuster Video across Cozby Street on its
north side; an Auto Zone Auto parts store on its south side; an auto repair shop
across Hwy 377 on its west side; and single family homes typical of the area
across McKinley on its east side. Streets in the neighborhood are primarily
paved and with curbs, gutters, and storm drains.
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
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The neighborhood has good access to the area's major traffic artery, Hwy 377.
Hwy 377 is a north/south highway through Benbrook providing access to 1-20, 1/2
mile north. 1-20 provides access to the Dallas/Ft. Worth Metroplex.
The area receives water and sewer service from the city of Benbrook.
Electricity, gas and telephone services are provided by local utility companies.
The subject property is considered to be in general conformity with other
properties in the neighborhood. The appearance and reputation of this area
generally is considered to be good, and the property values in the area appear
to be stable. We expect that trend to continue over the next few years.
Neighborhoods generally evolve through a pattern of growth and development. They
evolve from vacant, unimproved land through slow growth, steady to rapid growth,
reach a built-up or stagnant phase, and then begin to decline, with various
plateaus and modernization periods along the way. In that continuum of growth,
development and aging, the subject neighborhood is currently considered to be
built up and stable with no significant development observed.
A neighborhood's population make-up can dramatically affect the success of a
Nursing Home. As in all real estate, the economics of the immediately
surrounding population affect the ability of The Trinity Hills Manor to market
its real estate and services. The subject neighborhood's population make-up
would have an average appeal to a self-pay oriented market.
In summary, this neighborhood is considered to be primarily a middle-class
residential area with neighborhood shopping along traffic arteries.
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
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SITE DATA
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
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SITE DATA
LOCATION: The Trinity Hills Manor site is located at 1000 McKinley Street,
approximately one-half mile west from the Benbrook City Hall.
PHYSICAL CHARACTERISTICS: The subject is a corner lot with approximately 300
front feet along the northwest side of McKinley Street, approximately 150 front
feet along the south side of Cozby Street and approximately 300 front feet along
the east side of US Hwy 377. It is slightly rectangular in shape and contains
approximately 80,586 sf of gross area based on public records.
ZONING: According to the City of Benbrook, the subject property is zoned E-PD,
Commercial (Planned Development) by the City of Benbrook. The subject property
was constructed prior to zoning of the area. The subject improvements are
considered to be a legal, non-conforming use.
TOPOGRAPHY: The subject site lies at street grade. General area topography is
level. The subject site is basically level and cleared. Drainage appears
adequate.
SOIL ANALYSIS: Mineral deposits, if any, were disregarded by the appraiser. No
soil analysis has been prepared as a part of this report. However, considering
the number and type of existing improvements on surrounding sites, it is assumed
the subject property has sufficient soilbearing qualities for any type building
or construction that might be contemplated thereon. Soil and subsoil appear to
be the sandy loam typically found in this part of Texas. It is assumed that
soils at the site are generally of medium plasticity, with shrink/swell
potential typical of the area. Soil conditions in this part of Benbrook do not
appear to have limited land development.
EASEMENTS AND ENCROACHMENTS: Our site inspection of The Trinity Hills Manor
revealed no adverse easements or encroachments. This property is subject to
typical street and
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The Trinity Hills Manor, Benbrook, Texas
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utility easements. It should be noted that we would defer to competent legal
counsel for verification of these and all other legal matters.
ACCESS: Access to the site is considered good. It has one access point from
Cozby Street, a paved two-lane street and off street parking along McKinley
Street.
VISIBILITY: The site's visibility is rated good from US Hwy 377, Cozby Street,
and McKinley Street.
DRAINAGE/FLOOD ZONE: According to National Flood Certification Services, Inc.,
the subject property is located on a National Flood Insurance Program Map (NFIP)
designated flood hazard area. It is found on Community Panel #48439CO390H, dated
08/02/95 in an area designated as Zone X. A copy of their certification is
located in the addenda of this report. This Zone generally refers to: "Areas of
500-year flood; areas of 100-year flood with average depths of less than one
foot or with drainage areas less than one square mile; and areas protected by
levees from 100-year flood".
UTILITIES: The site is served by all municipal utilities and services including
water, sewage, police and fire protection. Gas, telephone and electricity are
provided by public utility firms.
TRAFFIC ARTERIES: The site has good proximity to major traffic arteries. It
adjoins U.S. 377, a NE/SW four-lane highway/commercial strip through Benbrook.
U.S. 377 provides access to I-20, 3/4 mile north. 1-20 connects to the
Dallas/Ft. Worth highway network.
TAXES: Juanita Golston in the tax assessor's office reported that the subject's
real estate tax identification number is 09707859. The tax assessor's reported
tax value for real estate is $1,000,000 and the assessed value is the same. The
tax assessor's reported tax value for personal property is $94,562 and the
assessed value is the same. The tax rate for the combined city county and school
is $2.803663 per $100 of assessed value. The county shows no personal property
listed; however the county and school assessment for personal property was used
in
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The Trinity Hills Manor, Benbrook, Texas
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the following calculations. This indicates an annual tax of $30,687.83 for
the subject property, calculated as follows:
<TABLE>
Real Estate Tax Assessment X Tax Rate = Annual Taxes
- ----------------------------- ---------- ------------
<S> <C> <C> <C> <C>
$1,000,000 X $.02803663 = $28,036.63
Personal Property Assessment
- -----------------------------
$ 94,562 X $.02803663 = $ 2,651.20
----------
TOTAL = $30,687.83
</TABLE>
HIGHEST AND BEST USE
The Appraisal Standards Board, in Standards Rule 2-2 (a) (ix) calls for a report
to contain the appraiser's opinion of Highest and Best Use unless considered
unnecessary as in certain types of appraisals, e.g., Value in Use appraisals.
This requirement calls for the appraiser to "describe the appraiser's opinion of
the highest and best use of the real estate, WHEN SUCH AN OPINION IS NECESSARY
AND APPROPRIATE. If an opinion is considered necessary, the reasoning in support
of the opinion must also be described in the depth and detail required by "ITS
SIGNIFICANCE TO THE APPRAISAL.""
We believe the subject property is of a type that generates a significant part
of its value from, or is strongly affected by its business component. Removal of
the subject's business component and reduction to real estate only would
dramatically change the subject's utility and marketability. Consequently,
alternative uses are of little interest to potential purchasers of the subject
who are almost exclusively interested in its Value in Use or Going Concern
Value. Accordingly, we believe an opinion of Highest and Best Use is unnecessary
as permitted by USPAP 2-2 (a) (ix).
We realize that some report reviewers may disagree with our opinion as to the
lack of necessity for stating and supporting Highest and Best Use. Therefore, we
offer below out opinion, and
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The Trinity Hills Manor, Benbrook, Texas
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support in such depth and detail as we believe is "required by the significance
to the appraisal" of this item which is rarely, if ever, considered by a
potential purchaser of this type property.
The Highest and Best Use of land is that use which may be reasonably expected to
produce the greatest net return to the land over a given period of time.
Moreover, it is that legal use which will yield to the land the highest present
value which is economically feasible, legally permissible and maximally
productive. The Highest and Best Use analysis is the basis for the final
conclusions drawn in this report.
Land is valued as though it were unimproved and available for whatever use would
produce the maximum return. Improved property is valued according to the extent
to which the improvements are consistent with the Highest and Best Use of the
site as if unimproved. The Highest and Best Use of the total properties "as
improved" is often determined to be different from the Highest and Best Use of
the land when considered as though "unimproved" and available for development.
In most cases, the existing use will continue until the land value under its
Highest and Best Use exceeds the total value of the property in its existing
use. As long as improvements contribute to the land, they constitute the Highest
and Best Use.
HIGHEST AND BEST USE - UNIMPROVED
Legal uses for the subject land, if unimproved, include: Apartments, Offices,
Commercial Retail, Single-family Residential, Condominiums and Nursing Homes.
The site's physical characteristics of this site, i.e., size, shape, terrain,
etc. would permit the following uses: Apartments, Retirement Apartments,
Offices, Commercial Retail, Single-family Residential, Condominiums and Nursing
Homes.
Our market analysis indicates there could be sufficient demand in the general
marketplace and in this specific location for the following uses: Apartments,
Offices, Commercial Retail and Nursing Homes.
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The Trinity Hills Manor, Benbrook, Texas
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The following might be economically feasible: Apartments, Offices, Commercial
Retail and Nursing Homes.
The most probable and reasonable uses for the subject property, if unimproved,
might include development of: Apartments, Offices, Commercial Retail and Nursing
Homes.
When considering the subject site as an unimproved tract of land, and after
considering all alternative uses, it is the appraiser's opinion that Nursing
Home use would be the Highest and Best Use: (a) at this time, (b) after a time
period sufficient to allow completion of any necessary improvements and (c) at
the time of estimated stabilized occupancy.
HIGHEST AND BEST USE - AS IMPROVED
There are uses other than the current one that would give an attractive return
to this land. However, there is no alternative use that would yield a large
enough return to justify removal or substantial renovation of the existing
structure. The subject improvements are functional in size, layout and utility
and do not contain any depreciation of sufficient amount; the cost of an
alternative use would not be justified. The subject property has operated for
several years as a Nursing Home and has developed a reputation which, in this
market, assures reasonable occupancy. Staffing appears adequate and no
unresolvable operational problems were uncovered. It would appear that this
operation is successful and is giving a good return to the underlying land. The
underlying land value does not warrant the demolition of the present subject
building improvements.
The appraiser considered several alternative uses for the land underlying The
Trinity Hills Manor. No alternative utilization other than for a Nursing Home
was considered likely to give a higher return in the immediate future.
Therefore, the use contemplated by our study; i.e., Nursing Home use, is
considered to be in conformity with the subject property's Highest and Best Use
As Improved.
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DESCRIPTION OF IMPROVEMENTS
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SUBJECT
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SUBJECT
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SUBJECT
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Floor Plan
[Map]
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SUBJECT
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The Trinity Hills Manor, Benbrook, Texas
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DESCRIPTION OF IMPROVEMENTS
Long-term care facilities must be designed with specific needs in mind. Typical
residents frequently have partially impaired vision, hearing, sense of touch,
mobility, agility, and orientation to time and place. To compensate for a
decrease in ability to distinguish colors, brightness, and depth perception,
developers need to emphasize bright colors against neutral backgrounds and bold
prints. There is also a need for increased interior and exterior lighting,
prevention of glare, and an emphasis on different color carpets to distinguish
stairs from floors. To compensate for decreased overall hearing ability, reduced
capability to discern high pitched sounds, and inability to discriminate normal
conversation from background noises, developers need to emphasize amplifiers on
telephones, PA systems, smoke detectors, installation of alarm systems with
flashing lights, and sound-absorbing materials in areas promoting socialization.
To deal with poor mobility and agility, including the use of wheelchairs, canes
and walkers, developers need to be cognizant of the length of halls, chairs
versus benches, smooth walking surfaces, wide halls and doorways for
wheelchairs, automatic sliding doors, the placement of handrails usable by both
wheelchair and ambulatory residents, and special kitchen and bathroom
arrangements. Decreased sensitivity to touch and circulation requires an
awareness of the increased need for and ease of adjustment in heating/cooling
for the private areas, and attention to the environmental tactile question in
general. Poor orientation to time and place and memory loss can be assisted by
environmental cues such as different colored floors, culturally familiar
designs, activity boards, and large clocks. A well-designed facility for the
disabled will incorporate many or all of these features. The subject property
includes a number of these features.
Frank Ramsey of HealthCare Property Appraisers of America, Inc. made an
inspection of the subject property on March 21, 1997. The following description
of improvements describes the buildings as they appeared to our inspector on the
date of inspection.
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HealthCare Property Appraisers of America, Inc. 48
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
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SUBJECT IMPROVEMENTS
The subject site was improved with a one-story building utilized as The Trinity
Hills Manor. The structure's initial completion date is scheduled for 1971. It
is irregular in shape. The appraiser considers the subject building structure to
contain a functional area of approximately 31,750 sf or 279 sf per bed. The
subject is a brick veneer structure with a gabled shingle roof. It is built
slab-on-grade on a level site. It is functional in design and is well
maintained.
The structure appraised contains all of the functional spaces typically found in
buildings designed for Nursing Home occupancy including offices, lobby, physical
therapy, beauty shop, kitchen and dining area, laundry, nurses' stations, public
and employee baths, and bedrooms. The dining room is capable of seating all
residents at once; so that meals are served at one sitting per meal. The
structure has a total possible utilization of 115 beds and is configured for 114
beds.
The subject's physical structure appears to be of good quality construction and
amenities. The physical plant has average appeal to potential residents and
families with sufficient financial resources to be selective in their choice of
a facility.
The property being appraised is assumed to contain a gross building area of
approximately 31,750 sf.
No Physical Deterioration-Curable (deferred maintenance) was observed. The
structure contains no Functional Obsolescence and the facility is considered to
be functional and modern. No External Obsolescence is noted.
The Effective Age of the structure is 25 years, and the Remaining Economic Life
is considered to be 25 years. Architecture and layout are considered typical for
a Nursing Home and appears in conformity with the community.
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The Trinity Hills Manor, Benbrook, Texas
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Following is a topical outline of the major improvements:
SITE PREPARATION: The building site was cleared, graded and prepared for
construction.
FOUNDATION: Foundation consisted of concrete bearing walls.
FRAME: Frame was mill-type wood.
FLOOR STRUCTURE: Floor structure is concrete on ground.
FLOOR COVERING: Floor covering consisted of carpet on pad, ceramic tile,
quarry tile, and vinyl composition tile.
CEILING: The ceiling was acoustical, organic fiber in suspended ceiling;
gypsum board, taped and painted; with insulation.
INTERIOR CONSTRUCTION: Interior construction was framed.
PLUMBING: All patient bathrooms are two- or three-fixtured china/porcelain
fixtures including chrome hardware, grab bars and other invalid aids. Individual
bathtubs and showers feature non-slip surfaces, grab bars, shower hoses and
non-ambulatory lifts. The property's plumbing is adequate. Fifty-six rooms share
a half-bath (toilet) with an adjoining room.
SPRINKLER: The structure was fully sprinklered.
HEATING, COOLING, VENTILATION: The property is heated with a package heating and
cooling system. Residents' rooms are air-conditioned with thru-the-wall heat
pump units with electrical resistance heating coils.
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The Trinity Hills Manor, Benbrook, Texas
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ELECTRICAL: Fully wired and lighted with three-phase wiring, adequate to provide
lighting and power for all equipment operation including fluorescent and
incandescent lighting, reading lights over each bed, nurse call system, fire
alarm system, and intercom system. There is one diesel generated, with a KW
rating of 30.
EXTERIOR WALLS: Exterior walls were wood or steel stud walls with face brick
veneer and insulation.
ROOF STRUCTURE: Roof structure is wood joists with composition deck.
ROOF COVER: Roof cover is composition shingle roof cover.
PARKING: Parking and drives of 2" plant mix asphalt on a crushed stone base.
Marked parking areas.
DOORS & WINDOWS: Interior doors are solid core; windows are single-hung in
aluminum frame.
EQUIPMENT: Specialized equipment necessary for operation as a Nursing Home
facility has been considered in valuing the subject property. Included in this
category are institutional kitchen equipment, stainless steel sinks, food
preparation counters, ovens, stoves, dishwashers, walk-in coolers and freezers,
exhaust fans and grease traps.
Laundry equipment includes two Wascomat brand washers and three Huebech dryers
rated average in condition.
Kitchen equipment includes one Cleanware dishwasher, one Nor-Lake walk-in
freezer, one Nor-Lake walk-in cooler, one unnamed freestanding cooler and one
Southbend range/oven rated average in condition.
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The Trinity Hills Manor, Benbrook, Texas
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ROOM FURNISHINGS: Include a bed, night stand, chair and retractable privacy
curtain.
WALKS & DRIVES: Walks are approximately 41" wide and constructed of 2 1/2"
concrete.
LANDSCAPING: Rated good. The lawn is well established.
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HealthCare Property Appraisers of America, Inc. 52
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COST APPROACH TO VALUE
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
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COST APPROACH TO VALUE
The Cost Approach is frequently a reliable indicator of a property's value. The
Principle of Substitution dictates that The Trinity Hills Manor will be worth no
more than the cost to reproduce improvements with equal utility on an equally
desirable site. Conversely, in an active building market, most properties are
usually worth at least as much as their cost to reproduce. Otherwise, developers
would not be building comparable buildings.
The initial step in the Cost Approach was the estimation of land value. The
appraiser next estimated the current construction costs to replace subject's
building improvements. The appraiser also considered the possible existence of
the three types of depreciation: Physical Deterioration, Functional
Obsolescence, and External Obsolescence.
To estimate the actual construction cost of the improvements, the appraiser
consulted with various contractors and architects familiar with this type
construction. We also have personal knowledge of comparable structures which
have been built and are familiar with their actual costs. Finally, we checked
with Marshall and Swift Valuation Service to ascertain the current cost factors
for this type construction in Benbrook.
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The Trinity Hills Manor, Benbrook, Texas
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Site Valuation
There are several methods which appraisers may use to estimate vacant land
values. These methods include the direct sales comparison, allocation, land
residual technique, direct capitalization of ground rent, and the land
development method. The direct sales comparison method is based upon the
principle of substitution. This is the best method whenever adequate quantities
of verified comparable sales data is available. We have used both the direct
sales comparison and allocation methods. For Nursing Home sites, the land
residual or land development methods are not a reliable indicator of value.
Direct Sales Comparison
The direct sales comparison technique is based on the economic principle of
substitution. This principle states the value of a property tends to be fixed by
the costs of acquiring an equally desirable substitute property with the same or
similar utility and physical characteristics. Comparisons are made between the
property appraised and the sales of similar properties which have occurred in
the marketplace. Typically, units of comparison are derived such as a sales
price per square foot, sales price per front foot, or sales price per building
unit. In the case of an apartment property, the economic indicator might be cost
per apartment, whereas in the case of a nursing home, the unit of value would be
cost per patient bed. The comparables are adjusted to reflect similarities and
dissimilarities of each to the subject for such characteristics as location,
time of sale, existing market conditions, and the physical characteristics of
the property. The adjusted sales prices of the comparables then become an
indication of value for the subject. In the case of the subject, we have looked
to properties with similar zoning and land use which have sold within the
Benbrook area.
The comparable sales utilized in this analysis are summarized in the land sales
summary and the adjustment grid which follow this section. A complete
description of the individual sales used is also included within this section.
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The Trinity Hills Manor, Benbrook, Texas
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<TABLE>
<CAPTION>
LAND SALE #1
<S> <C>
LOCATION: 7600 Bellaire Dr
BUYER: St. Peter's Orthodox Church
SELLER: Oakmont Land Investors
CONFIRMATION: K.L.H.
DATE OF SALE: 09/28/95
SIZE: 3.2200 Acres
ZONING: Commercial
SALE PRICE: $110,000
TERMS: Cash to Seller
COST/UNIT: $34,162/Acre
COMMENTS: Future 12,000 to 14,000 sf church planned
</TABLE>
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The Trinity Hills Manor, Benbrook, Texas
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<TABLE>
<CAPTION>
LAND SALE #2
<S> <C>
LOCATION: W/S Oakmont, 90' S. of Oakbend
BUYER: Certus Corporation
SELLER: Oak Ben partners, LP
DATE OF SALE: 04/16/96
SIZE: 1.2650 Acres
ZONING: Commercial
IMPROVEMENTS: Vacant
SALE PRICE: $110,204
TERMS: Cash to Seller
COST/UNIT: $87,120/Acre
COMMENTS: All utilities; purchased for construction of 16
unit retirement center.
</TABLE>
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The Trinity Hills Manor, Benbrook, Texas
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<TABLE>
<CAPTION>
LAND SALE #3
<S> <C>
LOCATION: W/S Oakmont Blvd at Oakbend
BUYER: Bruce H. Weiner
SELLER: Oak Bend Partners, LP
DATE OF SALE: 05/21/96
SIZE: 2.2551 Acres
ZONING: Commercial
SALE PRICE: $156,000
TERMS: Cash to Seller
COST/UNIT: $69,176/Acre
COMMENTS: All utilities available, purchased for future
construction of pediatric dental office and
another professional office building.
</TABLE>
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The Trinity Hills Manor, Benbrook, Texas
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<TABLE>
<CAPTION>
LAND SALE #4
<S> <C>
LOCATION: S/C Southwest Blvd & Crossland Road
BUYER: Herbert & Maline Singer Living Trust
SELLER: City of Benbrook
DATE OF SALE: 08/12/96
SIZE: 4.5 Acres
ZONING: Commercial
TOPOGRAPHY: Gently Sloping
SALE PRICE: $215,273
TERMS: Cash to Seller
COST/UNIT: $47,838/Acre
COMMENTS: Purchased for commercial development. Tact
included 4.93 acres, however 0.43 are in Crosslands
Road ROW. All utilities available.
</TABLE>
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The Trinity Hills Manor, Benbrook, Texas
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<TABLE>
<CAPTION>
LAND SALE #5
<S> <C>
LOCATION: W/S Oakmont Blvd, 1,000' MW of Bryant Irvin Road
BUYER: H. Dustin Filimore, K. Marvin Adams
SELLER: Oakmont Land Investors
DATE OF SALE: 10/02/96
SIZE: 2.3892 Acres
ZONING: Commercial
SALE PRICE: $217,000
TERMS: Cash to Seller
COST/UNIT: $90,826/Acre
COMMENTS: All utilities available; purchased for future
construction of law office building.
</TABLE>
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The Trinity Hills Manor, Benbrook, Texas
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<TABLE>
<CAPTION>
LAND SALES SUMMARY & ADJUSTMENT GRID
- ----------------------------------------------------------------------------------------------------------------------------
Comparison # Subject
Address 1000 No. 1 No. 2 No. 3
McKinley 7601 Bellaire W/S Oakmont W/S Oakmont at Oakbend
Benbrook, TX Fort Worth, TX Fort Worth, TX Fort Worth, TX
- ----------------------- -------------------------- ----------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
SITE DATA
Size (SF) 80,586 140,263 55,102 98,233
Size (Acres) 1.85 3.22 1.26 2.26
Zoning None Com CD E/F
Topography Level Level Level Level
Utilities All All All All
Corner No No No No
SALE DATA
Reported Sale Price $110,000 $110,204 $156,000
Sale Price/SF $0.00 $0.78 $2.00 $1.59
Sale Price/Acre $0 $34,162 $87,120 $69,176
Transaction Type ---- Closed Closed Closed
Rights Conveyed ---- Fee Simple Fee Simple Fee Simple
Financing Terms ---- Cash Cash Cash
Adjustment ---- ---- ---- ----
Condition of Sale ---- Arm's Length Arm's Length Arm's Length
---- ---- ----
Recorded Sale Date ---- 9/95 4/96 5/96
Adjustment ---- ---- ---- ----
Location ---- Inferior Similar Similar
Adjustment ---- 35% ---- ----
Size ---- Larger Similar Similar
Adjustment ---- 25% ---- ----
Zoning ---- Similar Similar Similar
Adjustment ---- ---- ---- ----
Topography ---- Similar Similar Similar
Adjustment ---- ---- ---- ----
---- Similar Similar Similar
Frontage/Visability ---- ---- ---- -10%
Adjustment
Utilities ---- Similar Similar Similar
Adjustment ---- ---- ---- ----
Adjstd Price/Sq Ft $1.32 $2.00 $1.59
Avg Price/Sq Ft $1.57
Adjstd Price/Acre $57,648 $87,120 $69,176
Avg Price/Acre $68,435
</TABLE>
<TABLE>
<CAPTION>
LAND SALES SUMMARY & ADJUSTMENT GRID
- ----------------------- -------------------------- -----------------------
Comparison # No. 5
Address No. 4 W/S Oakmont 1000' NW
S/C SW Blvd & Crossland of Irvin Rd.
Benbrook, TX Fort Worth, TX
- ----------------------- -------------------------- -----------------------
<S> <C> <C>
SITE DATA
Size (SF) 196,020 104,073
Size (Acres) 4.50 2.39
Zoning CD F
Topography Level Level
Utilities All All
Corner No No
SALE DATA
Reported Sale Price $215,273 $217,000
Sale price/SF $1.10 $2.09
Sale Price/Acre $47,838 $90,826
Transaction Type Closed Closed
Rights Conveyed Fee Simple Fee Simple
Financing Terms Cash Cash
Adjustment ---- ----
Condition of Sale Arm's Length Arm's Length
---- ----
Recorded Sale Date 8/96 10/96
Adjustment ---- ----
Location Similar Similar
Adjustment ---- ----
Size Larger Similar
Adjustment 25% ----
Zoning Similar Similar
Adjustment ---- ----
Topography Similar Similar
Adjustment ---- ----
Similar Similar
Frontage/Visability ---- ----
Adjustment
Utilities Similar Similar
Adjustment ---- ----
Adjstd Price/Sq Ft $1.37 $2.09
Avg Price/Sq Ft
Adjstd Price/Acre $59,798 $90,826
Avg Price/Acre
</TABLE>
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
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Reconciliation of Comparable Sales
The comparables have already been adjusted to the subject in respect to
location, size, zoning, topography, comer influence, and utilities. The
unadjusted sales prices range from $34,162 to $90,826 per acre. After the
adjustments, the comparables form a tighter range of $57,648 to $90,826 per
acre. The average adjusted price per acre was $68,436. Typically, the
comparables which have the least adjustments are most representative of the
subject. Accordingly, it is our opinion that the subject 80,586 sf site has a
market value of $125,000 or $67,568 per acre.
Considering the land sales data available and prices being paid by developers of
Nursing Homes in similar communities, we estimate the land value of the site
supporting the building and improvements to be $125,000.
This represents the following value per indicator:
<TABLE>
<CAPTION>
<S> <C>
Land Value Per Acre $67,568/Acre
Land Value Per Unit (bed/apt) $1,096/bed
Land Value as % of Project Cost 3.39%
SITE VALUE 1125,000
</TABLE>
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Building Costs
This appraisal firm compiles construction cost data on new and proposed
facilities throughout the United States. The hard construction costs vary
considerable depending upon geographical location and quality of improvements.
To estimate the Replacement Cost of The Trinity Hills Manor, the appraiser
utilized the Segregated Cost Method of cost estimating. This method is designed
to give separate consideration to all the major construction components of a
building. Many parts of a building, such as floor, ceiling and lighting,
increase in cost directly as the floor area of the building increases. Other
building costs vary with relation to parameters other than the floor area.
However, most costs can be related to floor area, wall area, roof area, or
sometimes an individual count of unit installations.
To facilitate the application of these individualized costs, they are grouped so
that all costs related to floor area can be added together and applied to the
total floor area, all wall area costs can be added together and applied to the
wall area, and all roof costs can be applied to the ground floor or roof area.
The appraiser utilized the Marshall and Swift Valuation Service, which is the
most widely recognized cost estimating manual in the world. This manual
separates each type of building by occupancy, type of construction, and quality.
It also makes adjustments for current cost factors on a monthly update basis.
Using the Marshall and Swift Valuation Service, the appraiser selected the
particular construction characteristics of The Trinity Hills Manor building
improvements and selected the appropriate quantity cost factors and adjustments.
Using the computer program, a Replacement Cost New of subject's building
improvements as well as individual estimates of depreciation for each component
item were developed. The computer calculations included all Direct Costs. The
Marshall and Swift Valuation Service includes
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architectural fees, loan interest and some other minor Indirect Costs. It
specifically excludes some of the costs of doing business, or Indirect Costs,
which we have estimated as follows:
<TABLE>
<S> <C>
Taxes 0.4%
Marketing 0.4%
Loan Points and Fees 2.0%
Legal 0.5%
Accounting 0.2%
Government Licensure & Permits 4.5%
Working Capital 4.0%
----
Total Indirect Costs 12.0%
</TABLE>
Our estimate of Indirect Costs and Developer's Profit and Overhead were based on
a percentage of Total Cost-New (depreciated at the same rate as the building
improvements). The Total Cost-New includes not only Direct Cost of construction,
as developed by the Marshall and Swift Valuation Service, but also the cost of
land, furniture, fixtures and equipment.
The Developer's Profit and Overhead was estimated at 15% of the Total Cost-New.
As an alternative to investors, Baa Bonds are currently yielding seven to eight
percent. The developer's profit should be higher than the Baa Bond rate as it is
somewhat riskier.
HealthCare Property Appraisers of America, Inc. compiles cost data on furniture,
fixtures and equipment budgets for facilities like subject. A summary of some of
the more recent transactions follows:
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The Trinity Hills Manor, Benbrook, Texas
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<TABLE>
<CAPTION>
NURSING HOME EQUIPMENT COST DATA
PRICE OF COST OF
DATE SOLD CITY STATE # BEDS FF&E FF&E/BED
- --------- ---- ----- ------ ---- --------
<S> <C> <C> <C> <C> <C>
05/92 Clearwater FL 120 $210,000 $1,750
02/90 Fluvanna VA 60 $225,000 $3,750
03/90 Goochland VA 72 $250,000 $3,472
04/92 Decaturville TN 60 $210,000 $3,500
02/92 Charlotte NC 120 $420,000 $3,500
05/92 Asheville NC 120 $420,000 $3,500
01/92 Virburnum MO 60 $120,000 $2,000
09/91 Corrigan TX 90 $160,000 $1,778
09/91 Wells TX 96 $168,000 $1,750
09/91 Brownwood TX 130 $230,000 $1,769
10/91 Port Orange FL 120 $600,000 $5,000
07/91 Orange City FL 120 $600,000 $5,000
05/91 Covington TN 196 $350,000 $1,786
02/91 Melbourne FL 120 $315,000 $2,625
04/91 Whites Creek TN 97 $280,000 $2,887
07/92 Casper WY 120 $350,804 $2,923
07/92 Palm City FL 116 $650,000 $5,603
07/92 Ashland TN 90 $260,000 $2,889
02/94 Lychburg VA 100 $380,000 $3,800
06/93 Ashland City TN 90 $260,000 $2,889
05/94 Hilo HI 120 $490,000 $4,083
12/95 Dyer TN 120 $400,000 $3,333
------
Average $3,163
Minimum $1,750
Maximum $5,603
</TABLE>
After considering the geographical location, size, and quality of the subject
property, we believe a cost new of $3,500 per unit to be appropriate. This
indicates a personal property value for the subject as follows:
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The Trinity Hills Manor, Benbrook, Texas
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<TABLE>
<CAPTION>
FF&E COST NEW # OF INCOME FF&E COST NEW
(PER UNIT) X GENERATING UNITS = (TOTAL)
---------- ---------------- -------
<S> <C> <C> <C>
$3,500 X 114 Beds = $399,000
</TABLE>
Our on-site inspection of The Trinity Hills Manor did not reveal any obvious
Physical Deterioration-Curable (deferred maintenance). Overall, the property
appeared to be well maintained and only normal maintenance situations were
observed. Physical Deterioration-Incurable, caused by natural aging of the
building structure in existing buildings, was estimated by the Marshall & Swift
Valuation Service based upon a data bank of sold depreciated properties.
The depreciation section of the Marshall and Swift Valuation Service is
primarily designed to measure Physical Deterioration-Incurable only. It does not
measure Physical Deterioration-Curable, i.e., Deferred Maintenance, or any loss
in value due to Functional Obsolescence that might be found in the specific
subject property, or External Obsolescence that might exist in the subject
neighborhood. The Marshall and Swift Valuation Service calculations are based
upon analysis of actual sales data from a large number of properties of
subject's type that have been sold within the last year. These sales prices,
after deletion of personal property and land values, are compared to
construction cost figures for new and similar properties. The resulting
depreciation estimate by the Marshall and Swift Valuation Service will not
exactly equal depreciation when calculated on an age-life basis (which is
basically an accounting method that has little or nothing to do with the market
place.) The Marshall and Swift market data method is considered to be a more
refined and accurate method as it is based on actual data from the market.
The real estate is functional in all respects and considered to be competitive
with Nursing Homes being constructed today. Therefore, no Functional
Obsolescence was deducted.
Our inspection of the neighborhood and the surrounding properties did not reveal
any situations which would detract from subject's value. Therefore, no deduction
was made for External Obsolescence.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 66
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
Our physical inspection of the subject indicated that the personal property,
i.e. furniture, fixtures and equipment, is generally in good condition relative
to its age. We have assumed an average useful life of ten years and an effective
age of 5 years, indicating depreciation of 50% (5 years divided by 10 years).
Depreciation on the personal property is estimated as follows:
<TABLE>
<CAPTION>
FF&E COST NEW X % DEPRECIATED = DEPRECIATION
------------- ------------- ------------
<S> <C> <C>
$399,000 X 50% = $199,500
</TABLE>
Following is a component breakdown of Replacement Costs for the improvements and
depreciation:
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 67
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
OCCUPANCY: CONVALESCENT HOSPITAL
<TABLE>
<CAPTION>
CLASS: D Frame COST RANK: 3.0 Above Average
EFFECTIVE AGE: 25 Years CONDITION: 3.0 Excellent
NUMBER OF STORIES: 1.0 AVERAGE STORY HEIGHTS: 10.0
FLOOR AREA: 31,900 Sq. Ft. COST AS OF: 3/97
- --------------------------------------------------------------------------------------------REPLACEMENT COST
COMPONENT UNITS COST NEW DEPR
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EXCAVATION & SITE PREPARATION
Site Preparation................................. 31,900 0.20 6,380 3,637
FOUNDATION:
Concrete, Bearing walls.......................... 31,900 1.64 52,316 29,820
FRAME:
Wood, Mill Type.................................. 31,900 3.76 119,944 68,368
FLOOR STRUCTURE:
Concrete on Ground............................... 31,900 2.84 90,596 51,640
FLOOR COVER:
Carpet and Pad................................... 957 3.35 3,206 1,827
Tile, Ceramic.................................... 1,595 8.35 13,318 7,591
Tile, Quarry..................................... 638 8.35 5,327 3,036
Vinyl Composition Tile........................... 28,710 1.53 43,926 25,038
SUBTOTAL......................................... 65,777 37,492
CEILING:
Acoustical, Organic Fiber........................ 1,595 1.36 2,169 1,236
Suspended Ceiling................................ 1,595 1.17 1,866 1,064
Gypsum Board, Taped & Paint...................... 30,305 1.22 36,972 21,074
SUBTOTAL......................................... 41,007 23,374
INTERIOR CONSTRUCTION:
Interior Construction, Framed.................... 31,900 17.85 569,415 324,567
PLUMBING:
Plumbing......................................... 31,900 9.06 289,014 164,738
FIRE PROTECTION:
Sprinklers....................................... 31,900 1.73 55,187 31,457
HEATING AND COOLING:
Package Heating & Cooling........................ 28,710 5.04 144,698 82,478
Window Heat Pump................................. 10 1,084 10,840 6,179
SUBTOTAL......................................... 155,538 88,657
ELECTRICAL:
Electrical....................................... 31,900 10.22 326,018 185,830
Standby Generator, Diesel........................ 30 523 15,690 8,943
SUBTOTAL......................................... 341,708 194,773
EXTERIOR WALL:
Face Brick Veneer................................ 22,330 15.53 346,785 197,667
Insulation....................................... 22,330 0.50 11,165 6,364
SUBTOTAL......................................... 357,950 204,031
ROOF STRUCTURE:
Wood Joists, Composition Deck.................... 31,900 4.03 128,557 73,277
ROOF COVER:
Composition Shingle.............................. 31,900 1.35 43,065 24,547
SUBTOTAL SUPERSTRUCTURE............................. 31,900 72.62 2,316,454 1,320,378
</TABLE>
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 68
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------REPLACEMENT COST
COMPONENT UNITS COST NEW DEPR
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YARD IMPROVEMENTS:
Paving, Asphalt.................................. 31,900 1.83 58,377 33,275
- -----------------------------------------------------------------------------------------------------------------
TOTAL............................................... 2,374,831 1,353,653
ARCHITECT'S FEES.................................... 7.0% 165,447 94,305
- -----------------------------------------------------------------------------------------------------------------
REPLACEMENT COST NEW................................ 31,900 79.63 2,540,278
DEPRECIATION........................................ (43.0%) (1,092,320)
DEPRECIATED COST.................................... 1,447,958
- -----------------------------------------------------------------------------------------------------------------
ROUNDED TO NEAREST $100 2,540,300 1,448,000
Cost Data by MARSHALL & SWIFT
</TABLE>
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 69
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUMMARY OF COST APPROACH
<S> <C> <C>
Bldg. Improvements - Replacement Cost $2,540,300
Indirect Costs 367,716
Developer's Profit & Overhead @15% 459,645
----------
Total Costs: $3,367,661
Less Depreciation:
Physical Deterioration - Curable $0
Physical Deterioration - Incurable
Replacement Costs
1,092,320
Physical Deterioration - Incurable
Indirect Costs 158,117
Physical Deterioration - Incurable
Devel. Profit & Overhead 197,646
Functional Obsolescence 0
External Obsolescence 0
----------
Total Depreciation 1,448,082
----------
Depreciated Value $1,919,579
Land Value $ 125,000
----------
Market Value -- Real Estate $2,044,579
Add Furniture, Fixtures, Equipment $399,000
Less Depreciation 199,500
--------
Depreciated Value of FF&E $ 199,500
----------
MARKET VALUE OF REAL & PERSONAL
MARKET VALUE OF REAL & PERSONAL PROPERTY
By Cost Approach
$2,244,079
(R) $2,240,000
----------
----------
</TABLE>
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 70
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
INCOME CAPITALIZATION APPROACH TO VALUE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 71
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
INCOME CAPITALIZATION APPROACH TO VALUE
To estimate The Trinity Hills Manor's Market Value through the Income
Capitalization Approach, the appraiser estimated the total gross income the
project will generate by: (a) studying local and regional markets, (b)
considering the economic feasibility of the project itself, and (c) considering
competing projects and the underlying demand for this type facility.
From the total Gross Income estimate was deducted an estimate for Vacancy and
Credit Loss. Even developments with extremely heavy demand usually experience
some loss of rent due to "down time," when living units are re-decorated between
residents. In addition, there are generally some bad debt losses in most
projects. The appraiser also deducted an estimate of all Expenses the typical
property owner might expect to incur. From this Net Operating Income estimate,
the appraiser processed an estimate of the property's Market Value. This process
is known as Capitalization and is simply a conversion of Net Operating Income
into Market Value.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 72
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
GROSS INCOME
A Nursing Home's Effective Gross Income is determined by three factors: (a)
various daily charge rates, (b) payor type mix or census and (c) occupancy rate.
Daily charge rates vary significantly from property to property, reflecting the
services offered and the various payor sources. To develop an accurate estimate
of revenue, the appraiser typically interviews the facility's administrator,
financial officers and the reimbursement specialist. Due to the confidential
nature of this assignment, these interviews as well as detailed financial
statements were not available. The appraiser was furnished and has analyzed the
last year's profit and loss statement. Our revenue for a stabilized year was
projected by inflating the historical revenue by 5%.
SUBJECT
The Trinity Hills Manor is licensed by the state for 114 Skilled Care (SNF), and
Intermediate Care (ICF) beds. The subject property is certified in accordance
with federal regulations pursuant to the Social Security Act as a provider of
Medicaid (Title XIX) Services for 114 beds and is certified for Medicare. It is
currently configured and operated with 114 beds, with a maximum physical
potential of 115 beds. The subject can potentially operate with 5 private beds
and 110 semiprivate beds.
Texas Medicaid Reimbursement Rates
During the 1995 Legislative Session, the Texas legislature passed a law that
requires adoption of state standards for Medicaid that match federal standards;
establishes an informal dispute resolution process at the Texas Department of
Human Services (TDHS) regional and central offices; allows for formal, binding
arbitration of disputes over penalties relating to deficiencies assessed to
nursing facilities; and ensures that evidence used in court is supported by
surveyor testimony.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 73
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
Texas recently received matching public and private funding to create a
blueprint for a demonstration project in which Medicare and Medicaid services
would be integrated. Capitated rates would be paid to managed care plans for
providing acute, primary and long-term care services to people aged 65 and over.
The state is planning the project with consulting help from HCFA, health care
related state agencies, managed care organizations, and providers, and has
applied for the necessary waiver from HCFA to implement it. One of the goals of
the plan is to decrease the need for institutional care in nursing homes. In
addition, the Texas Department of Human Services recently instituted a
state-wide a program to divert skilled nursing patients into alternative home-
and community-based care settings. The state is funding the program with money
appropriated by the Texas legislature. Currently, 71.8 percent of the nursing
home residents in Texas are Medicaid beneficiaries.
Medicaid
Texas Medicaid currently uses a modified flat rate "resident-specific"
prospective reimbursement scheme with a case-mix component. Under this scheme,
residents are classified into one of 11 Texas Index of Level Effort (TILE)
groups on the basis of the services that they need. Rates are prospective and
based on the average and/or median costs of all facilities, depending on the
cost center, projected forward. Rates can either increase or decrease if
corrections to the economic assumptions used would change the rate by more than
2%. Rates can also be reduced if the Texas Department of Human Services is
facing budgetary problems, but not by more than an adjustment factor. The first
division among TILE groups is a clinical classification based on the following
groups: heavy care, rehabilitation, clinically unstable, and clinically stable.
Each group is subdivided by the resident's Activities of Daily Living (ADL)
scores in three areas: their ability to eat, to transfer, and to toilet
themselves. Except for those residents in the lowest acuity TILE level, resident
reassessments are performed at least every 180 days. Patients are assigned to
the highest TILE level for which they are eligible. Each of the TILE groups has
its own fixed weight, based on the amount of resources required by the patients
in that category. Each patient's assigned TILE weight is annually adjusted by
the state's weighted case-mix index to arrive at a standardized weight. In 1996,
these weights ranged from 0. 6109 to 2.1277.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 74
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
Statewide per diem rates are based on three cost centers: patient care (which
includes the costs of nursing, social services, activities, training, laundry,
and housekeeping); general administrative, and dietary; and the Capital Asset
Use Fee. Reimbursement for the patient care component is based on the weighted
average costs of all facilities projected forward, and adjusted by a factor
equal to 7% of the component. Once the average case mix per diem is calculated,
the rate for each TILE group is calculated by adjusting the patient care per
diem by the case mix weight for each TILE group, and adding the patient care
component to the sum of the general, administrative, and dietary component and
the capital use fee. Reimbursement for the general, administrative, and dietary
component is based on the median cost of all facilities projected forward, and
adjusted by a factor equal to 7% of the component. For adjustment calculation
purposes, this component has a minimum occupancy rate equal to the lower of the
average state rate or 85 percent of the component. The capital use fee is based
on the most recent local county tax assessment of a building (as reported on the
cost report) and land. The capital use fee is calculated using one of two
methods. The first method uses the per-bed appraised value for the 80th
percentile to construct the property component. The value is then multiplied by
a 14 percent use rate to determine the dollar value of the component. The second
method sets the dollar value of the component equal to the previous year's
capital use fee inflated by one year using the Implicit Price Deflator for
Personal Consumption. The state selects the lower of the two calculated capital
use fees to be used for reimbursement purposes. In 1996, this component averaged
of $5.49 per diem. The patient care cost component, on the other hand, ranged
from $23.01 to $80.13 in 1996, while the general, administrative, and dietary
component was fixed at $23.30. There is an add-on available for
ventilator-dependent patients in certain TILE levels.
Overall rates are set equal to the sum of the adjusted and trended average
and/or median per diem allowable costs for each of the components for all
nursing facilities in the state. In 1996, overall per diem rates ranged from
$51.80 to $108.92, depending on the TILE level. The weighted average per diem
rate for all TILE levels in 1996 was $66.45.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 75
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
Certificate of Need
- -------------------
In 1985, the Texas Health Care Commission (the agency that issued CONs) was
abolished, and a moratorium on additional nursing home beds was established. In
March 1992, the state modified the moratorium to limit bed growth only for
facilities that received approval for participation in the Medicaid program
before March 1992. The moratorium allows exceptions for facilities that have
maintained a minimum occupancy rate of at least 90% and are located in counties
where the occupancy rate has remained at or above 85%, during each of the six
months prior to the facility's application for a Medicaid contract. Such
facilities may add up to 10 beds or 10% of their existing beds, whichever is
less, every two years. Facilities with fewer than 60 beds may also add up to 60
beds. The state also holds open solicitation periods, lasting no longer than 30
days, during which potential contractors (hospitals or nursing homes) located in
high-occupancy areas may ask to participate in a random-selection process for
additional beds. The state defines a high-occupancy area as a county in which
the occupancy rate has exceeded a 90% threshold during the six months before
the open solicitation period. The moratorium further allows for a few other
specific exceptions. The state currently has a large supply of beds of which an
estimated 90% are Medicaid-certified. The occupancy rate among certified beds,
currently 77%, is one of the lowest in the country. (The Guide to the Nursing
Home Industry, 1996 by HCIA Inc. and Arthur Andersen LLP).
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have a
dramatic impact on the property's value.
OCCUPANCY
The appraiser researched occupancy of this type facility on a national, state
and local basis. National statistics indicate long-term care facilities are
experiencing a nationwide occupancy of
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 76
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
91.0%. Texas's Department of Human Resources' most recent survey indicated a
statewide occupancy of 84%. The twelve month statement we reviewed indicates the
subject had occupancy last year of approximately 83.3%.
CENSUS or PATIENT/RESIDENT MIX
- ------------------------------
The appraiser researched census-mix (the ratio of various payor types) in the
market area. Patient distribution between government reimbursed programs and
privately funded sources varies from state to state and facility to facility.
Statewide factors contributing to a high self-pay census-mix include the
existence of a Certificate of Need "CON" program, social factors, the state's
restrictiveness on qualifying residents, statewide occupancy, and the adequacy
of the state's reimbursement program. Texas is considered medium in these areas.
Factors contributing to a high, self-pay census-mix in an individual facility in
Texas include reputation, quality of care, facility's age, participation in the
Medicare program, competitiveness of rate structure, and therapeutic programs
offered. The subject rates medium in these areas.
The subject is currently experiencing the following census breakdown by payor:
<TABLE>
<CAPTION>
Medicaid + Medicare + Self-pay = Total
-------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Current Census
Breakdown 66.8% + 13.1% + 20.1% = 100%
</TABLE>
We believe a potential purchaser would project a stabilized nonmedicaid (self
pay, VA, medicare) ratio of 20% for the immediately foreseeable future.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 77
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
REVENUE SUMMARY
The appraiser reviewed the subject's historical operating statements to compare
the reasonableness of our projections. Management's operating statements
indicated an Effective Gross Revenue of:
1996 $3,240,834
After studying actual historical financial statements, the operator's
projections, comparable rates, occupancy and census-mix, the appraiser projected
the subject's Effective Gross Revenue. The appraiser inflated the most recent
income by 5% and estimated an Effective Gross Revenue of:
Appraiser's Effective Gross Revenue: $3,402,876
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 78
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
EXPENSES
To estimate expenses for the subject, the appraiser reviewed the last 12 month
operating statement from the subject.
The subject is not operating at a profit if a management fee of 5% is deducted.
This appears to be for several reasons, i.e., low occupancy (only 83%) and high
expenses related to the lessee's rehabilitation program. We were unable to
dissect the lessee's financial statement to isolate income or expenses relative
to the ancillary program versus room and board revenue. However, we can tell
that extraordinary expenses have been attributable to those programs. In our
analysis, we have stabilized Healthcare expenses in line with industry
percentages and total expenses at 90% which is in line with Texas averages for
nursing homes.
Healthcare Department expenses include all those services required to provide
nursing and/or personal care and all ancillary and therapy services. Stabilized
staffing includes: directors of nursing (DON), ward clerks, therapists, social
services, in-service coordinator, activities director, activities staff,
registered nurses, licensed practical nurses and certified nursing assistants.
Healthcare Expenses
- -------------------
<TABLE>
<CAPTION>
$ %
Annual EGI
------ ---
<S> <C> <C>
1996 Historical $1,828,916 56%
Appraiser's Stabilized $1,599,352 47%
</TABLE>
Administrative and general expenses include salaries for administrators,
secretaries, clerks and bookkeepers. Expenses also include payroll benefits,
taxes, insurance, state provider or licensure fees (if applicable), phone,
legal, accounting management, transportation, miscellaneous and supplies.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 79
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
Administrative Expenses
- -----------------------
<TABLE>
<CAPTION>
$ %
Annual EGI
------ ---
<S> <C> <C>
1996 Historical $845,869 26%
Appraiser's Stabilized $816,690 24%
</TABLE>
The Dietary Department provides food service for patient/residents and staff and
is an important ingredient in the subject's overall marketing package. The
facility provides three meals a day, seven days a week. Stabilized staffing
includes: dietician/food service managers, cooks and server/helpers.
Dietary Expenses
- ----------------
<TABLE>
<CAPTION>
$ %
Annual EGI
------ ---
<S> <C> <C>
1996 Historical $297,269 9%
Appraiser's Stabilized $306,259 9%
</TABLE>
Housekeeping and Laundry expenses include salaries for: directors of
housekeeping and laundry, housekeepers and laundry workers.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 80
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
Housekeeping and Laundry Expenses
- ---------------------------------
<TABLE>
<CAPTION>
$ %
Annual EGI
------ ---
<S> <C> <C>
1996 Historical $159,200 5%
Appraiser's Stabilized $170,144 5%
</TABLE>
Maintenance expenses include all those necessary to operate and maintain the
physical plant. Staffing includes: maintenance manager, skilled maintenance
personnel and unskilled personnel. This category covers all day-to-day repairs,
periodic repainting and cosmetic work and lawn and service contracts.
Maintenance Expenses
- --------------------
<TABLE>
<CAPTION>
$ %
Annual EGI
------ ---
<S> <C> <C>
1996 Historical $167,894 5%
Appraiser's Stabilized $170,144 5%
</TABLE>
Total Expenses
- --------------
<TABLE>
<CAPTION>
$ %
Annual EGI
------ ---
<S> <C> <C>
1996 Historical $3,299,148 102%
Appraiser's Stabilized $3,062,588 90%
</TABLE>
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 81
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
Following is the appraiser's reconstructed pro forma operating statement with
stabilized income and expenses for subject property:
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 82
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
RECAP OF HISTORICAL VS STABILIZED INCOME
<TABLE>
<CAPTION>
12
MOS APPRAISER'S
1996 STABILIZED
---- ----------
<S> <C> <C>
Eff. Gross Income $3,240,834 $3,402,876
Less Expenses *
Healthcare Unit $1,828,916 $1,599,352
Administration $845,869 $816,690
Dietary $297,269 $306,259
Housekeeping/Laundry $159,200 $170,144
Maintenance $167,894 $170,144
---------- ----------
Fixed/Operating Exps $3,299,148 $3,062,588
---------- ----------
NET INCOME ($58,314) $340,288
</TABLE>
- ------------------------------------------------------------------------------
* Some expenses may have been eliminated as non-recurring or reclassified to
facilitate comparison with the appraiser's estimates and may not match
historical statements.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 83
<PAGE>
[Chart]
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
CAPITALIZATION
Most investors, in determining what price they would pay for The Trinity Hills
Manor, begin with the net income (estimated in the preceding section). This net
income is converted into a value estimate by means of capitalization; the
overall capitalization rate is simply the ratio of net income to value.
The typical investor, when selecting his desired rate of return (or overall
capitalization rate), considers: (a) the term for which he will hold the
property and (b) his initial cash investment. The investor's initial equity is
his actual downpayment at the time of purchase. His return is considered to be
all of the income stream during the holding period and the cash he receives when
he sells the property. The investor's equity may increase due to loan
amortization and is further affected by appreciation or depreciation in property
value.
Most investors consider the actual yield on equity more important than yield on
purchase price. Today's market requires an after tax yield of 10% to 25%,
depending upon the property type and the degree of risk.
The appraiser developed a Capitalization Rate using both a Direct Capitalization
method and a Yield Capitalization method.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 85
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
DIRECT CAPITALIZATION
Long Term Care Facility Sales
- -----------------------------
Capitalization rates on typical investment type real estate currently range from
8% to 10%. Historically, properties like subject, with some Going Concern Value
or Special Use characteristics, have commanded an increase in capitalization
rate of 1% to 3% over typical investment type property.
Summary Nursing Home Facility Sales
<TABLE>
<CAPTION>
OCCU- PRVT SF/ SP/ SP/ CAPT
UNITS AGE PANCY PAY UNIT SF UNIT EGIM RATE
----- --- ----- --- ---- -- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Averages 166 16 86% 42% 283 $103 $30150 1.33 14.1%
Total Facilities 30
</TABLE>
The data suggests a current rate of 13.5% to 14.5% (adjusted for today's
market).
YIELD CAPITALIZATION
- --------------------
Mortgage Equity Analysis
- ------------------------
The appraiser prepared a Mortgage Equity Analysis and developed a Weighted
Average Capitalization Rate sufficient to service the mortgage debt and equity
position. The Appraisal Foundation publishes a monthly of mortgage interest
rates derived from a survey of major institutional investors in the U.S.
Although interest rates for Nursing Homes are not included in the survey,
lenders advise that a premium of 1% to 3% should be added to the general
apartment rate to reflect the increased risk for any property containing some
Going Concern Value.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 86
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- ------------------------------------------------------------------------------
To develop an Overall Capitalization Rate by Band of Investment, Mortgage -
Equity, we assumed a first mortgage of 75% loan to value and 10.25% interest
rate, amortized over 25 years. Nursing Home lenders confirm this criteria would
be currently acceptable. The Equity Yield Rate was estimated at 25%. The
appraiser consulted with two major purchasers of this type property, who
reported that this return is sufficient to attract equity capital.
The weighted average does not reflect equity buildup from mortgage amortization
during the holding period. Mortgage amortization would accrue to the equity
position and satisfy part of the owner's yield requirements. To reflect this,
the appraiser deducted an appropriate rate from the weighted average. The
mortgage amortization rate is calculated by multiplying the loan to value ratio,
times the portion of the loan that will be paid off at the end of the holding
period; this product is multiplied by the Sinking Fund Factor at the equity
yield rate.
The weighted average rate does not incorporate the value appreciation or
depreciation that can be anticipated for this type property in this location
over the investment period. Studies show that well located real estate will
appreciate in value at a rate at least equal to the inflation rate. We have
assumed no appreciation or depreciation.
- ------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 87
<PAGE>
NATIONAL MARKET INDICATORS
<TABLE>
<CAPTION>
===================================================================================================================================
REGIONAL MALL CBD OFFICE INDUSTRIAL
------------- ---------- ----------
3rd Qtr Prior Qtr 3rd Qtr Prior Qtr 3rd Qtr Prior Qtr
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount Rate (IRR)a
Range 10.00%-14.00% 10.00%-14.00% 10.00%-15.00% 10.00%-15.00% 8.50%-14.00% 9.00%-14.00%
Average 11.56% 11.50% 11.93% 11.99% 11.19% 11.22%
Change (b.p.) -- +6 -- -6 -- -3
Overall cap Rate
(OAR)a
Range 6.25%-11.00% 6.25%-11.00% 7.00%-12.00% 8.00%-12.00% 7.25%-13.00% 7.25%-13.00%
Average 8.33% 8.17% 9.47% 9.53% 9.23% 9.23%
Change (b.p.) -- +16 -- -6 -- 0
Residual Cap Rate
Range 7.50%-11.00% 7.00%-11.00% 8.25%-12.00% 8.25%-12.00% 8.00%-11.00% 8.00%-11.00%
Average 8.71% 8.56% 9.67% 9.67% 9.55% 9.51%
Change (b.p.) -- +15 -- 0 -- +4
a. Rate on unleveraged, all-cash
transaction.
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
APARTMENT
---------
3rd Qtr Prior Qtr
<S> <C> <C>
Discount Rate (IRR)a
Range 10.00%-12.50% 10.00%-12.50%
Average 11.30% 11.35%
Change (b.p.) -- -5
Overall cap Rate
(OAR)a
Range 8.00%-10.50% 7.50%-10.50%
Average 9.03% 8,98%
Change (b.p.) -- +5
Residual Cap Rate
Range 8.50%-10.50% 8.00%-10.50%
Average 9.32% 9.39%
Change (b.p.) -- +3
</TABLE>
Definitions:
b.p.: Basis Points
DISCOUNT RATE (IRR): Internal rate of return on equity in an all-cash
transaction, based on annual year-end compounding; formerly termed the Free and
Clear Equity RR in the Korpacz Survey.
OVERALL CAPITALIZATION RATE (OAR): Initial cash-on-sale rate of return on the
equity investment in an all-cash transaction; formerly termed the Free and Clear
Equity Cap Rate in the Korpacz Survey.
RESIDUAL CAP RATE: Overall capitalization rate used in calculation of residual
price at conclusion of forecast period.
Source: Korpacz Real Estate Investor Survey. Personal survey of a cross section
of major institutional equity real estate market participants conducted in
October 1995 by Peter F. Korpacz & Associates, Inc. Published Fall 1996 in
Valuation Insights & Perspectives.
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AS % X REQUIRED = CAPT.
OF TOTAL ANNUAL RATE
RETURN
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First Mortgage 75.00% X 11.12% = 8.34%
Equity 25.00% X 25.00% = 6.25%
Weighted Average 14.59%
- -------------------------------------------------------------------------------------------------------
</TABLE>
LESS CREDIT FOR EQUITY BUILDUP:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
LOAN RATIO X PART X SINKING
LOAN FUND FACTOR =
PAID OFF
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
75.00% X 5.63% X 0.12180 = 0.51%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
ADJUSTMENT FOR DEPRECIATION/APPRECIATION:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
PLUS DEPRECIATION
(OR MINUS SINKING FUND =
APPRECIATION) X FACTOR
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0.0% X 0.12180 = 0.00% 1
</TABLE>
OVERALL CAPITALIZATION RATE:
<TABLE>
<S> <C>
TOTAL 14.08%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 89
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
CAPITALIZATION RATE SUMMARY
- ---------------------------
The various techniques examined indicated capitalization rates of-
<TABLE>
<S> <C>
Direct Capitalization (Sales Data) 13.5% to 14.5%%
Mortgage Equity 14.08%
</TABLE>
An overall capitalization rate of 14.00% was selected for our analysis,
indicating a value by the Income Capitalization Approach of:
<TABLE>
<S> <C> <C>
NET INCOME DIVIDED BY CAPT. RATE = VALUE
- ---------- ---------- -----
$340,288 DIVIDED BY 14.00% = $2,430,625
</TABLE>
MARKET VALUE OF REAL PROPERTY, PERSONAL
PROPERTY & BUSINESS VALUE (R) $2,430,000
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HealthCare Property Appraisers of America, Inc. 90
<PAGE>
SALES COMPARISON APPROACH TO VALUE
- -----------------------------------------------------------------------------
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
SALES COMPARISON APPROACH TO VALUE
The sales comparison approach is defined as "a set of procedures in which an
appraiser derives a value indication by comparing the property being appraised
to similar properties that have been sold recently, applying appropriate units
of comparison, and making adjustments, based on the elements of comparison, to
the sales prices of the comparables. " (This information taken from THE
DICTIONARY OF REAL ESTATE APPRAISAL, American Institute of Real Estate
Appraisers, second edition.)
In this approach, the market value of the subject is estimated by comparing it
to similar properties that have sold recently. This approach is predicated on
the direct relationship between subject property's market value and the sale
prices of comparable properties. In the case of a Nursing Home, such as the
subject, these properties are sold and purchased by investors on a regional and
national basis. For selection of comparable properties, we sought recent sales
first within Texas and then in the United States.
The accurate application of this approach is based, in part, on the choice of an
appropriate unit of comparison, as shown on the summary grid. We extracted from
each comparable two physical indicators and one economic indicator. The physical
indicators included sales price per revenue-generating unit (beds or apartments)
and sales price per square foot. The economic indicator used was an effective
gross income multiplier (EGIM). The following section presents information on
the sales analysis of comparables for an indicated value of the subject
property.
This appraiser interviewed Ms. Fern Chenault, Contract Coordinator in the
Department of Human Services Long Term Care Division concerning whether the
property owner could operate the subject facility and participate in the state
nursing home reimbursement program, in the event the current lessee does not
extend the lease. It was the opinion of Ms. Chenault that there are no legal or
regulatory requirements that would prohibit the property owner from obtaining a
new tenant or management company to operate the nursing home facility. The
reader is cautioned that the appraiser is not an expert on nursing home or
medicaid matters and
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 92
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
this critical assumption should be confirmed by legal counsel. If this
assumption is not accurate it could have a dramatic impact on the property's
value.
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 93
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
Facilities Within State
<TABLE>
<CAPTION>
COMP OCCU- PRIV. SF/ SP/ SP/ CAPT
# STATE DATE BEDS AGE PANCY PAY BED SF BED GIM RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1340 TX Feb 93 302 15 .80 .90 407 112 45364 1.31 .139
1469 TX Apr 93 270 10 .94 .35 245 112 27500 1.20 .129
1470 TX Jan 93 195 31 .85 282 66 18500 1.23 .134
1493 TX Dec 93 101 .96 .27 182 110 20000 1.08 .259
1498 TX Apr 93 120 4 .80 .43 236 100 23500 1.40 .032
1555 TX Dec 94 120 7 .98 .37 291 175 50833 2.45 .139
1557 TX Dec 94 224 18 .90 .96 338 201 67969 2.54 .103
1600 TX Oct 94 342 .75 .15 220 94 20760 0.91 .105
1635 TX Jul 95 178 7 .98 .62 345 155 53371 1.72 .087
1636 TX Jan 95 120 7 1.00 .30 351 98 34333
1637 TX Jul 95 120 7 .90 .32 271 92 25000 1.03 .178
1638 TX Jan 94 192 6 .87 1.00 347 101 35000 1.76 .161
1639 TX Jul 94 120 8 .92 .49 309 113 35000 1.23 .090
1640 TX Jun 94 100 1 .95 287 81 23250
1641 TX Sep 94 240 8 .90 50000
1642 TX Apr 94 160 22 .98 .25 259 74 19063 0.91 .194
1644 TX May 94 140 8 .90 .22 262 109 28571 1.18 .188
1645 TX Dec 93 120 10 .84 249 104 25908 1.58 .164
1646 TX Dec 93 206 9 .80 277 136 37600
1647 TX Oct 93 107 25 .94 .30 207 124 25701 1.11 .161
1730 TX May 94 157 9 .76 387 50 19325
1731 TX Oct 95 60 12 .76 .95 349 103 35833 1.49 .189
1732 TX Dec 95 102 21 .75 96 90 17647
1733 TX Dec 95 169 25 .92 .26 237 117 27751 1.10 .127
1734 TX Jul 95 181 20 .91 .28 298 87 26000 1.35 .104
1735 TX Apr 96 178 20 .87 .15 365 73 26764 1.19 .077
1736 TX Jan 95 166 11 .95 246 123 30120
1737 TX Jan 95 280 66 .71 .02 314 57 17857
1779 TX Aug 96 112 31 .54 220 82 18000 0.94 .125
1780 TX Aug 96 111 35 .84 247 73 18000 0.74 .221
Averages: 166 16 .86 .42 283 103 30150 1.33 .141
Total Facilities: 30
</TABLE>
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPARABLE #1779
<S> <C>
Property: Oaks Health and Rehabilitation Center
Location: 510 North 3rd Street
Orange, TX
Seller: Continue, Inc.
Buyer: Orange, L.L.C.
Level of Care: NH
Date of Sale: AUG 96
Sale Price: $2016000
Terms: Cash to seller.
Building Notes: Wood and hadite block w/brick veneer and flat built-up tar
and gravel roof in average condition
Building Date: 1965
No. of Units: 112
Occupancy: 0.54
Building SF: 24654 SF
SF/Unit: 220 SF
Effective Gross Income: $2151192
Expenses: $1899502
Net Income: $251690
Price/SF: $82/SF
Price/Unit: $18000/Unit
EGIM: 0.94
Capt. Rate: 0.1250
Comments: 2.5 acre site; Grantee entered into a triple net lease agreement
w/ Sunrise Healthcare: 10 yrs with 2-5 yr options; beginning
lease rate of $346,320/annum or $260/mo.
</TABLE>
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HealthCare Property Appraisers of America, Inc. 96
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPARABLE #1780
<S> <C>
Property: Jones Health and Rehabilitation Center
Location: 3000 Cardinal Drive
Orange, TX
Seller: Continue, Inc.
Buyer: Orange, L.L.C.
Level of Care: NH
Date of Sale: AUG 96
Sale Price: $1998000
Terms: Cash to seller.
Building Notes: Wood and hadite block w/brick veneer and flat built-up tar
and gravel roof in average condition.
Building Date: 1962
Year Renovated: 63
No. of Units: 111
Occupancy: 0.84
Building SF: 27385 SF
SF/Unit: 247 SF
Effective Gross Income: $2687722
Expenses: $2246935
Net Income: $440787
Price/SF: $73/SF
Price/Unit: $18000/Unit
EGIM: 0.74
Capt. Rate: 0.2210
Comments: 3.1 acre site; Grantee entered into a triple net lease agreement
w/ Sunrise Healthcare: 10 yrs with 2-5 yr options; beginning
lease rate of $346,320/annum or $260/mo.
</TABLE>
- -------------------------------------------------------------------------------
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPARABLE #1733
<S> <C>
Property: Afton Oaks Nursing Center
Location: 7514 Kingsley Street
Houston, TX
Seller: Williams Nursing Homes, Inc.
Buyer: Divisicare Leasing Corp.
Level of Care: NH
Date of Sale: DEC 95
Sale Price: $4690000
Terms: Cash
Building Notes: Good condition
Building Date: 1971
Year Renovated: 1986
No. of Units: 169
Occupancy: 0.92
Building SF: 40019 SF
SF/Unit: 237 SF
Non-Medicaid Ratio: 0.26
Effective Gross Income: $4251089
Expenses: $3653652
Net Income: $597437
Price/SF: $117/SF
Price/Unit: $27751/Unit
EGIM: 1.10
Capt. Rate: 0.1270
Comments: Expenses include approx. 5% management fee.
</TABLE>
- -------------------------------------------------------------------------------
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPARABLE #1734
<S> <C>
Property: Granbury Care Center
Location: 301 Park Street
Granbury, TX
Seller: Granbury Nursing Home, Inc.
Buyer: Lynnhaven I - LLC
Level of Care: NH
Date of Sale: JUL 95
Sale Price: $4706000
Terms: Cash
Building Notes: Wood frame, brick veneer with slightly pitched comp. roof,
well maintained.
Building Date: 1976
Year Renovated: 1995
No. of Units: 181
Occupancy: 0.91
Building SF: 53887 SF
SF/Unit: 298 SF
Non-Medicaid Ratio: 0.28
Effective Gross Income: $3474852
Expenses: $2984941
Net Income: $489911
Price/SF: $87/SF
Price/Unit: $26000/Unit
EGIM: 1.35
Capt. Rate: 0.1040
Comments: Expenses include 5% management fee; Originally 101 beds; 20
added in 1983 and 60 in 1988.
</TABLE>
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 99
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPARABLE #1735
<S> <C>
Property: Chapel of Care Nursing Home
Location: 1815 SH 75 South
Sherman, TX
Seller: Sherman Health Care, Inc.
Buyer: K & Y Investments
Level of Care: NH
Date of Sale: APR 96
Sale Price: $4764000
Terms: Cash
Building Notes: Wood frame, masonry exterior with slightly pitched comp.
roof.
Building Date: 1976
No. of Units: 178
Occupancy: 0.87
Building SF: 65000 SF
SF/Unit: 365 SF
Non-Medicaid Ratio: 0.15
Effective Gross Income: $3992000
Expenses: $3624000
Net Income: $368000
Price/SF: $73/SF
Price/Unit: $26764/Unit
EGIM: 1.19
Capt. Rate: 0.0770
</TABLE>
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 100
<PAGE>
SALES COMPARISON SUMMARY GRID
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Comp # SUBJECT #1779 #1780 #1733 #1734 #1735
Name Benbrook Oaks Jones Afton Granbury Chapel
Trinity Hills Health Health Oaks Care Care
City Benbrook Orange Orange Houston Granbury Sherman
State TX TX TX TX TX TX
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PROPERTYE DATA
Year Built 1971 1965 1962,63 1971 1976 1976
# Beds 114 112 111 169 181 178
GBA (sf) 31,750 24,654 27,385 40,019 53,887 65,000
SF Per Bed/Apt 279 220 247 237 298 365
Occupancy % 83% 54% 84% 92% 91% 87%
SALE DATA
Date of Sale Aug '96 Aug '96 Dec '95 Jul '95 Apr '96
Sale Price $2,016,000 $1,998,000 $4,690,000 $4,706,000 $4,764,000
Price/Bed $18,000 $18,000 $27,751 $26,000 $26,764
Price/SF $81.77 $72.96 $117.19 $87.33 $73.29
CUMULATIVE ADJUSTMENTS
Rights Conveyed 0% 0% 0% 0% 0%
Adjusted Price $18,000 $18,000 $27,751 $26,000 $26,764
$82 $73 $117 $87 $73
Financing Terms 0% 0% 0% 0% 0%
Adjusted Price $18,000 $18,000 $27,751 $26,000 $26,764
$82 $73 $117 $87 $73
Conditions of Sale 0% 0% 0% 0% 0%
Adjusted Price $18,000 $18,000 $27,751 $26,000 $26,764
$82 $73 $117 $87 $73
Market Conditions 0% 0% 0% 0% 0%
Adjusted Price $18,000 $18,000 $27,751 $26,000 $26,764
$82 $73 $117 $87 $73
NON-CUMULATIVE
ADJUSTMENTS
Physical
Characteristics:
Location 0% 0% 0% 0% 0%
0% 0% 0% 0% 0%
Quality/Design 0% 0% 0% 0% 0%
Conditions/Age
Area/Bed 0% 0% 0% 0% 0%
Economic Factors 0% 0% -25% -25% -25%
Non-Cumulative Adjustments 0% 0% -25% -25% -25%
ADJUSTED VALUE INDICATORS
Sale Price/Bed $18,000 $18,000 $20,814 $19,500 $20,073
Sale Price/SF $82 $73 $88 $65 $55
Average Sale Price/Bed $19,277
Average Sale Price/SF $73
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ADJUSTED SALES COMPARISONS
SALE PRICE PER SQUARE FOOT
[GRAPH]
<PAGE>
ADJUSTED SALES COMPARISONS
SALE PRICE PER BED
[GRAPH]
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
COMPARISON OF COMPARABLES TO SUBJECT
In our final and most detailed analysis and comparison to subject, the appraiser
selected comparable sales with the highest combination of important similar
characteristics. Those characteristics considered most indicative of subject's
Market Value were considered to be (1) Private Pay ratio (subject is 20%), (2)
Geographical Location (subject is in Texas), (3) Square Feet of building per Bed
(Subject has 279), and (4) Overall Quality (subject is considered good.
EXPLANATION OF ADJUSTMENTS
The sales included in this analysis all occurred in Texas. Each sale has been
adjusted for differences, both economic and physical, in relation to the
subject. Following is a discussion of each characteristic of the property with
an explanation of the adjustments made to each comparable sale.
CUMULATIVE ADJUSTMENTS
"Cumulative Adjustments" were applied to the sales prior to other adjustments in
order to reconcile the sales prices for intangible occurrences which could alter
the sales prices. Additional noncumulative adjustments for physical and economic
considerations are analyzed thereafter. Cumulative adjustments considered
included:
PROPERTY RIGHTS CONVEYED
This adjustment is for sales which had rights conveyed differently than
the subject's. In this appraisal, the Fee Simple Going Concern is being
appraised. All of the sales were also sold as Going Concerns, none of
which were leased facilities. As the appraiser, at this point in this
analysis, is seeking Fee Simple Value of Going Concern, no adjustment
was made.
FINANCING
No adjustment is applied for financing, as all sales are reported to be
cash to seller or cash equivalent transactions. We are not aware of
atypical financing that would require an adjustment for cash
equivalency.
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 104
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
CONDITIONS OF SALE
No adjustments were considered necessary to reflect any special
conditions or terms of sale.
MARKET CONDITIONS (DATE OF SALE)
Adjustments for recorded sales date, or time, is reflective of
differences in the market at different times. An upward adjustment of
approximately 10% annually was made to the comparables sale prices.
NON-CUMULATIVE ADJUSTMENTS
LOCATION
Location at adjustments reflect the difference in value attributed to a
property's specific location. All the comparables were located in Texas
and are considered equally as desirable.
QUALITY/DESIGN
This adjustment reflects physical differences of specific properties
for varying qualities of building materials, layout, building finish,
etc. None were necessary.
CONDITION/AGE
Many older facilities receive renovations and on going maintenance due
to State requirements and market expectations. However, their appeal to
the private pay market is less than newer facilities. In addition,
newer facilities are generally more efficient to operate, thus
increasing profit. All are in the same age bracket as subject.
AVERAGE SQUARE FOOTAGE PER BED
The comparables presented a range of 220 s.f. to 365 s.f. per bed. The
subject, at 279 s.f., is in the middle of the range. The area per bed
is an indication of the existence, or at least the potential, for
better support areas which can positively affect profitability.
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 105
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
ECONOMICS/PROPRIETARY VALUE
The total value of a general purpose real estate property frequently
consists of only land and improvements. However, in the case of a
property in which a business is operated, such as a nursing home, the
total value will also usually contain personal property as well as
intangible assets (referred to here as Proprietary Value, and
consisting of business enterprise, goodwill, and going-concern value).
the income generated from the property is derived not only from the
tangible assets, but also from the intangible assets. In the case of a
nursing home, the intangible assets are considered to be tied to the
real estate. The in-place management, staff, operations and stabilized
occupancy, good will, percentage of nonsubsidized residents and general
reputation of the property are difficult, if not impossible, to
relocate, and therefore, the value attributable to them is considered
to be tied to the real estate.
The subject property will generate more income as an owner/operated
facility than it would if it were leased to an operator. The third
party operator has to have some income available to him to compensate
his entrepreneurial effort. Capitalization of the net operating income
from the owner/operator standpoint will give a higher value to the
property than capitalization of income from an outside, third party
lease. The difference between those two capitalized values is an
indication of the Proprietary Interest attributable to the property's
business operation.
The percentage of business value or proprietary interest will depend to
a large extent upon the complexity of the business being operated
therein. A skilled nursing home and/or specialty type medical facility
requires a great deal of specialized and skilled labor, knowledge of
medical, governmental and bureaucratic procedures, time and effort. On
the lower end of the skilled continuum, i.e., personal care homes or
ACLF type properties, there is a much lower level of skill and effort
required. Consequently, we find a higher percentage of Proprietary
interest on the skilled end and a lower percentage of Proprietary
Interest on the lower-skilled level.
Our analysis of the market indicates that the highly skilled properties
me Interest of 20% to 25% of the total sales price whereas the lower
skill Proprietary Interest of 10% to 15%. The subject is currently not
pro adjustment was made to those homes showing a superior economic
situation.
SALES PRICE PER BED
Facilities which are of good quality but predominantly medicaid funded are
selling on a nationwide basis for approximately $25,000 to $50,000 per bed. The
higher quality homes, which offer better care services, more amenities, and
therapy areas (or homes which show unusual profit potential), are generally sold
for $45,000 to $75,000 per bed. HealthCare Property Appraisers maintains a
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
nationwide data bank on long term health care facilities, which currently
includes sales of over 1,200 facilities.
The comparables selected for close analysis have an unadjusted sales price per
bed range from $18,000 to $27,751 with an average of $23,303. The factors which
affect the sales price per bed include unit mix, number of residents per room,
project amenities, and average area per bed. Typically, a property which has a
larger average area per bed will sell at a higher unit price.
After adjusting the comparables to the subject using the net income differential
multiplier, the sales price per bed formed a range of $18,000 to $20,814 with an
average of $19,277. Giving further consideration to subject's average bed area
and other physical characteristics, the value range on a per bed basis is
estimated at $19,000 to $19,500. Applying this range to the subject's 114
indicates a value range of $2,166,000 to $2,223,000.
<TABLE>
<S> <C> <C> <C>
# BEDS X SALE PRICE PER BED = INDICATED VALUE
- ------ - ------------------ - ---------------
114 X $19,000 to $19,500 = $2,166,000 to $2,223,000
</TABLE>
SALES PRICE PER SQUARE FOOT
The unadjusted comparables formed a sales price range from $73 to $117 per
square foot with an average of $87. An inverse relationship usually exists
between the sales price per square foot and the average area per bed, assuming
all amenities and services are similar. A smaller unit usually generates more
income on a per square foot basis than a larger unit. This is reflective of the
staffing costs as, typically, the per resident day costs are not directly
influenced by the unit size. It is also reflective of the fixed costs of
furniture, fixtures, and equipment, which are spread over the total square
footage. After economic adjustments, the comparables formed a sales price per
square foot range of $55 to $88 with an average of $73.
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 107
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
Considering the subject's functional utility, area per resident, quality and
condition, we believe a value range of $72 to $74 per square foot to be
indicated. Applying the unit values to the subject's 31,750 of gross building
area indicates a value range of $2,286,000 to $2,349,500.
<TABLE>
<S> <C> <C> <C> <C>
BUILDING SIZE X SALE PRICE PER BED = INDICATED VALUE
- ------------- - ------------------ - ------------------------
31,750 X $72 to $74 = $2,286,000 to $2,349,500
</TABLE>
RECONCILIATION OF SALES COMPARISON INDICATORS
The value ranges developed by both of the indicators are summarized below:
<TABLE>
<CAPTION>
INDICATORS OF VALUE VALUE RANGE
- ------------------- -----------
<S> <C>
SALES PRICE PER BED $2,166,000 to $2,223,000
SALES PRICE PER SQUARE FOOT $2,286,000 to $2,349,500
</TABLE>
The sales price per bed tends to be a good indicator if the comparables have
similar rates, per patient day occupancy, and self pay ratios. The sales price
per square foot can be a good indicator, if all the comparables happen to be
similar to size. The flaws or deficiencies of the physical indicators have been
tempered with an economic adjustment. Accordingly, we believe all three
indicators provided a meaningful, but limited, indication of value. Giving
consideration to current market conditions and the subject's physical and
economic characteristics, the sales comparison approach is best represented by a
narrower range of $2,150,000 to $2,350,000.
The Sales Comparison Approach has a limited use in providing a value range.
Differences in location, services offered by the facility, and many other
variables, make a precise comparison between the comparable sales and the
subject property extremely difficult. Economic adjustments were used to lessen
these differences somewhat. Moreover, there is no accurate way to determine
whether the sales prices actually paid represent fair market values, because it
is difficult to determine
- -------------------------------------------------------------------------------
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
the exact motivations of the buyers and sellers, or what special conditions may
have influenced the sales. We are of the opinion that the sales comparison
approach has limited application for indicating a specific value estimate.
Therefore, it has been used to establish a range that can test the
reasonableness of the values indicated by the Cost and Income Capitalization
Approaches.
SUMMARY
The reconciled market value range indicated by the Sales Comparison Approach:
$2,150,000 to $2,350,000
- -------------------------------------------------------------------------------
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
RECONCILIATION AND FINAL VALUE ESTIMATE
<TABLE>
<S> <C>
INDICATED VALUE BY $2,240,000
COST APPROACH
INDICATED VALUE BY $2,430,000
INCOME APPROACH
INDICATED VALUE BY $2,150,000
SALES COMPARISON APPROACH to $2,350,000
</TABLE>
To estimate the final Market Value for The Trinity Hills Manor, it is
necessary to reconsider all three approaches, correlate the data, and
determine what emphasis to give each approach.
The COST APPROACH was based upon a component cost breakdown prepared by a
computer utilizing the Marshall and Swift Valuation Service Cost Data Bank.
This nationally recognized building costs service prepared a very accurate
estimate of replacement costs for subject's improvements. From replacement
costs (direct and indirect) was deducted depreciation based upon observation
and age of the improvements and sales data as well as consideration of
Functional and External Obsolescence. Subject's 80,586 sf of land were valued
at $1.55 or $125,000. This approach indicated a market value for the real
estate and the Furniture, Fixtures, and Equipment in The Trinity Hills Manor
of $2,240,000, which includes an estimated $199,500 for FF&E.
The Principle of Substitution does not recognize the fact that it is very
difficult to take a long-term care project from the initial construction
stages through all of the regulatory agencies, obtain a Certificate of Need
(CON) from the state, operate the facility successfully, and generate the
reputation for excellence necessary to attract a strong private pay census.
The application and approval of the Certificate of Need necessary to operate
will quite often take as long as two years and is by no means a guarantee of
success. Once a CON has been
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<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
obtained, it is sometimes sold prior to construction. Sales prices of $50,000
to $500,000 for an approved CON have been reported. The business expertise
necessary to deal with the Medicaid and Medicare authorities as well as the
multitude of governmental agencies regulating and supervising a nursing home
also requires considerable specialized knowledge. None of this expertise was
reflected by the Cost Approach to Value. Therefore, the least emphasis was
placed upon the Cost Approach to Value in this analysis.
Under the INCOME APPROACH to value, the appraiser analyzed the subject
property from the standpoint of a potential investor who would be most
interested in its income stream. After reviewing the owner's operating
statements for the subject property as well as other comparable properties,
the appraiser believes the subject's estimated income stream is a reasonable
expectation. Our stabilized income stream was based upon an anticipated Gross
Income of $5,828,407,965, Occupancy of 95.0%, a non-government funded ratio of
6134%, and Expenses of $3,062,588 (or 90.0% of Effective Gross Income). The
projected Net Income to Real Estate of $340,288 was capitalized at 14.00%.
Based upon a consideration of current financing, available alternatives, and
equity demands, the Market Value of The Trinity Hills Manor was indicated by
the Income Approach to be $2,430,000, which includes $199,500 for Furniture,
Fixtures and Equipment.
Under the SALES COMPARISON APPROACH, the appraiser reviewed a considerable
number of sales of Nursing Homes. Analysis of this data after adjustments for
property differences indicated a Market Value for The Trinity Hills Manor of
$2,150,000 to $2,350,000, based on a Gross Income Multiplier of to and
$19,000 to $19,500 per unit. The $2,150,000 to $2,350,000 value includes
Furniture, Fixtures and Equipment estimated at $199,500.
We believe equal emphasis can be placed on the Income Capitalization and
Sales Comparison Approaches. Based on the enclosed data and analyses, I
believe the Subject Property described
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herein has the following estimated Final Market Value as of March 21, 1997 at
Stabilized Census, Occupancy and Rates:
FINAL MARKET VALUE OF SUBJECT PROPERTY: $2,400,000
MARKETING PERIOD
Due to the fairly strong market and demand for Nursing Homes, The Trinity Hills
Manor should be readily saleable. Although the market is not as strong today as
it was a few years ago, there are a number of buyers seeking for this type
property. In fact, the market for this type property is strong enough that they
generally are not listed with real estate brokers, but are usually sold "off the
market." The appraiser is familiar with the sale of a number of Nursing Homes
that have taken place over the past year. The average sales time for those
properties was approximately six months. If the subject property were fairly
priced and adequately marketed, we believe it could be sold at our appraised
value within approximately twelve months.
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ALLOCATION OF VALUE BETWEEN REAL PROPERTY, PERSONAL PROPERTY AND
BUSINESS ENTERPRISE
The total value of a real estate property frequently consists of only land
and improvements. However, in the case of a "Going Concern" property in which
a business is operated, such as a Nursing Home, the total value may also
contain personal property and/or intangible assets (i.e., "Business Value")
consisting of business enterprise, goodwill, and going-concern value). Income
generated from the property is derived from tangible real and personal
property and intangible assets.
Both the real estate and the business enterprise are required to generate
income. To estimate the value of the real estate, the appraiser must divide
the net operating income between the two components of real estate and
business enterprise. In the case of a Nursing Home, the intangible assets
(i.e., in-place management, staff, operations, stabilized occupancy, good
will, percentage of nonsubsidized residents and general reputation of the
property) are difficult to relocate. Consequently, the value attributable to
them is considered to be tied to the real estate.
The operation of a Nursing Home is a highly specialized business enterprise,
requiring extensive knowledge of national and state health care systems, over
and above a knowledge of health care and the business acumen required to operate
any business. This is evidenced by the fact that the State Department of Public
Health requires very specific licensing of the professionals and real estate
that provide these services.
Management of this specialized business can be contracted out to a
professional management firm for a specified fee arrangement (typically 3% to
6% of effective gross income). The management firm will provide the business
acumen to operate the business enterprise. However, the management company,
while operating this business on behalf of an owner, will not assume the
ownership risk of that business. Any liability risk, entrepreneurship risk,
and/or losses to be covered are the responsibility of the owner of the business
enterprise. Accordingly,
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the real estate interest and the operating business enterprise interest are two
separate components that are frequently bought, sold, and leased independently
from each other.
To study the value of the real estate separate from the value of the business
enterprise, the appraiser first examined leases of various facilities. Our study
of Nursing Home leases did not develop a consistent pattern of rental rates per
bed or any other common denominator that could be applied to the subject
appraisal assignment. The lease rate paid on a Nursing Home is affected by a
large number of variables (e.g., the funding program for government subsidized
residents, accounting methods used, occupancy and census ratio) in addition to
the usual array of variables found in any real estate. These factors vary to
such an extent that analysis of other leases in comparison to the subject
property did not develop any meaningful or helpful data.
Analysis of leases on a specific subject property may also be less than helpful
in estimating the value of the fee simple estate. An old lease may have a
contract rental different from the market rental rate, developing some leasehold
estate value. The leased fee value and the leasehold value can be ascertained by
studying the fair market rental or economic rental of the subject property.
However, it is not necessary to consider an old lease to develop a value for the
fee simple estate.
The appraiser considered several methods for studying the Business Value by
investigating the relationship between: (a) the COST OF TANGIBLE ASSETS versus
the total VALUE OF ALL ASSETS, (b) capitalization rates of typical investment
properties versus Going Concern properties and (c) the debt coverage ratio
required for Going Concern type real property.
COST ANALYSIS
Under the Cost Approach to Value, we estimated the replacement cost of all
tangible components, such as land and direct and indirect construction costs.
The difference between the reproduction costs of the tangible assets and the
Final Market Value of the total subject property was considered to be an
indication of Business Value.
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<TABLE>
<S> <C>
Final Market Value $2,400,000
Less Cost Approach $2,240,000
----------
Indicated Business Value $160,000
</TABLE>
CAPITALIZATION RATE ANALYSIS
Properties which include intangibles like Going Concern Value, normally have
a higher Overall Capitalization Rate than properties without any Business
Value. The higher Overall Capitalization Rate recognizes, in part, the
greater risk of owning a business versus owning real estate or other tangible
assets. Comparison of the subject's Capitalization Rate to the Capitalization
Rate for properties not having any Business Value (but having similar age,
construction, location and value) indicates the portion of the total value
attributable to the business enterprise. The higher Capitalization Rate of
Nursing Homes includes the return necessary on the real estate, the business
portion, and furniture, fixtures and equipment. In our subject study we
developed an Overall Capitalization Rate of 14.00% for the subject property.
A fair market Capitalization Rate for a comparable property without any
Business Value is considered to be 9.00%. Dividing the real estate
Capitalization Rate of 9.00% by subject's Capitalization Rate of 14.00%
indicates the portion of subject's value representing tangible real property
and business value to be:
<TABLE>
<CAPTION>
REAL PROPERTY DIVIDED BY SUBJECT = % TANGIBLE
CAPT. RATE CAPT. RATE REAL ESTATE
- ---------- ---------- -----------
<S> <C> <C>
9.00% DIVIDED BY 14.00% = 64.0% (R)
</TABLE>
<TABLE>
<CAPTION>
FINAL % TANGIBLE VALUE OF
MARKET VALUE X REAL ESTATE = REAL PROPERTY
- ------------ ----------- -------------
<S> <C> <C>
$2,400,000 X 64.0% (R) = $1,536,000
</TABLE>
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<TABLE>
<S> <C>
Final Market Value (Total Property) $2,400,000
Less Value Of Real Property $1,536,000
----------
Business Value and Furniture, Fixtures And Equipment $ 864,000
Less Furniture, Fixtures And Equipment $ 199,500
----------
Indicated Business Value $ 664,500
</TABLE>
DEBT COVERAGE RATIO ANALYSIS
An indication of the subject property's Business Value can be developed by
separating net income into real estate and business components. (Personal
property is handled in our income model with a replacement reserve.) Investors
in Nursing Home real estate and Nursing Home business enterprises have specific
income rate of return and "debt coverage" requirements. The relationship between
the "debt coverage" requirements of a real estate investor and the requirements
of a business enterprise investor can be ascertained mathematically.
REAL ESTATE INVESTOR
There are several investors for real estate entities that do not contain the
business enterprise component. Many investors want to be passive real estate
investors, without the management problems or risk associated with operating a
Nursing Home. The typical investor is a health care oriented, real estate
investment trust (REIT) who purchases 100% of a Nursing Home's real estate. The
appraiser surveyed acquisition officers of several REITs to ascertain their rate
of return and "debt coverage" (i.e., rent coverage) requirements:
- Omega Healthcare is currently seeking 11.8% on a variable
return and underwrites debt coverage with a minimum of 1.25X.
- Healthcare REIT's current yield requirement is based on 500
points over the 10 year T bill rate. Today, this is a total
return of 11.84%. Their minimum debt coverage ratio is 1.25X.
- Health Equity Properties' current return requirement is 12%
to 12.5%. Their minimum debt coverage ratio is 1.25X to 1.4X,
depending on the credit.
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From the above data, it appears that the real estate in a Nursing Home like the
subject property can be sold and leased back, giving a return to the passive
real estate investor of approximately 11.8% to 12.5%, or an average (mode) of
12%. The most common "debt coverage" factor is 1.20X to 1.50X, or an average of
1.35X.
BUSINESS ENTERPRISE INVESTORS
Many Nursing Home operators and individual investors will purchase the business
enterprise operating within a Nursing Home property. Consequently, the real
estate in a Nursing Home is frequently sold to a real estate investor, such as a
REIT. The new real estate owner will then lease it to a management company who
will own and operate the business enterprise. Management companies and
individual investors try to group their property operations within a specific
state for obvious reasons; however, they will usually consider an individual
acquisition within any state that has a viable government assistance program. We
surveyed companies and individuals who invest in Nursing Home businesses to
determine their requirements for investing in a Nursing Home business
enterprise. The results of this survey include:
- Health Prime, Inc., an active purchaser of Nursing Home going
concerns and business enterprises, reported they would acquire
a health care business (without the underlying real estate) if
the investment would provide a return of 15% to 17%. This
assumes they had no other facilities within the area, were not
attempting to fill out their management team, and had no other
ulterior motives.
- Life Care Affiliates reported that their investors require a
15% return on cash invested, assuming the real estate is
owned by another entity and the investors are strictly buying
the business operation with no interest in the underlying real
or personal property assets.
- Regency Health Care reported that they would be willing to
consider purchasing a leasehold estate or the business
interest in a going concern property, assuming a cash-on-cash
return of 15% to 18%.
There are many potential purchasers actively seeking the acquisition of Nursing
Homes either as "going concerns" (i.e., containing both real estate and the
business enterprise) or as the operating business enterprise only. As evident
from the above, the business enterprise
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operating within the subject real estate can probably be sold to an investor who
would require a 15% cash-on-cash return after satisfying all requirements of
real estate, personal property and management.
DISTRIBUTION OF INCOME BETWEEN REAL ESTATE AND BUSINESS ENTERPRISE
The subject property's Economic Rental is the amount of net operating income
available to satisfy a potential purchaser of the real estate and his
requirements for rate of return and "debt coverage." Conversely, the income
available to an investor in the business enterprise is the income available
after satisfying the priority claim on income by ownership of the real and
personal property. The division of income (and value) between the various
components of the total going concern entity (i.e., real property, personal
property and business enterprise) can be developed by studying their
mathematical relationship.
Debt coverage ratios for this type property range from 1.1OX to 3.OOX,
depending on the quality of the property and dependability of its income stream.
We believe the subject ranks average in credit risk and estimate a debt coverage
ratio of 1.35X to be appropriate.
When a potential purchaser of real estate requires a "debt coverage" factor of
1.35, he is requiring that a minimum of 26% of the net operating income be
available to compensate the business enterprise owner. Without that minimum
return, no one will provide the requirements of business enterprise ownership
for this facility. This is demonstrated mathematically as follows:
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<TABLE>
<CAPTION>
MAXIMUM INCOME
DEBT AVAILABLE TO
FACILITY'S NET COVERAGE REAL ESTATE
OPERATING INCOME DIVIDED BY RATIO = OWNER
- ---------------- ----- --------------
<S> <C> <C>
100% DIVIDED BY 1.35X = 74%
</TABLE>
<TABLE>
<CAPTION>
INCOME
ALLOWABLE
TO REAL INCOME REQUIRED
FACILITY'S ESTATE FOR BUSINESS
OPERATING INCOME - OWNER = OWNER
- ---------------- --------- ---------------
<S> <C> <C>
100% - 74% = 26%
</TABLE>
This analysis of the capital requirements of purchasers of Nursing Home real
estate demonstrates that a minimum of 26% of the net operating income must be
allocated to the business enterprise component. Conversely, a maximum of 74% of
the property's net operating income is available for economic rental to the
owner of the underlying real estate. Accordingly, the appraiser allocated 26% of
net operating income to provide the necessary compensation for the required
business enterprise ownership.
DISTRIBUTION OF VALUE BETWEEN REAL, PERSONAL AND BUSINESS PROPERTY
The personal property component has already been estimated and its respective
capital requirement previously deducted. The remaining net income can be
distributed between real property and business enterprise as shown above. By
studying the capital return requirements of real property versus a business
enterprise, a mathematical relationship between the value of those two
components can be established.
Ownership of the real estate component requires a 10% return, according to the
typical REIT investors in real estate. Ownership of the business enterprise
component requires a 15% return on investment, according to typical purchasers
of business property. A distribution of income and related values for the two
property components is shown below. Assuming a $ 100,000 net
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operating income, and the required rate of return and debt coverage factors
previously discussed, the "Going Concern" value of a Nursing Home would be
distributed between real estate and business enterprise as follows:
<TABLE>
<CAPTION>
Distribution of Income
Between Real Estate
Ownership & Business DIVIDED BY Required Rate = Distribution of Percentage Distribution
Enterprise Ownership of Return Value Between of Value Between Real
(Assumes 1.35X Debt Components Estate & Business
Coverage & $100K NOI)
- --------------------- ------------- --------------- -----------------------
<S> <C> <C> <C>
Real Estate =
$ 74,000 (74%) DIVIDED BY 10% = $740,000 81%
Business Enterprise =
$ 26,000 (26%) DIVIDED BY 15% = $173,333 19%
Total Property =
$100,000 (100%) $913,333 100%
</TABLE>
Indicated Business Value: $2,400,OOO X 19% = $456,000
SUMMARY
The two methods of estimating Business Value have indicated values as follows:
<TABLE>
<S> <C>
Cost Analysis $160,000
Capitalization Rate Analysis $664,500
Debt Coverage Ratio Analysis $456,000
</TABLE>
After considering all methods, it was our opinion that the subject property's
final Market Value of $2,400,000 included a Business Value of:
<TABLE>
<S> <C>
BUSINESS VALUE $500,000
</TABLE>
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SUMMARY OF VALUES
It was our opinion that the Subject Property described herein had the following
Market Value, as of March 21, 1997, at current occupancy and in its present
physical condition, subject to the Underlying Assumptions and Limiting
Conditions contained in this report:
<TABLE>
<S> <C>
Land $125,000
Building Improvements $1,575,500
----------
Total Real Estate $1,700,500
Personal Property $199,500
Business Value $500,000
----------
Total Property $2,400,000
</TABLE>
SPECIAL CONDITION
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have a
dramatic impact on the property's value.
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UNDERLYING ASSUMPTIONS AND LIMITING CONDITIONS
1. The Appraiser assumes no responsibility for legal matters nor renders
an opinion of title. Good title to The Trinity Hills Manor is assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to appear
in court, commission, or in any other capacity without prior
arrangements and additional compensation.
This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report without the preparer's written consent is an
unintended user, and does so at his own risk.
3. The separate values for land, equipment, business value and/or
buildings must not be used in reference to any other appraisal and are
invalid if so used. The distribution of total value applies only to
existing utilization.
4. The factual information in this report--furnished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
5. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each
appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared. However, selected portions of
this appraisal report shall not be given to third parties without prior
written consent of the signatories of this appraisal report. Further,
neither all nor any part of this appraisal report shall be disseminated
to the general public by use of advertising, public relations, news,
sales, or other media for public communication without the prior
written consent of the signatories of this appraisal report.
6. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not responsible
for any adverse condition that may be found in these matters.
7. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters (including
but not limited to termites, dry rot, wet rot, and other
wood-destroying organisms) are not present or have been detected and
properly corrected.
8. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations and mechanical, plumbing,
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electrical, heating, ventilation, air conditioning, and roof systems
are assumed to be adequate, in good working order and capable of
performing the function for which they were designed. The appraiser has
no expertise in this area and cannot certify the condition or
functional adequacy of these items. A qualified inspector should be
utilized for that purpose. The appraiser assumes no responsibility for
any hidden or unapparent conditions of the property, soil, subsoil, or
structures that would affect its value.
9. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
10. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
11. The appraiser has not researched the subject property for liens nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value. The property is therefore appraised as though it were free and
clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
12. The value estimate and estimated income and expenses assume responsible
ownership and typical, competent management.
13. Gross area of land and improvements is estimated by methods and from
sources considered reliable and the data is believed to be accurate.
However, no responsibility is assumed for its accuracy and it is
recommended that a licensed surveyor be employed for that purpose. The
appraiser's Final Market Value estimate is primarily predicated upon
the economic viability of the project itself and its projected income
stream. Any minor difference in the subject's actual land or
improvement size would have little or no effect on its true market
value. Any statement by the appraiser contained herein as to the size
of land or building improvements is for descriptive purposes and is a
statement of the appraiser's opinion as to the property's functional
utility and not a statement of fact as to its physical size.
14. The subject property is subject to licensing and certification by
several regulatory agencies. Our value estimate is predicated upon the
subject property maintaining its Certificate Of Need and/or License and
Certification to Operate as a Nursing Home. The loss of either one of
those items could affect the value of the subject property.
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15. In the event that any residents are funded by public or third party
payors, we have assumed that all payments will be made promptly.
16. The Market Value estimate is predicated upon an assumption of
stabilized occupancy, rates and census.
17. The appraiser's projections of income and expenses are not predictions
of the future. They are our best estimates of current market thinking
about what future income and expenses might be. We make no warranty or
representations that these projections will materialize.
18. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale. There may
have been transactions of this type, but the relevant details were not
available. While any present or past listing, option or sales data on
the subject available to the appraiser have been considered in this
analysis, the Final Market Value was estimated as though subject were
available for sale on the open market.
19. To the best of the Appraiser's knowledge, this report conforms to the
current requirements prescribed by the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation as required by the Financial Institutions Reform,
Recovery and Enforcement Act (FIRREA) and the Appraisal Institute.
20. The Americans with Disabilities Act "ADA" became effective January 26,
1992. We have 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
we have no direct evidence relating to this issue, I (we) did not
consider possible noncompliance with the requirements of ADA in
estimating the value of the property. Based on our personal inspection,
we are not aware of any irregular or apparent non-compliant handicap
items.
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21. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
SPECIAL CONDITION
After discussions with appropriate state agencies, the appraiser believes the
property owner will be able to continue operating the subject facility as a
nursing home. The reader is cautioned that the appraiser is not an expert on
nursing home or medicaid matters and this critical assumption should be
confirmed by legal counsel. If this assumption is not accurate it could have a
dramatic impact on the property's value.
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APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- The statements of fact contained in this appraisal report are true and
correct.
- The reported appraisal 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 personal interest or bias with respect to
the parties involved.
- My compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event.
- My analyses, opinions and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation as required by the Financial Institutions Reform,
Recovery and Enforcement Act (FIRREA) and the Code of Professional
Ethics and Standards of Professional Appraisal Practice of the
Appraisal Institute.
- As of the date of this report, J. Michael Burroughs, MAI, SRA has
completed the requirements of the continuing education program 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.
- The subject property was inspected by Franklin M. Ramsey and was not
inspected by J. Michael Burroughs.
- Eve L. Burroughs and Bonny J. Sinclair provided valuable assistance in
compiling data for this report. No one else provided significant
professional assistance to the undersigned. The appraiser gratefully
acknowledges the contribution of data from several sources.
- The appraiser has complied with the USPAP competency provision.
- The USPAP departure provision does not apply.
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- This appraisal assignment was not based on a requested minimum or
maximum valuation, a specific valuation, or the approval of a loan.
I do not authorize the out-of-context quoting from or partial
reprinting of this appraisal report. Further, neither all nor any part of this
appraisal report shall be disseminated to the general public by the use of media
for public communication without the prior written consent of the appraiser(s)
signing this appraisal report.
/s/ J. MICHAEL BURROUGHS, MAI, SRA
----------------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
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REFERENCES
The appraiser would like to acknowledge the following resources:
1. Laventhol & Horwath, Retirement Housing Industry 1989 (Laventhol &
Horwath, Philadelphia, PA 1990).
2. Laventhol & Horwath, Nursing Home Industry 1988 (Laventhol & Horwath,
Philadelphia, PA 1989).
3. Marshall and Swift Computerized Services, Los Angeles, CA.
4. National Planning Data Corporation, Ithaca, NY.
5. SMG Marketing Group, Inc. -C-1993.
6. Ernst & Young and American Association of Homes for the Aging Study.
Continuing Care Retirement Communities: An Industry in Action, Analysis
and Developing Trends, 1989.
7. THE DICTIONARY OF REAL ESTATE APPRAISAL, American Institute of Real
Estate Appraisers, second edition.
8. THE APPRAISAL OF REAL ESTATE, ninth edition.
9. THE GUIDE TO THE NURSING HOME INDUSTRY, 1993. A joint publication of
Health Care Investment Analysis, Inc. and Arthur Andersen & Co.
10. U. S. Bureau of Census.
11. MARION MERRELL DOW MANAGED CARE DIGEST LONG TERM CARE EDITION 1993.
Marion Merrell Dow, Inc.
12. AN OVERVIEW OF THE ASSISTED LIVING INDUSTRY, October 1993, Coopers &
Lybrand and The Assisted Living Facilities Association of America.
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QUALIFICATIONS OF APPRAISER
J. MICHAEL BURROUGHS, MAI & SRA
POST OFFICE BOX 2227
HWY 64 EAST, LAUREL TERRACE, 2ND FLOOR
CASHIERS, NORTH CAROLINA 28717
BUSINESS EXPERIENCE
J. Michael Burroughs has been engaged in the preparation of appraisals,
feasibility studies, economic analyses, and general consulting on all types of
properties for various clients. In the mid-1970s, Mr. Burroughs began
specializing in the appraisal of long-term health care facilities and housing
for the elderly. Since 1985, Mr. Burroughs has worked exclusively with long-term
health care and housing for the elderly in the areas of appraising, brokerage,
and finance.
Assignments have been in more than 44 of the 50 United States. Current
assignments include all types of healthcare and senior housing real estate:
Nursing Homes
Continuing Care Retirement Communities (Both Rental and Endowment)
Assisted Living Facilities
Acute Care Hospitals
Psychiatric Hospitals
Congregate Living Facilities
Properties appraised total approximately 3,000 in number and exceed $7 Billion
in appraised value. Mr. Burroughs has also been active as a general partner in
five successful apartment to condominium conversion projects and is actively
engaged in the buying and selling of investment real estate for his own account
and for clients. He is a nationally recognized convention speaker and published
author on healthcare appraising and financing.
EMPLOYMENT
HealthCare Property Appraisers of America, Inc. -- President
June, 1973 to Present
Atlantic Mortgage and Investment Company -- First Vice President
January, 1972 to July, 1973, Winston-Salem, NC
Wachovia Mortgage Company -- Asst. VP and Manager of the Charlotte Income
Property Loan Department
May, 1970 to January, 1972, Charlotte, NC
Prudential Insurance Company -- Real Estate and Mortgage Loan Department
Regional Appraiser
December, 1964 to April, 1969, Montgomery, Alabama
May 1969 to May, 1970, Charlotte, N. C.
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 129
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
GENERAL EDUCATION
Mars Hill College--Associate of Arts--1962
University of North Carolina at Chapel Hill--B.S. in Business Administration
(Major: Banking and Finance) 1964
REAL ESTATE EDUCATION
American Institute of Real Estate Appraisers--Real Estate Valuation--Course
I--University of Mississippi, 1966.
American Institute of Real Estate Appraisers--Real Estate Valuation--Course
II--Tulane University, 1967.
Various Seminars in Tax Deferred Exchanging and Computer Applications for
Real Estate Analysis.
PROFESSIONAL CONTRIBUTIONS
Mr. Burroughs has authored articles for national industry periodicals and is a
nationally recognized speaker on the valuation of healthcare and senior living
properties.
MEMBERSHIPS AND PROFESSIONAL DESIGNATIONS
The Appraisal Institute--MAI, SRA
Licensed Real Estate Broker
The Academy of Real Estate Exchangers
State Certified General Appraiser
AREA OF SPECIALTY--LONG-TERM HEALTH CARE
HEALTHCARE AND NURSING HOME FACILITIES
Facilities Appraised: 2500
Location: Located in 44 States
Type: Skilled, ICF, Personal Care, Head Trauma,
Long-Term Pediatric Care, Substance Abuse,
Mentally Retarded (MR), Rehabilitation,
Alzheimer's, Acute, Sub-Acute, Rehab, and
Psychiatric Hospitals
RETIREMENT HOUSING
Facilities Appraised: 60+
Location: Located in over 14 States
Type: Lease Rental, Condo Ownership, Retirement
Apartments with or without Nursing Home,
Assisted Living, and Luxurious Hotel-type
for the well elderly. Housing for the
elderly requiring some personal care and
services.
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 130
<PAGE>
The Trinity Hills Manor, Benbrook, Texas
- -------------------------------------------------------------------------------
TYPICAL NURSING HOME CLIENTS (PARTIAL LIST)
MORTGAGE/BOND LENDERS
Bank One, Indianapolis, IN
Bear Stearns Investment Bankers, New York, NY
Dominion Bank, Richmond, VA
First American National Bank, Nashville, TN
First National of Maryland, Baltimore, MD
Grove Capital, Atlanta, GA
Healthcare REIT, Toledo, OH
Hibernia National Bank, New Orleans, LA
J. C. Bradford, Nashville TN and Pensacola, FL
Maryland National Bank, Baltimore, MD
Society Bank, Dayton, Ohio
Southtrust Bank, N.A., Birmingham, AL
Van Kampen Merritt, Philadelphia, PA
Wachovia Bank & Trust, Raleigh, NC
Wright One Financial, Dayton, OH
HEALTHCARE MANAGEMENT COMPANIES
American Retirement Corporation, Nashville, TN
The Angell Group, Winston-Salem, NC
Asheville Psychiatric Hospital, Asheville, NC
Beverly Enterprises, Ft. Smith, AR
Brian Management Group, Hickory, NC
The Brunner Companies, Dayton, OH
Charlotte Memorial Hospital, Charlotte, NC
Convalescent Services, Atlanta, GA
Cumberland Health Systems, Nashville, TN
Denver Health Group, Denver, CO
Diversicare Corporation of America, Franklin, TN
Elmhurst Psychiatric Hospital, Portland, CT
Genesis Health, West Point, PA
Health Care Capital, Atlanta, GA
Health Care Concepts, Atlanta, GA
Health Prime, Atlanta, GA
Meridian Healthcare, Towson, MD
Multicare Management, Inc., Hackensack, NJ
National Health Corporation, Murfreesboro, TN
Nomura, New York, NY
Quest Rescue, Atlanta, GA
Quorum Health Services, Inc., Wellesley, MA
Regency Health Care, Ormond Beach, FL
Resource Housing of America, Atlanta, GA
Royal Care, Inc., Cleveland, TN
Southern Care Enterprises, Atlanta, GA
TheraTx, Baltimore, MD
Total Care Systems, Inc., West Point, PA
WellCare, Inc., Atlanta, GA
- -------------------------------------------------------------------------------
HealthCare Property Appraisers of America, Inc. 131
<PAGE>
ADDENDA
- --------------------------------------------------------------------------------
<PAGE>
BENBROOK AT TRINITY HILLS
Balance Sheet
December 31, 1996
(Unaudited)
<TABLE>
<S> <C> <C> <C>
Assets Liabilities and Stockholder's Equity
Current Assets: Current Liabilities:
Cash and cash equivalents.................. 91,632 Current maturities of long-term debt....... 0
Patient accounts and third-party payor Notes payable.............................. 0
settlements receivable, less allowance Accounts payable........................... 246,018
for doubtful receivable.................. 947,801 Accrued expenses and other................. 213,262
Supplies inventory, prepaid expenses and Income taxes............................... 0
other current assets..................... 36,571 ----------
---------- Total current liabilities.............. 459,280
Total current assets................... 1,076,004 ----------
---------- Intercompany................................. 3,664,235
Property, plant and equipment, net........... 2,448,815 Long-term debt, less current maturities...... 747,435
Deferred financing costs..................... 0 Subordinate debt............................. 0
Deferred pre-opening costs................... 2,211 Deferred gain on sale leaseback
Intangible assets of businesses acquired..... 0 transactions............................... 0
Other assets................................. 0 Stockholder's equity:
---------- Preferred stock............................ 0
Common stock............................... 0
Additional paid-in capital................. 0
Deficit--prior............................. (672,088)
Deficit--current........................... (671,832)
----------
Net stockholder's equity............... (1,343,920)
----------
Total assets................................. 3,527,030 Total liabilities and stockholder's equity... 3,527,030
---------- ----------
---------- ----------
Data Provided
By Owner
</TABLE>
<PAGE>
BEMBROOK AT TRINITY HILLS Page 1
Facility Consolidation 03/06/97
Report ID: O.SDP.ADJ 16:01:48
INTEGRATED HEALTH SERVICES, INC.
DETAIL STATEMENT OF OPERATIONS
PERIOD ENDED 12/31/96
<TABLE>
<CAPTION>
CURRENT MONTH YEAR TO DATE
PREVIOUS ------------------------------ PREVIOUS -----------------------------------
MONTH ACTUAL BUDGET VARIANCE YEAR ACTUAL BUDGET VARIANCE
--------- --------- --------- -------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Resident Days 2,987 2,962 3,067 (105) 31,361 34,672 34,854 (182)
Revenues
- --------
Basic/routine Revenue (126,692) (115,960) (8,197) (107,763) (529,444) (2,048,879) 7,334 (2,056,213)
Specialty Room and Board 233,275 211,854 182,227 49,627 1,277,085 2,363,401 1,481,182 882,219
Mgmt. Services/Other Revenue 16,118 6,203 5,502 701 26,891 143,731 60,175 83,556
Bad Debts (13,675) (13,942) (2,124) (11,818) (27,960) (78,248) (17,455) (60,793)
--------- --------- --------- -------- ---------- ---------- --------- ----------
109,026 88,155 157,408 (69,253) 746,552 380,005 1,531,236 (1,151,231)
Ancillary Revenues 336,007 369,843 228,407 141,436 3,066,033 4,711,082 2,606,516 2,104,564
Ancillary Expenses (150,353) (148,622) (132,458) (16,164) (1,164,746) (1,850,253) (1,488,067) (362,166)
--------- --------- --------- -------- ---------- ---------- --------- ----------
185,654 221,221 95,949 125,272 1,901,267 2,860,829 1,118,431 1,742,398
--------- --------- --------- -------- ---------- ---------- --------- ----------
TOTAL REVENUES 294,680 309,376 253,357 56,019 2,647,639 3,240,834 2,649,667 591,167
--------- --------- --------- -------- ---------- ---------- --------- ----------
Expenses
- --------
Nursing Administration 10,829 10,141 11,925 (1,784) 234,103 219,635 140,270 99,365
Benefits 35,922 35,457 23,677 11,780 248,847 322,010 280,423 41,587
Admissions 2,661 3,793 1,672 2,121 25,539 31,077 19,670 11,407
Nurse Aide Training 885 201 684 8,278 6,752 2,367 6,385
Nursing Medicare Certified 17,534 22,421 25,758 (3,337) 201,484 410,300 304,939 105,361
Nursing Non-Certified 107,743 105,000 53,282 51,726 709,272 997,229 618,051 379,178
Nursing Staff development 3,195 3,302 2,320 982 55,565 51,712 27,281 24,431
Activities 1,691 2,436 1,065 1,371 17,495 18,476 12,532 5,944
Social Services 2,019 2,147 1,711 434 21,876 26,342 20,148 6,194
Dietary 26,021 24,766 21,067 3,699 268,300 297,269 238,500 58,769
Housekeeping 9,892 8,089 6,503 1,586 79,501 105,607 76,888 28,919
Maintenance/Plant oper. 14,754 17,923 10,020 7,903 124,154 187,894 117,833 50,061
Laundary 4,384 3,966 4,286 (320) 53,317 53,393 49,430 3,963
Central Supply 1,584 1,596 1,055 541 17,979 20,452 12,411 8,041
Medical Records 1,991 1,478 1,178 300 17,743 24,941 13,864 11,077
Facility Administration 37,695 39,116 22,527 16,589 286,249 361,817 265,566 96,251
--------- --------- --------- -------- ---------- ---------- --------- ----------
Total Operating Expenses 277,895 282,524 188,249 94,275 2,443,502 3,137,106 2,200,173 936,933
--------- --------- --------- -------- ---------- ---------- --------- ----------
Contribution Margin 16,785 26,852 65,108 (38,256) 204,337 103,728 449,494 (345,766)
--------- --------- --------- -------- ---------- ---------- --------- ----------
Nursing Administration 55
Dietary 64 64 64 64
Maintenance/Plant oper. 270
Facility Administration 41,853 40,904 30,488 10,416 251,123 477,970 365,861 112,109
--------- --------- --------- -------- ---------- ---------- --------- ----------
Total Non-operating Expenses 41,653 40,988 30,488 10,480 251,448 478,034 365,861 112,173
</TABLE>
<PAGE>
BENBROOK AT TRINITY HILLS PAGE 1
03/06/97
REPORT ID: CENSUS.TTL 16:02:51
INTEGRATED HEALTH SERVICES, INC.
CENSUS ANALYSIS
PERIOD ENDED 12/31/96
<TABLE>
<CAPTION>
CURRENT MONTH PRIOR MONTH 2 MONTHS PRIOR YEAR TO DATE
ACTUAL ACTUAL ACTUAL ACTUAL
DAYS PPD DAYS PPD DAYS PPD DAYS PPD
----- ----- ----- ----- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Private and Other 440 14.19 531 17.70 520 16.77 5,844 16.01
Medicare 0 0.00 0 0.00 0 0.00 (60) (0.16)
Medicaid 1,917 61.84 1,815 60.50 1,880 60.65 22,423 61.43
----- ----- ----- ----- ----- ----- ------ -----
Long Term Care 2,357 76.03 2,346 78.20 2,400 77.42 28,207 77.28
Private and Other 136 4.39 142 4.73 144 4.65 1,140 3.12
Medicare 314 10.13 349 11.63 342 11.03 4,555 12.48
Medicaid 155 5.00 150 5.00 124 6.00 770 2.11
----- ----- ----- ----- ----- ----- ------ -----
Complex Care Unit 605 19.52 641 21.36 610 19.68 6,465 17.71
----- ----- ----- ----- ----- ----- ------ -----
TOTAL FACILITY 2,962 95.59 2,987 99.56 3,010 97.10 34,672 94.99
----- ----- ----- ----- ----- ----- ------ -----
----- ----- ----- ----- ----- ----- ------ -----
FACILITY CONSOLIDATED
- ---------------------
Private and Other 440 14.19 531 17.70 520 16.77 5,844 16.01
Medicare 0 0.00 0 0.00 0 0.00 (60) (0.16)
Medicaid 1,917 61.84 1,815 60.50 1,880 60.65 22,423 61.43
----- ----- ----- ----- ----- ----- ------ -----
TOTAL GNF & OTHER 2,357 76.03 2,346 78.20 2,400 77.42 28,207 77.28
Private and Other 136 4.39 142 4.73 144 4.65 1,140 3.12
Medicare 314 10.13 349 11.63 342 11.03 4,555 12.48
Medicaid 155 5.00 150 5.00 124 4.00 770 2.11
----- ----- ----- ----- ----- ----- ------ -----
TOTAL MSU 605 19.52 641 21.37 610 19.68 6,465 17.71
----- ----- ----- ----- ----- ----- ------ -----
Private and Other 576 18.58 673 22.43 664 21.42 6,984 19.13
Medicare 314 10.13 349 11.63 342 11.03 4,495 12.32
Medicaid 2,072 66.84 1,965 65.50 2,004 64.65 23,193 63.54
----- ----- ----- ----- ----- ----- ------ -----
TOTAL FACILITY 2,962 95.55 2,987 99.57 3,010 97.10 34,672 94.99
----- ----- ----- ----- ----- ----- ------ -----
----- ----- ----- ----- ----- ----- ------ -----
</TABLE>
<PAGE>
BEMBROOK AT TRINITY HILLS Page 2
Facility Consolidation 03/06/97
Report ID: O.SDP.ADJ 16:01:48
INTEGRATED HEALTH SERVICES, INC.
DETAIL STATEMENT OF OPERATIONS
PERIOD ENDED 12/31/96
<TABLE>
<CAPTION>
CURRENT MONTH YEAR TO DATE
PREVIOUS ----------------------------- PREVIOUS -----------------------------------
MONTH ACTUAL BUDGET VARIANCE YEAR ACTUAL BUDGET VARIANCE
--------- --------- --------- -------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
--------- --------- --------- -------- ---------- ---------- --------- ----------
TOTAL EXPENSES 319,748 323,492 218,737 104,755 2,694,950 3,615,140 2,566,034 1,049,106
--------- --------- --------- -------- ---------- ---------- --------- ----------
NET INCOME BEFORE TAXES
& CDC (25,000) (14,116) 34,620 (48,736) (47,111) (374,308) 83,633 (457,939)
Central Office Allocations 27,083 25,904 25,904 228,807 297,527 297,527
--------- --------- --------- -------- ---------- ---------- --------- ----------
NET INCOME (52,151) (40,020) 34,620 (74,640) (275,928) (671,633) 83,633 (755,486)
--------- --------- --------- -------- ---------- ---------- --------- ----------
--------- --------- --------- -------- ---------- ---------- --------- ----------
</TABLE>
<PAGE>
[form]
- --------------------------------------------------------------------------------
FEDERAL EMERGENCY MANAGEMENT AGENCY
STANDARD FLOOD HAZARD DETERMINATION
See the Attached Instructions
O.M.B. No. 3887 0264
Expires April 30, 1998
Section I - LOAN INFORMATION
- -------------------------------------------------------------------------------
1. LENDER NAME AND ADDRESS
HEALTHCARE PROPERTY APRAISERS
HWY 64 EAST BOX 2227
CASHIERS, NC 28717
2. COLLATERAL (Building/Mobile Home/Personal Property) PROPERTY ADDRESS
(Legal description may be attached)
1000 MCKINLEY ST
BENBROOK, TX 76126-3474
3. LENDER ID. NO.
4. LOAN IDENTIFIER
6
5. AMOUNT OF FLOOD INSURANCE REQUIRED
$0
Section II
- ------------------------------------------------------------------------------
A. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) COMMUNITY JURISDICTION
NFIP COMMUNITY
Name
BENBROOK, CITY OF
County(ies)
TARRANT
State
TX
NFIP Community Number
480586
B. NATIONAL FLOOD INSURANCE PROGRAM (NFIP) DATA AFFECTING BUILDING/MOBILE HOME
NFIP Map Number or Community Panel Number (Community name, if not the same as
"A")
48439C09390H
NFIP Map Panel Effective/Revised Date
08/02/95
LOBAL/LOHR
- ----- ------------
Yes Date
Flood Zone
x
No. NFIP Map
C. FEDERAL FLOOD INSURANCE AVAILABILITY (Check all that apply)
X Federal Food Insurance is available (community participates in NFIP).
- --- X Regular Program Emergency Program of NFIP
--- ---
Federal Flood Insurance is not available because community is not
- --- participating in the NFIP
Building/Mobile Home is in a Coastal Barrier Resources Area (CBRA),
- --- Federal Flood Insurance may not be available. CBR designation date:
----------------
D. DETERMINATION
IS BUILDING/MOBILE HOME IN SPECIAL FLOOD HAZARD AREA (ZONES BEGINNING WITH
LETTERS "A" OR "V")? YES X NO
----- -----
If yes, flood insurance is required by the Flood Disaster Protection Act of
1973.
If no, flood insurance is not required by the Flood Disaster Protection Act
of 1973.
E. COMMENTS (Optional):
Name:
Type: REGULAR
Priority: REGULAR
Cert No: 1405443-0
Client ID: 7425
BFE: UNSHADED
Requested By: EVE OR SONNY
Fax 1-(704) 743-1730
This determination is based on examining the NFIP map, any Federal Emergency
Management Agency revisions to it, and any other information needed to locate
the building/mobile home on the NFIP map.
F. PREPARER'S INFORMATION
NAME, ADDRESS, TELEPHONE NUMBER (if other than Lender)
BANKERS HAZARD DETERMINATION SERVICES - BHDS
P.O. BOX 33001
ST. PETERSBURG, FL 33733
PHONE: 1-800-723-6327
DATE OF DETERMINATION
03/17/97
FEMA Form 81-93 JUN 95
<PAGE>
December 20, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
4160 Dallas Parkway
Dallas, Texas 75240
Re: Restricted Update Appraisal Report of the Complete Appraisal on The
Cedarbrook Rebound Facility in Gallatin, Tennessee AND Residential
Property at 2375 Nashville Pike, Gallatin, Tennessee Residential
Property at 1284 Hitt Lane in Goodlettsville, Tennessee
Dear Mr. Brickman
USE RESTRICTION
The use of this Restricted Appraisal Report is restricted in that it may be
relied on only by you, its intended user. Anyone else is an unintended user. It
cannot be understood properly without additional information contained in our
office work file or in the Self-Contained Appraisal Report dated April 10, 1997.
On April 10, 1997 we performed an appraisal and issued a report on the above
property. This current Restricted Appraisal Report incorporates by reference
that preceding appraisal, all supporting data and files. We have not
re-inspected the site and building improvements. The purpose of the current
update appraisal, with Report Date of December 20, 1997, has been to estimate
the Market Value of the fee simple estate as of an effective date of December
20, 1997. We understand the intended use of this appraisal to be for your
internal use.
SCOPE OF THE APPRAISAL
Our original Complete Appraisal dated April 10, 1997 was not limited in scope,
and was based upon generally accepted appraisal practices. Within that valuation
analysis we completed the following functions and procedures:
- Made an inspection of the subject property;
- Familiarized ourselves with the neighborhood and analyzed the
surrounding property trends;
- Considered and reviewed the historical market taking into account
stability and/or changes;
<PAGE>
Mr. David Brickman
December 20, 1997
The Cedarbrook Rebound Facility
- Gathered comparable land sales to determine the market value of the
land, and estimated the replacement cost new and accrued depreciation,
and calculated the value of the subject property via the cost approach
to value;
- Researched comparable sales, comparing actual sales of similar
properties to the subject, confirmed wherever possible, and valued the
subject via the Sales Comparison Approach to Value;
- Did not perform the Income Capitalization Approach to Value due to the
Special Purpose nature of the structure;
- Considered all applicable approaches to value specifically, the Cost
and Sales Comparison Approaches to Value, and their applicability in
the analysis of the subject property, and reconciled our final value
conclusion.
In this update report, the scope of our work included consultation with local
real estate brokers and appraisers as well as healthcare professionals, in order
to ascertain if there has been any change in the local market and hence the
Value of the Subject Property. Sources utilized to obtain this information
include information contained in our office files, and discussions with other
real estate experts, including brokers, other appraisers, buyers, sellers,
developers, and lenders.
This Restricted Appraisal Report sets forth in summary form the property
identification, purpose and effective date of the appraisal and our opinion of
the subject property's Market Value. This letter should be considered a
Restricted Appraisal Report in that it is presented here in an abridged format.
The information contained in this Restricted Appraisal Report is limited in
scope, and based on more complete information, analysis and conclusions retained
in our file. The complete data, investigation, and analyses leading to the
conclusions reached are not fully described or discussed, but are incorporated
as part of this Restricted Appraisal Report by reference.
Market Value is as defined in The Uniform Standards of Professional Appraisal
Practice (USPAP).
The subject property is generally identified as The Cedarbrook Rebound Facility
which is located at 1400 Nashville Pike, Gallatin, Tennessee. The subject
property includes 6.95 acres of land and building improvements containing 42,350
sf of building area. The subject property to be valued consists of real property
only, without personal property or any business value that might be derived from
the business operation operated therein.
According to the present owner, the subject property has not been sold in the
last three years. L
We interviewed knowledgeable realtors and appraisers who are active in the
Northern Nashville area. This is generally an attractive area for long term
growth as it lies between Gallatin and Goodlettsville and Nashville and on the
main connecting highway. This is an attractive
2
<PAGE>
Mr. David Brickman
December 20, 1997
The Cedarbrook Rebound Facility
residential area as there has been some development of large luxury homes for
the Country Music Entertainment market. The close proximity to the college is
also a possible benefit. However, as with all properties of this type, there are
considerable special use factors in the subject's structure that will limit its
marketability. It is our opinion that there has no been no measurable market
change since our April report.
After reviewing the local market and the Cost and Sales Comparison Approaches to
Value, we reconfirm the FINAL MARKET VALUE, as of December 20, 1997, of the
Cedarbrook Rebound Facility main campus subject to the Limiting Conditions and
Underlying Assumptions and Appraiser's Certification attached, to be:
$200,000
The appraiser has reviewed an appraisal by Robert Collier, SRA on the
residential property located at 2375 Nashville Pike in Gallatin, TN. This 5,179
sf house sits on 7.5 acres of land. Mr. Collier appraised this property April
25, 1997 for $390,000. After discussion with Mr. Collier, we can reconfirm that
value estimate as still valid.
The appraiser has reviewed an appraisal of 1284 Hitt Lane in Goodlettsville, TN,
prepared by Mr. Robert Collier, SRA, estimating a value as of April 25, 1997 of
$790,000. This 5,354 sf home sits on 11.35 acres. After discussions with Mr.
Collier, we believe this property to continue to have that same value in today's
market.
Respectfully submitted,
J. MICHAEL BURROUGHS, MAI, SRA
President
3
<PAGE>
APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- ------- The statements of fact contained in this appraisal report are true and
correct.
- ------- The reported appraisal 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 upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event.
- ------- My analyses, opinions and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation (as required by the Financial Institutions Reform,
Recovery and Enforcement Act -FIRREA) and the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the
Appraisal Institute.
- ------- As of the date of this report, J. Michael Burroughs, MAI, SRA has
completed the requirements of the continuing education program 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.
- ------- The subject property was inspected by Franklin M. Ramsey, and was not
inspected by J. Michael Burroughs.
- ------- Eve L. Burroughs provided valuable assistance in compiling data for
this report. No one else provided significant professional assistance
to the undersigned. The appraiser gratefully acknowledges the
contribution of data from several sources.
- ------- The appraiser has complied with the USPAP competency provision.
- ------- The USPAP departure provision does not apply.
- ------- This appraisal assignment was not based on a requested minimum or
maximum valuation, a specific valuation, or the approval of a loan.
4
<PAGE>
I do not authorize the out-of-context quoting from or partial reprinting of this
appraisal report. Further, neither all nor any part of this appraisal report
shall be disseminated to the general public by the use of media for public
communication without the prior written consent of the appraiser(s) signing this
appraisal report.
------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
5
<PAGE>
GENERAL LIMITING CONDITIONS
1. No responsibility is assumed by the appraiser for matters legal in
nature, nor is an opinion of title rendered herewith. Good title to The
Cedarbrook Rebound Facility is assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to appear
in court, commission, or in any other capacity without prior
arrangements and additional compensation.
3. This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc.. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report, without the preparer's written consent is
an unintended user, and does so at his own risk.
4. The factual information in this report--furnished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
5. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each
appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared; however, selected portions of
this appraisal report shall not be given to third parties without prior
written consent of the signatories of this appraisal report. Further,
neither all nor any part of this appraisal report shall be disseminated
to the general public by use of advertising media, public relations
media, news media, sales media, or other media for public communication
without the prior written consent of the signatories of this appraisal
report.
6. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not to be held
responsible for any adverse condition that may be found in these
matters.
7. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters, including
but not limited to termites, dry rot, wet rot, and other wood
destroying organisms, are not present or have been detected and
properly corrected.
8. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations, mechanical, plumbing, electrical, heating, ventilation,
air conditioning, and roof systems are assumed to be adequate, in good
working order and capable of performing the function for which they
were designed. The appraiser has no expertise in this area, and cannot
certify the condition or functional adequacy of these items. A
qualified inspector should be utilized for that purpose. The
6
<PAGE>
appraiser assumes no responsibility for any hidden or unapparent
conditions of the property, soil, subsoil, or structures that would
affect its value.
9. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure, The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
10. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos, or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
11. The appraiser has not researched the subject property for liens, nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value, and the property is therefore appraised as though it were free
and clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
12. The value estimate, and estimated income and expenses assumes
responsible ownership and typical, competent management.
13. Gross area of land and improvements is estimated by methods and from
sources considered reliable, and the data is believed to be accurate.
However, no responsibility is assumed for its accuracy and it is
recommended that L a licensed surveyor be employed for that purpose.
Any statement by the appraiser contained herein as to the size of land
or building improvements is for descriptive purposes and is a statement
of the appraiser's opinion as to the property's functional utility and
not a statement of fact as to its physical size.
14. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale. There may
have been transactions of this type, but the relevant details were not
available. While any present or past listing, option or sales data on
the subject available to the appraiser have been considered in this
analysis, the Final Market Value was estimated as though subject were
available for sale on the open market.
15. To the best of my knowledge, this report conforms to the current
requirements prescribed by the Uniform Standards of Professional
Appraisal Practice of the Appraisal Standards Board of the Appraisal
Foundation (as required by the Financial Institutions Reform, Recovery
and Enforcement Act - FIRREA) and the Appraisal Institute.
16. The Americans with Disabilities Act (ADA) became effective January 26,
1992. 1 (we) have 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
7
<PAGE>
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 I (we) have no
direct evidence relating to this issue, I (we) did not consider
possible noncompliance with the requirements of ADA in estimating the
value of the property.
17. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
8
<PAGE>
HealthCare Property Appraisers
Of America, Inc.
Post Office Box 2227
Hwy. 64 E., Laurel Terrace, 2nd Floor
Cashiers, North Carolina 28717
Phone: 704-743-5204
Fax: 704-743-1730
December 20, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
4160 Dallas Parkway
Dallas, Texas 75240
Re: Restricted Update Appraisal Report of the Complete Appraisal on
The Cambridge Nursing Home
Cambridge, Massachusetts
Dear Mr. Brickman
USE RESTRICTION
The use of this Restricted Appraisal Report is restricted in that it may be
relied on only by you, its intended user. Anyone else is an unintended user. It
cannot be understood properly without additional information contained in our
office work file or in the Self-Contained Appraisal Report dated April 10, 1997.
On April 10, 1997 we performed an appraisal and issued a report on the above
property. This current Restricted Appraisal Report incorporates by reference
that preceding appraisal, all supporting data and files. We have not
re-inspected the site and building improvements. The purpose of the current
update appraisal, with Report Date of December 20, 1997, has been to estimate
the Market Value of the fee simple estate as of an effective date of
December 20, 1997. We understand the intended use of this appraisal to be
for your internal use.
SCOPE OF THE APPRAISAL
Our original Complete Appraisal dated April 10, 1997 was not limited in scope,
and was based upon generally accepted appraisal practices. Within that valuation
analysis we completed the following functions and procedures:
- Made an inspection of the subject property.
<PAGE>
- Familiarized ourselves with the neighborhood and analyzed the
surrounding property trends;
- Considered and reviewed the historical market taking into account
stability and/or changes;
- Gathered comparable land sales to determine the market value of the
land, and estimated the replacement cost new and accrued depreciation,
and calculated the value of the subject property via the cost approach
to value.
- Researched comparable sales, comparing actual sales of similar
properties to the subject, confirmed wherever possible, and valued the
subject via the Sales Comparison Approach to Value;
- Did not perform the Income Capitalization Approach to Value due to the
Special Purpose nature of the structure;
- Considered all applicable approaches to value specifically, the Cost
and Sales Comparison Approaches to Value, and their applicability in
the analysis of the subject property, and reconciled our final value
conclusion.
In this update report, the scope of our work included consultation with local
real estate brokers and appraisers as well as healthcare professionals, in order
to ascertain if there has been any change in the local market and hence the
Value of the Subject Property. Sources utilized to obtain this information
include information contained in our office files, and discussions with other
real estate experts, including brokers, other appraisers, buyers, sellers,
developers, and lenders.
This Restricted Appraisal Report sets forth in summary form the property
identification, purpose and effective date of the appraisal and our opinion of
the subject property's Market Value. This letter should be considered a
Restricted Appraisal Report in that it is presented here in an abridged format.
The information contained in this Restricted Appraisal Report is limited in
scope, and based on more complete information, analysis and conclusions retained
in our file. The complete data, investigation, and analyses leading to the
conclusions reached are not fully described or discussed, but are incorporated
as part of this Restricted Appraisal Report by reference.
Market Value is as defined in The Uniform Standards of Professional Appraisal
Practice (USPAP).
The subject property is generally identified as The Cambridge Nursing Home which
is located at I Russell Street, Cambridge, Massachusetts. The property includes
21,600 sf of land and building improvements containing 24,700 sf of building
area. The subject property to be valued consists of real property, personal
property and business value that might be derived from the business operation
operated therein.
According to the present owner, the subject property has not been sold in the
last three years.
2
<PAGE>
The appraiser interviewed the administrator of this facility concerning current
occupancy, census mix, rate structure, and staffing payrolls. There has been
little change in this facility's operation or general market since the date of
our last appraisal in April. We have also performed other appraisals of nursing
homes and assisted living facilities in this general market which has kept us
current with market conditions. Without any substantial change in the general
nursing home market or with the facility's operational characteristics, we see
no reason to change our value estimate as presented in our April report.
After reviewing the local market and the Cost and Sales Comparison Approaches to
Value, we reconfirm the FINAL MARKET VALUE, as of December 20, 1997, of the
subject property subject to the Limiting Conditions and Underlying Assumptions
and Appraiser's Certification attached, to be:
$1,650,000
Respectfully submitted,
J. MICHAEL BU MAI, SRA
President
3
<PAGE>
APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- ------- The statements of fact contained in this appraisal report are true
and correct.
- ------- The reported appraisal 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 upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event.
- ------- My analyses, opinions and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation (as required by the Financial Institutions Reform,
Recovery and Enforcement Act -FIRREA) and the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the
Appraisal Institute.
- ------- As of the date of this report, J. Michael Burroughs, MAI, SRA has
completed the requirements of the continuing education program 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.
- ------- The subject property was inspected by Franklin M. Ramsey, and was not
inspected by J. Michael Burroughs.
- ------- Eve L. Burroughs provided valuable assistance in compiling data for
this report. No one else provided significant professional assistance
to the undersigned. The appraiser gratefully acknowledges the
contribution of data from several sources.
- ------- The appraiser has complied with the USPAP competency provision.
- ------- The USPAP departure provision does not apply.
- ------- This appraisal assignment was not based on a requested minimum or
maximum valuation, a specific valuation, or the approval of a loan.
I do not authorize the out-of-context quoting from or partial reprinting of this
appraisal report. Further, neither all nor any part of this appraisal report
shall be disseminated to the general
4
<PAGE>
public by the use of media for public communication without the prior written
consent of the appraiser(s) signing this appraisal report.
----------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
5
<PAGE>
GENERAL LIMITING CONDITIONS
1. No responsibility is assumed by the appraiser for matters legal in
nature, nor is an opinion of title rendered herewith. Good title to The
Cambridge Nursing Home is assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to appear
in court, commission, or in any other capacity without prior
arrangements and additional compensation.
This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc.. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report, without the preparer's written consent is
an unintended user, and does so at his own risk.
3. The factual information in this report--furnished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
4. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each
appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared; however, selected portions of
this appraisal report shall not be given to third parties without prior
written consent of the signatories of this appraisal report. Further,
neither all nor any part of this appraisal report shall be disseminated
to the general public by use of advertising media, public relations
media, news media, sales media, or other media for public communication
without the prior written consent of the signatories of this appraisal
report.
5. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not to be held
responsible for any adverse condition that may be found in these
matters.
6. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters, including
but not limited to termites, dry rot, wet rot, and other wood
destroying organisms, are not present or have been detected and
properly corrected.
7. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations, mechanical, plumbing, electrical, heating, ventilation,
air conditioning, and roof systems are assumed to be adequate, in good
working order and capable of performing the fimction for which they
were designed. The appraiser has no expertise in this area, and cannot
certify the condition or functional adequacy of these items. A
qualified inspector should be utilized for that purpose. The appraiser
assumes no responsibility for any hidden or unapparent conditions of
the property, soil, subsoil, or structures that would affect its value.
6
<PAGE>
8. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
9. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos, or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
10. The appraiser has not researched the subject property for liens, nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value, and the property is therefore appraised as though it were free
and clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
11. The value estimate, and estimated income and expenses assumes
responsible ownership and typical, competent management.
12. Gross area of land and improvements is estimated by methods and from
sources considered reliable, and the data is believed to be accurate.
However, no responsibility is assumed for its accuracy and it is
recommended that a licensed surveyor be employed for that purpose. Any
statement by the appraiser contained herein as to the size of land or
building improvements is for descriptive purposes and is a statement of
the appraiser's opinion as to the property's functional utility and not
a statement of fact as to its physical size.
13. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale. There may
have been transactions of this type, but the relevant details were not
available. While any present or past listing, option or sales data on
the subject available to the appraiser have been considered in this
analysis, the Final Market Value was estimated as though subject were
available for sale on the open market.
14. To the best of my knowledge, this report conforms to the current
requirements prescribed by the Uniform Standards of Professional
Appraisal Practice of the Appraisal Standards Board of the Appraisal
Foundation (as required by the Financial Institutions Reform, Recovery
and Enforcement Act - FIRREA) and the Appraisal Institute.
15. The Americans with Disabilities Act (ADA) became effective January 26,
1992. 1 (we) have 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
I (we) have no direct evidence relating to this issue, I (we)
7
<PAGE>
did not consider possible noncompliance with the requirements of ADA in
estimating the value of the property.
16. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
8
<PAGE>
HealthCare Property Appraisers
Of America, Inc.
Post Office Box 2227
Hwy. 64 E., Laurel Terrace, 2nd Floor
Cashiers, North Carolina 28717
Phone: 704-743-5204
Fax: 704-743-1730
December 20, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
4160 Dallas Parkway
Dallas, Texas 75240
Re: Restricted Update Appraisal Report of the Complete Appraisal on
The McCurdy Residential Center
Evansville, Indiana
Dear Mr. Brickman
USE RESTRICTION
The use of this Restricted Appraisal Report is restricted in that it may be
relied on only by you, its intended user. Anyone else is an unintended user. It
cannot be understood properly without additional information contained in our
office work file or in the Self-Contained Appraisal Report dated April 10, 1997.
On April 10, 1997 we performed an appraisal and issued a report on the above
property. This current Restricted Appraisal Report incorporates by reference
that preceding appraisal, all supporting data and files. We have not
re-inspected the site and building improvements. The purpose of the current
update appraisal, with Report Date of December 20, 1997, has been to estimate
the Market Value of the fee simple estate as of an effective date of
December 20, 1997. We understand the intended use of this appraisal to be
for your internal use.
SCOPE OF THE APPRAISAL
Our original Complete Appraisal dated April 10, 1997 was not limited in scope,
and was based upon generally accepted appraisal practices. Within that valuation
analysis we completed the following functions and procedures:
- Made an inspection of the subject property;
<PAGE>
Mr. David Brickman
December 20, 1997
The McCurdy Residential Center
- Familiarized ourselves with the neighborhood and analyzed the
surrounding property trends;
- Considered and reviewed the historical market taking into account
stability and/or changes;
- Gathered comparable land sales to determine the market value of the
land, and estimated the replacement cost new and accrued depreciation,
and calculated the value of the subject property via the cost approach
to value.
- Researched comparable sales, comparing actual sales of similar
properties to the subject, confirmed wherever possible, and valued the
subject via the Sales Comparison Approach to Value;
- Did not perform the Income Capitalization Approach to Value due to the
Special Purpose nature of the structure;
- Considered all applicable approaches to value specifically, the Cost
and Sales Comparison Approaches to Value, and their applicability in
the analysis of the subject property, and reconciled our final value
conclusion.
In this update report, the scope of our work included consultation with local
real estate brokers and appraisers as well as healthcare professionals, in order
to ascertain if there has been any change in the local market and hence the
Value of the Subject Property. Sources utilized to obtain this information
include information contained in our office files, and discussions with other
real estate experts, including brokers, other appraisers, buyers, sellers,
developers, and lenders.
This Restricted Appraisal Report sets forth in summary form the property
identification, purpose and effective date of the appraisal and our opinion of
the subject property's Market Value. This letter should be considered a
Restricted Appraisal Report in that it is presented here in an abridged format.
The information contained in this Restricted Appraisal Report is limited in
scope, and based on more complete information, analysis and conclusions retained
in our file. The complete data, investigation, and analyses leading to the
conclusions reached are not fully described or discussed, but are incorporated
as part of this Restricted Appraisal Report by reference.
Market Value is as defined in The Uniform Standards of Professional Appraisal
Practice (USPAP).
The subject property is generally identified as The McCurdy Residential Center
which is located at 10 1 Southeast First Street, Evansville, Indiana. The
property includes 3 1,3 63 sf of land and building improvements containing
135,350 sf of building area. The subject property to be valued
2
<PAGE>
Mr. David Brickman
December 20, 1997
The McCurdy Residential Center
consists of real property, personal property and business value that might be
derived from the business operation operated therein.
According to the present owner, the subject property has not been sold in the
last three years.
To update our information on this facility, the appraiser spoke with the
administrator of this facility concerning current occupancy, census mix, rate
structure, and staffing payrolls. It would appear that little has changed in
this facility's operation or general market since the date of our last appraisal
in April. We have also performed other appraisals of nursing homes and assisted
living facilities in this general market which has kept us current with market
conditions. As there has been no substantial change in the general nursing or
personal care home market or with the facility's operational characteristics, we
see no reason to change our value estimate as presented in our April report.
After reviewing the local market and the Cost and Sales Comparison Approaches to
Value, we reconfirm the FINAL MARKET VALUE, as of December 20, 1997, of the
subject property subject to the Limiting Conditions and Underlying Assumptions
and Appraiser's Certification attached, to be:
$11,250,000
Respectfully, submitted,
J. MICHAEL BURRO S, MAI, SRA
President
3
<PAGE>
APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- ------- The statements of fact contained in this appraisal report are true and
correct.
- ------- The reported appraisal 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 upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event.
- ------- My analyses, opinions and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation (as required by the Financial Institutions Reform,
Recovery and Enforcement Act -FIRREA) and the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the
Appraisal Institute.
- ------- As of the date of this report, J. Michael Burroughs, MAI, SRA has
completed the requirements of the continuing education program 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.
- ------- The subject property was inspected by Franklin M. Ramsey, and was not
inspected by J. Michael Burroughs.
- ------- Eve L. Burroughs provided valuable assistance in compiling data for
this report. No one else provided significant professional assistance
to the undersigned. The appraiser gratefully acknowledges the
contribution of data from several sources.
- ------- The appraiser has complied with the USPAP competency provision.
- ------- The USPAP departure provision does not apply.
- ------- This appraisal assignment was not based on a requested minimum or
maximum valuation, a specific valuation, or the approval of a loan.
I do not authorize the out-of-context quoting from or partial reprinting of this
appraisal report. Further, neither all nor any part of this appraisal report
shall be disseminated to the general
4
<PAGE>
public by the use of media for public communication without the prior written
consent of the appraiser(s) signing this appraisal report.
--------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
5
<PAGE>
GENERAL LIMITING CONDITIONS
1. No responsibility is assumed by the appraiser for matters legal in
nature, nor is an opinion of title rendered herewith. Good title to The
McCurdy Residential Center is assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to appear
in court, commission, or in any other capacity without prior
arrangements and additional compensation.
This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc.. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report, without the preparer's written consent is
an unintended user, and does so at his own risk.
3. The factual information in this report--fumished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
4. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each
appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared; however, selected portions of
this appraisal report shall not be given to third parties without prior
written consent of the signatories of this appraisal report. Further,
neither all nor any part of this appraisal report shall be disseminated
to the general public by use of advertising media, public relations
media, news media, sales media, or other media for public communication
without the prior written consent of the signatories of this appraisal
report.
5. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not to be held
responsible for any adverse condition that may be found in these
matters.
6. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters, including
but not limited to termites, dry rot, wet rot, and other wood
destroying organisms, are not present or have been detected and
properly corrected.
7. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations, mechanical, plumbing, electrical, heating, ventilation,
air conditioning, and roof systems are assumed to be adequate, in good
working order and capable of performing the function for which they
were designed. The appraiser has no expertise in this area, and cannot
certify the condition or functional adequacy of these items. A
qualified inspector should be utilized for that purpose. The appraiser
assumes no responsibility for any hidden or unapparent conditions of
the property, soil, subsoil, or structures that would affect its value.
6
<PAGE>
8. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
9. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos, or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
10. The appraiser has not researched the subject property for liens, nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value, and the property is therefore appraised as though it were free
and clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
11. The value estimate, and estimated income and expenses assumes
responsible ownership and typical, competent management.
12. Gross area of land and improvements is estimated by methods and from
sources considered reliable, and the data is believed to be accurate.
However, no responsibility is assumed for its accuracy and it is
recommended that a licensed surveyor be employed for that purpose. Any
statement by the appraiser contained herein as to the size of land or
building improvements is for descriptive purposes and is a statement of
the appraiser's opinion as to the property's functional utility and not
a statement of fact as to its physical size.
13. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale. There may
have been transactions of this type, but the relevant details were not
available. While any present or past listing, option or sales data on
the subject available to the appraiser have been considered in this
analysis, the Final Market Value was estimated as though subject were
available for sale on the open market.
14. To the best of my knowledge, this report conforms to the current
requirements prescribed by the Uniform Standards of Professional
Appraisal Practice of the Appraisal Standards Board of the Appraisal
Foundation (as required by the Financial Institutions Reform, Recovery
and Enforcement Act - FIRREA) and the Appraisal Institute.
15. The Americans with Disabilities Act (ADA) became effective January 26,
1992. 1 (we) have 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
I (we) have no direct evidence relating to this issue, I (we)
7
<PAGE>
did not consider possible noncompliance with the requirements of ADA in
estimating the value of the property.
16. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
8
<PAGE>
December 20, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
4160 Dallas Parkway
Dallas, Texas 75240
Re: Restricted Update Appraisal Report of the Complete Appraisal on
The Trinity Hills Manor
Benbrook, Texas
Dear Mr. Brickman
USE RESTRICTION
The use of this Restricted Appraisal Report is restricted in that it may be
relied on only by you, its intended user. Anyone else is an unintended user. It
cannot be understood properly without additional information contained in our
office work file or in the Self-Contained Appraisal Report dated April 21, 1997.
On April 21, 1997 we performed an appraisal and issued a report on the above
property. This current Restricted Appraisal Report incorporates by reference
that preceding appraisal, all supporting data and files. We have not
re-inspected the site and building improvements. The purpose of the current
update appraisal, with Report Date of December 20, 1997, has been to estimate
the Market Value of the fee simple estate as of an effective date of December
20, 1997. We understand the intended use of this appraisal to be for your
internal use.
SCOPE OF THE APPRAISAL
Our original Complete Appraisal dated April 21, 1997 was not limited in scope,
and was based upon generally accepted appraisal practices. Within that valuation
analysis we completed the following functions and procedures:
- Made an inspection of the subject property;
- Familiarized ourselves with the neighborhood and analyzed the
surrounding property trends;
- Considered and reviewed the historical market taking into account
stability and/or changes;
<PAGE>
Mr. David Brickman
December 20, 1997
The Trinity Hills Manor
- Gathered comparable land sales to determine the market value of the
land, and estimated the replacement cost new and accrued depreciation,
and calculated the value of the subject property via the cost approach
to value.
- Researched comparable sales, comparing actual sales of similar
properties to the subject, confirmed wherever possible, and valued the
subject via the Sales Comparison Approach to Value;
- Did not perform the Income Capitalization Approach to Value due to the
Special Purpose nature of the structure;
- Considered all applicable approaches to value specifically, the Cost
and Sales Comparison Approaches to Value, and their applicability in
the analysis of the subject property, and reconciled our final value
conclusion.
In this update report, the scope of our work included consultation with local
real estate brokers and appraisers as well as healthcare professionals, in order
to ascertain if there has been any change in the local market and hence the
Value of the Subject Property. Sources utilized to obtain this information
include information contained in our office files, and discussions with other
real estate experts, including brokers, other appraisers, buyers, sellers,
developers, and lenders.
This Restricted Appraisal Report sets forth in summary form the property
identification, purpose and effective date of the appraisal and our opinion of
the subject property's Market Value. This letter should be considered a
Restricted Appraisal Report in that it is presented here in an abridged format.
The information contained in this Restricted Appraisal Report is limited in
scope, and based on more complete information, analysis and conclusions retained
in our file. The complete data, investigation, and analyses leading to the
conclusions reached are not fully described or discussed, but are incorporated
as part of this Restricted Appraisal Report by reference.
Market Value is as defined in The Uniform Standards of Professional Appraisal
Practice (USPAP).
The subject property is generally identified as The Trinity Hills Manor which is
located at 1000 McKinley Street, Benbrook, Texas. The property includes 80,586
sf of land and building improvements containing 31,750 sf of building area. The
subject property to be valued consists of real property, personal property and
business value that might be derived from the business operation operated
therein.
According to the present owner, the subject property has not been sold in the
last three years.
In analyzing the subject property, the appraiser interviewed the administrator
of this facility concerning current occupancy, census mix, rate structure, and
staffing payrolls. There appears to have been little change in this facility's
operation or general market since the date of our
2
<PAGE>
Mr. David Brickman
December 20, 1997
The Trinity Hills Manor
last appraisal in April. We have also performed other appraisals of
nursing homes and assisted living facilities in this general market which has
kept us current with market conditions. Without any substantial change in the
general nursing home market or with the facility's operational characteristics,
we confirm our value estimate as presented in our April report.
After reviewing the local market and the Cost and Sales Comparison Approaches to
Value, we reconfirm the FINAL MARKET VALUE, as of December 20, 1997, of the
subject property subject to the Limiting Conditions and Underlying Assumptions
and Appraiser's Certification attached, to be:
$2,400,000
Respectfully submitted,
J. MICHAEL BURROUGHS, MAI, SRA
President
3
<PAGE>
APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
_____ The statements of fact contained in this appraisal report are true
and correct.
_____ The reported appraisal 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 upon the reporting of a
predetermined value or direction in value that favors the
cause of the client, the amount of the value estimate, the
attainment of a stipulated result, or the occurrence of a
subsequent event.
_____ My analyses, opinions and conclusions were developed, and this
report has been prepared, in conformity with the Uniform
Standards of Professional Appraisal Practice of the Appraisal
Standards Board of the Appraisal Foundation (as required by
the Financial Institutions Reform, Recovery and Enforcement
Act -FIRREA) and the Code of Professional Ethics and the
Standards of Professional Appraisal Practice of the Appraisal
Institute.
_____ As of the date of this report, J. Michael Burroughs, MAI, SRA
has completed the requirements of the continuing education
program 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.
_____ The subject property was inspected by Franklin M. Ramsey, and was
not inspected by J. Michael Burroughs.
_____ Eve L. Burroughs provided valuable assistance in compiling
data for this report. No one else provided significant
professional assistance to the undersigned. The appraiser
gratefully acknowledges the contribution of data from several
sources.
_____ The appraiser has complied with the USPAP competency provision.
_____ The USPAP departure provision does not apply.
_____ This appraisal assignment was not based on a requested minimum
or maximum valuation, a specific valuation, or the approval of
a loan.
<PAGE>
I do not authorize the out-of-context quoting from or partial reprinting of this
appraisal report. Further, neither all nor any part of this appraisal report
shall be disseminated to the general public by the use of media for public
communication without the prior written consent of the appraiser(s) signing this
appraisal report.
----------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
5
<PAGE>
GENERAL LIMITING CONDITIONS
1. No responsibility is assumed by the appraiser for matters legal in nature,
nor is an opinion of title rendered herewith. Good title to The Trinity
Hills Manor is assumed.
2. The commissioning and/or possession of this report does not carry with it
the right of publication, nor does it oblige the appraiser to appear in
court, commission, or in any other capacity without prior arrangements and
additional compensation.
3. This appraisal report has been prepared for the exclusive benefit of its
intended user, Capitol Senior Living, Inc.. it may not be used or relied
upon by any other party. Any party who uses or relies upon any information
in this report, without the preparer's written consent is an unintended
user, and does so at his own risk.
4. The factual information in this report--furnished by others or taken from
public records--is believed to be reliable, but no responsibility is
assumed for its accuracy. We do not guarantee the correctness of estimates,
opinions, sketches and other exhibits.
5. One (or more) of the signatories of this appraisal report is a Member of
the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each appraisal
report signed by such Member. Therefore, except as hereinafter provided,
the party for whom this appraisal report was prepared may distribute copies
of this appraisal report, in its entirety, to such third parties as may be
selected by the party for whom this appraisal report was prepared; however,
selected portions of this appraisal report shall not be given to third
parties without prior written consent of the signatories of this appraisal
report. Further, neither all nor any part of this appraisal report shall be
disseminated to the general public by use of advertising media, public
relations media, news media, sales media, or other media for public
communication without the prior written consent of the signatories of this
appraisal report.
6. The soil and subsoil, unless otherwise detailed, appear firm and solid. No
engineering study has been made and the appraiser is not to be held
responsible for any adverse condition that may be found in these matters.
7. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters, including but
not limited to termites, dry rot, wet rot, and other wood destroying
organisms, are not present or have been detected and properly corrected.
8. Any description of improvements is intended to be general, for descriptive
purposes only, and based primarily upon observation. All foundations,
mechanical, plumbing, electrical, heating, ventilation, air conditioning,
and roof systems are assumed to be adequate, in good working order and
capable of performing the function for which they were designed. The
appraiser has no expertise in this area, and cannot certify the condition
or functional adequacy of these items. A qualified inspector should be
utilized for that purpose. The
6
<PAGE>
appraiser assumes no responsibility for any hidden or unapparent conditions
of the property, soil, subsoil, or structures that would affect its value.
9. Any site or building improvement, whether existing or proposed, is assumed
by the appraiser to comply with all applicable building codes, zoning and
environmental regulations for this jurisdiction and is assumed to be a
legal structure. The appraiser has not verified the accuracy of this
assumption. We recommend an attorney be retained for verification purposes.
10. The existence (if any) of potentially hazardous material (such as, but not
limited to, formaldehyde foam insulation, radon, asbestos, or toxic waste)
was not considered. The appraiser is not qualified to detect such
substances and we urge the client to retain an expert in this field.
11. The appraiser has not researched the subject property for liens, nor
reviewed any mortgage documents. Our analysis is based upon the assumption
that any mortgages encumbering subject are of such amount, rates, and terms
as to be considered typical in the market place and would neither
contribute to nor detract from the property's market value, and the
property is therefore appraised as though it were free and clear of any
debt encumbrances or subject to financing which is generally acceptable in
the market.
12. The value estimate, and estimated income and expenses assumes responsible
ownership and typical, competent management.
13. Gross area of land and improvements is estimated by methods and from
sources considered reliable, and the data is believed to be accurate.
However, no responsibility is assumed for its accuracy and it is
recommended that a licensed surveyor be employed for that purpose. Any
statement by the appraiser contained herein as to the size of land or
building improvements is for descriptive purposes and is a statement of the
appraiser's opinion as to the property's functional utility and not a
statement of fact as to its physical size.
14. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale. There may have
been transactions of this type, but the relevant details were not
available. While any present or past listing, option or sales data on the
subject available to the appraiser have been considered in this analysis,
the Final Market Value was estimated as though subject were available for
sale on the open market.
15. To the best of my knowledge, this report conforms to the current
requirements prescribed by the Uniform Standards of Professional Appraisal
Practice of the Appraisal Standards Board of the Appraisal Foundation (as
required by the Financial Institutions Reform, Recovery and Enforcement Act
- FIRREA) and the Appraisal Institute.
16. The Americans with Disabilities Act (ADA) became effective January 26,
1992. 1 (we) have 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
7
<PAGE>
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 I (we) have no
direct evidence relating to this issue, I (we) did not consider possible
noncompliance with the requirements of ADA in estimating the value of the
property.
17. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract or
lease and that the property would be available for negotiation of a new
lease or management contract at this time.
8
<PAGE>
December 20, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
4160 Dallas Parkway
Dallas, Texas 75240
Re: Restricted Update Appraisal Report of the Complete Appraisal on
The Crenshaw Creek Rehabilitation Center
Lancaster, South Carolina
Dear Mr. Brickman
USE RESTRICTION
The use of this Restricted Appraisal Report is restricted in that it may be
relied on only by you, its intended user. Anyone else is an unintended user. It
cannot be understood properly without additional information contained in our
office work file or in the Self-Contained Appraisal Report dated April 10, 1997
On April 10, 1997 we performed an appraisal and issued a report on the above
property. This current Restricted Appraisal Report incorporates by reference
that preceding appraisal, all supporting data and files. We have not
re-inspected the site and building improvements. The purpose of the current
update appraisal, with Report Date of December 20, 1997, has been to estimate
the Market Value of the fee simple estate as of an effective date of December
20, 1997. We understand the intended use of this appraisal to be for your
internal use.
SCOPE OF THE APPRAISAL
Our original Complete Appraisal dated April 10, 1997 was not limited in scope,
and was based upon generally accepted appraisal practices. Within that valuation
analysis we completed the following functions and procedures:
- Made an inspection of the subject property;
- Familiarized ourselves with the neighborhood and analyzed the
surrounding property trends;
- Considered and reviewed the historical market taking into account
stability and/or changes;
<PAGE>
Mr. David Brickman
December 20, 1997
The Crenshaw Creek Rehabilitation Center
- Gathered comparable land sales to determine the market value of the
land, and estimated the replacement cost new and accrued depreciation,
and calculated the value of the subject property via the cost approach
to value.
- Researched comparable sales, comparing actual sales of similar
properties to the subject, confirmed wherever possible, and valued the
subject via the Sales Comparison Approach to Value;
- Did not perform the Income Capitalization Approach to Value due to the
Special Purpose nature of the structure;
- Considered all applicable approaches to value specifically, the Cost
and Sales Comparison Approaches to Value, and their applicability in
the analysis of the subject property, and reconciled our final value
conclusion.
In this update report, the scope of our work included consultation with local
real estate brokers and appraisers as well as healthcare professionals, in order
to ascertain if there has been any change in the local market and hence the
Value of the Subject Property. Sources utilized to obtain this information
include information contained in our office files, and discussions with other
real estate experts, including brokers, other appraisers, buyers, sellers,
developers, and lenders.
This Restricted Appraisal Report sets forth in summary form the property
identification, purpose and effective date of the appraisal and our opinion of
the subject property's Market Value. This letter should be considered a
Restricted Appraisal Report in that it is presented here in an abridged format.
The information contained in this Restricted Appraisal Report is limited in
scope, and based on more complete information, analysis and conclusions retained
in our file. The complete data, investigation, and analyses leading to the
conclusions reached are not fully described or discussed, but are incorporated
as part of this Restricted Appraisal Report by reference.
Market Value is as defined in The Uniform Standards of Professional Appraisal
Practice (USPAP).
The subject property is generally identified as The Crenshaw Creek
Rehabilitation Center which is located at 134 E. Rebound Road, Lancaster, South
Carolina. The property includes 43.92 acres of land and building improvements
containing 37,250 sf of building area. The subject property to be valued
consists of real property only, without personal property or any business value
that might be derived from any business operation operated therein.
According to the present owner, the subject property has not been sold in the
last three years.
We interviewed knowledgeable Realtors and appraisers who are active in the
Lancaster and Charlotte area. This is generally an attractive area for long term
growth as it lies between Lancaster and Charlotte and on the main connecting
highway. However, this property is fairly
2
<PAGE>
Mr. David Brickman
December 20, 1997
The Crenshaw Creek Rehabilitation Center
well removed from any immediate development. The opportunity to move this
property or to receive any value for the improvements is very limited for the
foreseeable future. This will continue to be an increasingly attractive area,
but development will be slow. In our opinion there has been no significant
market change since our April report.
After reviewing the local market and the Cost and Sales Comparison Approaches to
Value, we reconfirm the FINAL MARKET VALUE, as of December 20, 1997, of the
subject property subject to the Limiting Conditions and Underlying Assumptions
and Appraiser's Certification attached, to be:
$240,000
Respectfully submitted,
J. MICHAEL BURROUGHS, MAI, SRA
President
3
<PAGE>
APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- ------- The statements of fact contained in this appraisal report are true and
correct.
- ------- The reported appraisal 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 upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event.
- ------- My analyses, opinions and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation (as required by the Financial Institutions Reform,
Recovery and Enforcement Act -FIRREA) and the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the
Appraisal Institute.
- ------- As of the date of this report, J. Michael Burroughs, MAI, SRA has
completed the requirements of the continuing education program 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.
- ------- The subject property was inspected by Franklin M. Ramsey, and was not
inspected by J. Michael Burroughs.
- ------- Eve L. Burroughs provided valuable assistance in compiling data for
this report. No one else provided significant professional assistance
to the undersigned. The appraiser gratefully acknowledges the
contribution of data from several sources.
- ------- The appraiser has complied with the USPAP competency provision.
- ------- The USPAP departure provision does not apply.
- ------- This appraisal assignment was not based on a requested minimum or
maximum valuation, a specific valuation, or the approval of a loan.
4
<PAGE>
I do not authorize the out-of-context quoting from or partial reprinting of this
appraisal report. Further, neither all nor any L part of this appraisal report
shall be disseminated to the general public by the use of media for public
communication without the prior written consent of the appraiser(s) signing this
appraisal report.
------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
5
<PAGE>
GENERAL LIMITING CONDITIONS
1. No responsibility is assumed by the appraiser for matters legal in
nature, nor is an opinion of title rendered herewith. Good title to The
Crenshaw Creek Rehabilitation Center is assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to appear
in court, commission, or in any other capacity without prior
arrangements and additional compensation.
3. This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc.. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report, without the preparer's written consent is
an unintended user, and does so at his own risk.
4. The factual information in this report--furnished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
5. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each
appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared; however, selected portions of
this appraisal report shall not be given to third parties without prior
written consent of the signatories of this appraisal report. Further,
neither all nor any part of this appraisal report shall be disseminated
to the general public by use of advertising media, public relations
media, news media, sales media, or other media for public communication
without the prior written consent of the signatories of this appraisal
report.
6. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not to be held
responsible for any adverse condition that may be found in these
matters.
7. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters, including
but not limited to termites, dry rot, wet rot, and other wood
destroying organisms, are not present or have been detected and
properly corrected.
8. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations, mechanical, plumbing, electrical, heating, ventilation,
air conditioning, and roof systems are assumed to be adequate, in good
working order and capable of performing the function for which they
were designed. The appraiser has no expertise in this area, and cannot
certify the condition or functional adequacy of these items. A
qualified inspector should be utilized for that purpose. The
6
<PAGE>
appraiser assumes no responsibility for any hidden or unapparent
conditions of the property, soil, subsoil, or structures that would
affect its value.
9. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
10. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos, or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
11. The appraiser has not researched the subject property for liens, nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value, and the property is therefore appraised as though it were free
and clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
12. The value estimate, and estimated income and expenses assumes
responsible ownership and typical, competent management.
13. Gross area of land and improvements is estimated by methods and from
sources considered reliable, and the data is believed to be accurate.
However, no responsibility is assumed for its accuracy and it is
recommended that a licensed surveyor be employed for that purpose. Any
statement by the appraiser contained herein as to the size of land or
building improvements is for descriptive purposes and is a statement of
the appraiser's opinion as to the property's functional utility and not
a statement of fact as to its physical size.
14. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale. There may
have been transactions of this type, but the relevant details were not
available. While any present or past listing, option or sales data on
the subject available to the appraiser have been considered in this
analysis, the Final Market Value was estimated as though subject were
available for sale on the open market.
15. To the best of my knowledge, this report conforms to the current
requirements prescribed by the Uniform Standards of Professional
Appraisal Practice of the Appraisal Standards Board of the Appraisal
Foundation (as required by the Financial Institutions Reform, Recovery
and Enforcement Act - FIRREA) and the Appraisal Institute.
16. The Americans with Disabilities Act (ADA) became effective January 26,
1992. 1 (we) have 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
7
<PAGE>
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 I (we) have no
direct evidence relating to this issue, I (we) did not consider
possible noncompliance with the requirements of ADA in estimating the
value of the property.
17. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
8
<PAGE>
December 20, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
4160 Dallas Parkway
Dallas, Texas 75240
Re: Restricted Update Appraisal Report of the Complete Appraisal on
The Hearthstone of Round Rock
Round Rock, Texas
Dear Mr. Brickman
USE RESTRICTION
The use of this Restricted Appraisal Report is restricted in that it may be
relied on only by you, its intended user. Anyone else is an unintended user. It
cannot be understood properly without additional information contained in our
office work file or in the Self-Contained Appraisal Report dated April 10, 1997.
On April 10, 1997 we performed an appraisal and issued a report on the above
property. This current Restricted Appraisal Report incorporates by reference
that preceding appraisal, all supporting data and files. We have not
re-inspected the site and building improvements. The purpose of the current
update appraisal, with Report Date of December 20, 1997, has been to estimate
the Market Value of the fee simple estate as of an effective date of December
20, 1997. We understand the intended use of this appraisal to be for your
internal use.
SCOPE OF THE APPRAISAL
Our original Complete Appraisal dated April 10, 1997 was not limited in scope,
and was based upon generally accepted appraisal practices. Within that valuation
analysis we completed the following functions and procedures:
- Made an inspection of the subject property;
- Familiarized ourselves with the neighborhood and analyzed the
surrounding property trends;
- Considered and reviewed the historical market taking into account
stability and/or changes;
<PAGE>
Mr. David Brickman
December 20, 1997
The Hearthstone of Round Rock
- Gathered comparable land sales to determine the market value of the
land, and estimated the replacement cost new and accrued depreciation,
and calculated the value of the subject property via the cost approach
to value.
- Researched comparable sales, comparing actual sales of similar
properties to the subject, confirmed wherever possible, and valued the
subject via the Sales Comparison Approach to Value;
- Did not perform the Income Capitalization Approach to Value due to the
Special Purpose nature of the structure;
- Considered all applicable approaches to value specifically, the Cost
and Sales Comparison Approaches to Value, and their applicability in
the analysis of the subject property, and reconciled our final value
conclusion.
In this update report, the scope of our work included consultation with local
real estate brokers and appraisers as well as healthcare professionals, in order
to ascertain if there has been any change in the local market and hence the
Value of the Subject Property. Sources utilized to obtain this information
include information contained in our office files, and discussions with other
real estate experts, including brokers, other appraisers, buyers, sellers,
developers, and lenders.
This Restricted Appraisal Report sets forth in summary form the property
identification, purpose and effective date of the appraisal and our opinion of
the subject property's Market Value. This letter should be considered a
Restricted Appraisal Report in that it is presented here in an abridged format.
The information contained in this Restricted Appraisal Report is limited in
scope, and based on more complete information, analysis and conclusions retained
in our file. The complete data, investigation, and analyses leading to the
conclusions reached are not fully described or discussed, but are incorporated
as part of this Restricted Appraisal Report by reference.
Market Value is as defined in The Uniform Standards of Professional Appraisal
Practice (USPAP).
The subject property is generally identified as The Hearthstone of Round Rock
which is located at 401 Oakwood Boulevard, Round Rock, Texas. The property
includes 4.58 acres of land and building improvements containing 47,000 sf of
building area. The subject property to be valued consists of real property,
personal property and business value that might be derived from the business
operation operated therein.
According to the present owner, the subject property has not been sold in the
last three years.
The appraiser spoke with the administrator concerning this facility's current
occupancy, census mix, rate structure, and staffing payrolls. There has been
relatively little change in this facility's operation or general market since
the date of our last appraisal in April. We have also performed
2
<PAGE>
Mr. David Brickman
December 20, 1997
The Hearthstone of Round Rock
other appraisals of nursing homes and assisted living facilities in this general
market which has kept us current with market conditions. With no substantial
change in the general nursing home market or with the facility's operational
characteristics, we confirm our value estimate as presented in our April report.
After reviewing the local market and the Cost and Sales Comparison Approaches to
Value, we reconfirm the FINAL MARKET VALUE, as of December 20, 1997, of the
subject property subject to the Limiting Conditions and Underlying Assumptions
and Appraiser's Certification attached, to be:
$5,900,000
Respectfully submitted,
J. MICHAEL BURROUGHS, MAI, SRA
President
3
<PAGE>
APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- ------- The statements of fact contained in this appraisal report are true and
correct.
- ------- The reported appraisal 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 upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event.
- ------- My analyses, opinions and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation (as required by the Financial Institutions Reform,
Recovery and Enforcement Act -FIRREA) and the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the
Appraisal Institute.
- ------- As of the date of this report, J. Michael Burroughs, MAI, SRA has
completed the requirements of the continuing education program 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.
- ------- The subject property was inspected by Franklin M. Ramsey, and was not
inspected by J. Michael Burroughs.
- ------- Eve L. Burroughs provided valuable assistance in compiling data for
this report. No one else provided significant professional assistance
to the undersigned. The appraiser gratefully acknowledges the
contribution of data from several sources.
- ------- The appraiser has complied with the USPAP competency provision.
- ------- The USPAP departure provision does not apply.
- ------- This appraisal assignment was not based on a requested minimum or
maximum valuation, a specific valuation, or the approval of a loan.
4
<PAGE>
I do not authorize the out-of-context quoting from or partial reprinting of this
appraisal report. Further, neither all nor any part of this appraisal report
shall be disseminated to the general public by the use of media for public
communication without the prior written consent of the appraiser(s) signing this
appraisal report.
------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
5
<PAGE>
GENERAL LIMITING CONDITIONS
1. No responsibility is assumed by the appraiser for matters legal in
nature, nor is an opinion of title rendered herewith. Good title to The
Hearthstone of Round Rock is assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to appear
in court, commission, or in any other capacity without prior
arrangements and additional compensation.
3. This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc.. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report, without the preparer's written consent is
an unintended user, and does so at his own risk.
4. The factual information in this report--furnished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
5. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each
appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared; however, selected portions of
this appraisal report shall not be given to third parties without prior
written consent of the signatories of this appraisal report. Further,
neither all nor any part of this appraisal report shall be disseminated
to the general public by use of advertising media, public relations
media, news media, sales media, or other media for public communication
without the prior written consent of the signatories of this appraisal
report.
6. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not to be held
responsible for any adverse condition that may be found in these
matters.
7. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters, including
but not limited to termites, dry rot, wet rot, and other wood
destroying organisms, are not present or have been detected and
properly corrected.
8. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations, mechanical, plumbing, electrical, heating, ventilation,
air conditioning, and roof systems are assumed to be adequate, in good
working order and capable of performing the function for which they
were designed. The appraiser has no expertise in this area, and cannot
certify the condition or functional adequacy of these items. A
qualified inspector should be utilized for that purpose. The
6
<PAGE>
appraiser assumes no responsibility for any hidden or unapparent
conditions of the property, soil, subsoil, or structures that would
affect its value.
9. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
10. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos, or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
11. The appraiser has not researched the subject property for liens, nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value, and the property is therefore appraised as though it were free
and clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
12. The value estimate, and estimated income and expenses assumes
responsible ownership and typical, competent management.
13. Gross area of land and improvements is estimated by methods and from
sources considered reliable, and the data is believed to be accurate.
However, no responsibility is assumed for its accuracy and it is
recommended that L a licensed surveyor be employed for that purpose.
Any statement by the appraiser contained herein as to the size of land
or building improvements is for descriptive purposes and is a statement
of the appraiser's opinion as to the property's functional utility and
not a statement of fact as to its physical size.
14. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale. There may
have been transactions of this type, but the relevant details were not
available. While any present or past listing, option or sales data on
the subject available to the appraiser have been considered in this
analysis, the Final Market Value was estimated as though subject were
available for sale on the open market.
15. To the best of my knowledge, this report conforms to the current
requirements prescribed by the Uniform Standards of Professional
Appraisal Practice of the Appraisal Standards Board of the Appraisal
Foundation (as required by the Financial Institutions Reform, Recovery
and Enforcement Act - FIRREA) and the Appraisal Institute.
16. The Americans with Disabilities Act (ADA) became effective January 26,
1992. 1 (we) have 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
7
<PAGE>
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 I (we) have no
direct evidence relating to this issue, I (we) did not consider
possible noncompliance with the requirements of ADA in estimating the
value of the property.
17. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
8
<PAGE>
December 20, 1997
Mr. Mr. David Brickman
Capitol Senior Living, Inc.
4160 Dallas Parkway
Dallas, Texas 75240
Re: Restricted Update Appraisal Report of the Complete Appraisal on
The Cane Creek Rehabilitation Center
Martin, Tennessee
Dear Mr. Brickman
USE RESTRICTION
The use of this Restricted Appraisal Report is restricted in that it may be
relied on only by you, its intended user. Anyone else is an unintended user. It
cannot be understood properly without additional information contained in our
office work file or in the Self-Contained Appraisal Report dated April 10, 1997.
On April 10, 1997 we performed an appraisal and issued a report on the above
property. This current Restricted Appraisal Report incorporates by reference
that preceding appraisal, all supporting data and files. We have not
re-inspected the site and building improvements. The purpose of the current
update appraisal, with Report Date of December 20, 1997, has been to estimate
the Market Value of the fee simple estate as of an effective date of December
20, 1997. We understand the intended use of this appraisal to be for your
internal use.
SCOPE OF THE APPRAISAL
Our original Complete Appraisal dated April 10, 1997 was not limited in scope,
and was based upon generally accepted appraisal practices. Within that valuation
analysis we completed the following functions and procedures:
- Made an inspection of the subject property.
- Familiarized ourselves with the neighborhood and analyzed the
surrounding property trends;
- Considered and reviewed the historical market taking into account
stability and/or changes;
<PAGE>
Mr. Mr. David Brickman
December 20, 1997
The Cane Creek Rehabilitation Center
- Gathered comparable land sales to determine the market value of the
land, and estimated the replacement cost new and accrued depreciation,
and calculated the value of the subject property via the cost approach
to value.
- Researched comparable sales, comparing actual sales of similar
properties to the subject, confirmed wherever possible, and valued the
subject via the Sales Comparison Approach to Value;
- Did not perform the Income Capitalization Approach to Value due to the
Special Purpose nature of the structure;
- Considered all applicable approaches to value specifically, the Cost
and Sales Comparison Approaches to Value, and their applicability in
the analysis of the subject property, and reconciled our final value
conclusion.
In this update report, the scope of our work included consultation with local
real estate brokers and appraisers as well as healthcare professionals, in order
to ascertain if there has been any change in the local market and hence the
Value of the Subject Property. Sources utilized to obtain this information
include information contained in our office files, and discussions with other
real estate experts, including brokers, other appraisers, buyers, sellers,
developers, and lenders.
This Restricted Appraisal Report sets forth in summary form the property
identification, purpose and effective date of the appraisal and our opinion of
the subject property's Market Value. This letter should be considered a
Restricted Appraisal Report in that it is presented here in an abridged format.
The information contained in this Restricted Appraisal Report is limited in
scope, and based on more complete information, analysis and conclusions retained
in our file. The complete data, investigation, and analyses leading to the
conclusions reached are not fully described or discussed, but are incorporated
as part of this Restricted Appraisal Report by reference.
Market Value is as defined in The Uniform Standards of Professional Appraisal
Practice (USPAP).
The subject property is generally identified as The Cane Creek Rehabilitation
Center which is located at 1800 Mt. Pelia Road, Martin, Tennessee. The property
includes 11.9 acres of land and building improvements containing 36,500 sf of
building area. The subject property to be valued consists of real property,
personal property and business value that might be derived from the business
operation operated therein.
According to the present owner, the subject property has not been sold in the
last three years.
We interviewed local appraisers and realtors concerning current developments in
the Martin area. The area continues to be an attractive location for
institutional, educational or medical facilities. Unfortunately, the subject's
special use characteristics will continue to be a hindrance
2
<PAGE>
Mr. Mr. David Brickman
December 20, 1997
The Cane Creek Rehabilitation Center
to its possible sale. This will continue to be an attractive area because of the
location of other medical and educational properties. It is our opinion that the
market value as reported in April continues to be appropriate for this property.
After reviewing the local market and the Cost and Sales Comparison Approaches to
Value, we reconfirm the FINAL MARKET VALUE, as of December 20, 1997, of the
subject property subject to the Limiting Conditions and Underlying Assumptions
and Appraiser's Certification attached, to be:
$2,000,000
The $2,000,000 value is based on the assumption that a Buyer/User can be found
for this property. We rate that possibility as "good." However, if a Buyer/User
cannot be found, the value would be considerably less due to the special use
characteristics of this building. If no Buyer/User can be found, we estimate the
value to be:
$450,000
Respectfully submitted,
J. MICHAEL BURROUGHTS, MAI, SRA
President
3
<PAGE>
APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
- ------- The statements of fact contained in this appraisal report are true and
correct.
- ------- The reported appraisal 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 upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event.
- ------- My analyses, opinions and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Standards Board of the
Appraisal Foundation (as required by the Financial Institutions Reform,
Recovery and Enforcement Act -FIRREA) and the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the
Appraisal Institute.
- ------- As of the date of this report, J. Michael Burghs, MAI, SRA has
completed the requirements of the continuing education program 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.
- ------- The subject property was inspected by Franklin M. Ramsey, and was not
inspected by J. Michael Burghs.
- ------- Eve L. Burghs provided valuable assistance in compiling data for this
report. No one else provided significant professional assistance to the
undersigned. The appraiser gratefully acknowledges the contribution of
data from several sources.
- ------- The appraiser has complied with the USPAP competency provision.
- ------- The USPAP departure provision does not apply.
- ------- This appraisal assignment was not based on a requested minimum or
maximum valuation, a specific valuation, or the approval of a loan.
4
<PAGE>
I do not authorize the out-of-context quoting from or partial reprinting of this
appraisal report. Further, neither all nor any part of this appraisal report
shall be disseminated to the general public by the use of media for public
communication without the prior written consent of the appraiser(s) signing this
appraisal report.
------------------------------
J. MICHAEL BURROGHS, MAI, SRA
5
<PAGE>
GENERAL LIMITING CONDITIONS
1. No responsibility is assumed by the appraiser for matters legal in
nature, nor is an opinion of title rendered herewith. Good title to The
Cane Creek Rehabilitation Center is assumed.
2. The commissioning and/or possession of this report does not carry with
it the right of publication, nor does it oblige the appraiser to appear
in court, commission, or in any other capacity without prior
arrangements and additional compensation.
3. This appraisal report has been prepared for the exclusive benefit of
its intended user, Capitol Senior Living, Inc. It may not be used or
relied upon by any other party. Any party who uses or relies upon any
information in this report, without the preparer's written consent is
an unintended user, and does so at his own risk.
4. The factual information in this report--furnished by others or taken
from public records--is believed to be reliable, but no responsibility
is assumed for its accuracy. We do not guarantee the correctness of
estimates, opinions, sketches and other exhibits.
5. One (or more) of the signatories of this appraisal report is a Member
of the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each
appraisal report signed by such Member. Therefore, except as
hereinafter provided, the party for whom this appraisal report was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party for
whom this appraisal report was prepared; however, selected portions of
this appraisal report shall not be given to third parties without prior
written consent of the signatories of this appraisal report. Further,
neither all nor any part of this appraisal report shall be disseminated
to the general public by use of advertising media, public relations
media, news media, sales media, or other media for public communication
without the prior written consent of the signatories of this appraisal
report.
6. The soil and subsoil, unless otherwise detailed, appear firm and solid.
No engineering study has been made and the appraiser is not to be held
responsible for any adverse condition that may be found in these
matters.
7. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters, including
but not limited to termites, dry rot, wet rot, and other wood
destroying organisms, are not present or have been detected and
properly corrected.
8. Any description of improvements is intended to be general, for
descriptive purposes only, and based primarily upon observation. All
foundations, mechanical, plumbing, electrical, heating, ventilation,
air conditioning, and roof systems are assumed to be adequate, in good
working order and capable of performing the function for which they
were designed. The appraiser has no expertise in this area, and cannot
certify the condition or functional adequacy of these items. A
qualified inspector should be utilized for that purpose. The
6
<PAGE>
appraiser assumes no responsibility for any hidden or unapparent
conditions of the property, soil, subsoil, or structures that would
affect its value.
9. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is
assumed to be a legal structure. The appraiser has not verified the
accuracy of this assumption. We recommend an attorney be retained for
verification purposes.
10. The existence (if any) of potentially hazardous material (such as, but
not limited to, formaldehyde foam insulation, radon, asbestos, or toxic
waste) was not considered. The appraiser is not qualified to detect
such substances and we urge the client to retain an expert in this
field.
11. The appraiser has not researched the subject property for liens, nor
reviewed any mortgage documents. Our analysis is based upon the
assumption that any mortgages encumbering subject are of such amount,
rates, and terms as to be considered typical in the market place and
would neither contribute to nor detract from the property's market
value, and the property is therefore appraised as though it were free
and clear of any debt encumbrances or subject to financing which is
generally acceptable in the market.
12. The value estimate, and estimated income and expenses assumes
responsible ownership and typical, competent management.
13. Gross area of land and improvements is estimated by methods and from
sources considered reliable, and the data is believed to be accurate.
However, no responsibility is assumed for its accuracy and it is
recommended that a licensed surveyor be employed for that purpose. Any
statement by the appraiser contained herein as to the size of land or
building improvements is for descriptive purposes and is a statement of
the appraiser's opinion as to the property's functional utility and not
a statement of fact as to its physical size.
14. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale. There may
have been transactions of this type, but the relevant details were not
available. While any present or past listing, option or sales data on
the subject available to the appraiser have been considered in this
analysis, the Final Market Value was estimated as though subject were
available for sale on the open market.
15. To the best of my knowledge, this report conforms to the current
requirements prescribed by the Uniform Standards of Professional
Appraisal Practice of the Appraisal Standards Board of the Appraisal
Foundation (as required by the Financial Institutions Reform, Recovery
and Enforcement Act - FIRREA) and the Appraisal Institute.
16. The Americans with Disabilities Act (ADA) became effective January 26,
1992. 1 (we) have 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
7
<PAGE>
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 I (we) have no
direct evidence relating to this issue, I (we) did not consider
possible noncompliance with the requirements of ADA in estimating the
value of the property.
17. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract
or lease and that the property would be available for negotiation of a
new lease or management contract at this time.
8
<PAGE>
December 20, 1997
Mr. David Brickman
Capitol Senior Living, Inc.
4160 Dallas Parkway
Dallas, Texas 75240
Re: Restricted Update Appraisal Report of the Complete Appraisal on
The Sandybrook Center
Mt. Dora, Florida
Dear Mr. Brickman
USE RESTRICTION
The use of this Restricted Appraisal Report is restricted in that it may be
relied on only by you, its intended user. Anyone else is an unintended user. It
cannot be understood properly without additional information contained in our
office work file or in the Self-Contained Appraisal Report dated April, 10,
1997.
On April, 10, 1997 we performed an appraisal and issued a report on the above
property. This current Restricted Appraisal Report incorporates by reference
that preceding appraisal, all supporting data and files. We have not
re-inspected the site and building improvements. The purpose of the current
update appraisal, with Report Date of December 20, 1997, has been to estimate
the Market Value of the fee simple estate as of an effective date of December
20, 1997. We understand the intended use of this appraisal to be for your
internal use.
SCOPE OF THE APPRAISAL
Our original Complete Appraisal dated April, 10, 1997 was not limited in scope,
and was based upon generally accepted appraisal practices. Within that valuation
analysis we completed the following functions and procedures:
- Made an inspection of the subject property.
- Familiarized ourselves with the neighborhood and analyzed the
surrounding property trends;
- Considered and reviewed the historical market taking into account
stability and/or changes;
<PAGE>
Mr. David Brickman
December 20, 1997
The Sandybrook Center
- Gathered comparable land sales to determine the market value of the
land, and estimated the replacement cost new and accrued depreciation,
and calculated the value of the subject property via the cost approach
to value;
- Researched comparable sales, comparing actual sales of similar
properties to the subject, confirmed wherever possible, and valued the
subject via the Sales Comparison Approach to Value;
- Did not perform the Income Capitalization Approach to Value due to the
Special Purpose nature of the structure;
- Considered all applicable approaches to value specifically, the Cost
and Sales Comparison Approaches to Value, and their applicability in
the analysis of the subject property, and reconciled our final value
conclusion.
In this update report, the scope of our work included consultation with local
real estate brokers and appraisers as well as healthcare professionals, in order
to ascertain if there has been any change in the local market and hence the
Value of the Subject Property. Sources utilized to obtain this information
include information contained in our office files, and discussions with other
real estate experts, including brokers, other appraisers, buyers, sellers,
developers, and lenders.
This Restricted Appraisal Report sets forth in summary form the property
identification, purpose and effective date of the appraisal and our opinion of
the subject property's Market Value. This letter should be considered a
Restricted Appraisal Report in that it is presented here in an abridged format.
The information contained in this Restricted Appraisal Report is limited in
scope, and based on more complete information, analysis and conclusions retained
in our file. The complete data, investigation, and analyses leading to the
conclusions reached are not fully described or discussed, but are incorporated
as part of this Restricted Appraisal Report by reference.
Market Value is as defined in The Uniform Standards of Professional Appraisal
Practice (USPAP).
The subject property is generally identified as The Sandybrook Center which is
located at 19650 U.S. 441 E., Mt. Dora, Florida. The property includes 19.63
acres of land and building improvements containing 36,270 sf of building area.
The subject property to be valued consists of real property only, without
personal property or any business value that might be derived from any business
operation operated therein.
According to the present owner, the subject property has not been sold in the
last three years.
We interviewed the Mayor of Mt Dora concerning current developments in the Mt
Dora area. The area continues to improve albeit at a slow pace. We also spoke
with Realtors who are active in the immediate area. One realtor was currently
selling land adjoining the subject for an
2
<PAGE>
Mr. David Brickman
December 20, 1997
The Sandybrook Center
apartment project and represented a possible buyer for the subject. However,
their interest was for the land only and they were unwilling to allow any value
for the subject's improvements. This will continue to be an increasingly
attractive area because of the location of the new hospital further out this
highway. However, development will be slow. We confirm our value as estimated in
April 1997.
After reviewing the local market and the Cost and Sales Comparison Approaches to
Value, we reconfirm the FINAL MARKET VALUE, as of December 20, 1997, of the
subject property subject to the Limiting Conditions and Underlying Assumptions
and Appraiser's Certification attached, to be:
$500,000
Respectfully submitted,
J. MICHAEL BURROUGHS, MAI, SRA
President
3
<PAGE>
APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief:
_____ The statements of fact contained in this appraisal report are true
and correct.
_____ The reported appraisal 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 upon the reporting of a
predetermined value or direction in value that favors the
cause of the client, the amount of the value estimate, the
attainment of a stipulated result, or the occurrence of a
subsequent event.
_____ My analyses, opinions and conclusions were developed, and this
report has been prepared, in conformity with the Uniform
Standards of Professional Appraisal Practice of the Appraisal
Standards Board of the Appraisal Foundation (as required by
the Financial Institutions Reform, Recovery and Enforcement
Act -FIRREA) and the Code of Professional Ethics and the
Standards of Professional Appraisal Practice of the Appraisal
Institute.
_____ As of the date of this report, J. Michael Burroughs, MAI, SRA
has completed the requirements of the continuing education
program 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.
_____ The subject property was inspected by Franklin M. Ramsey, and was
not inspected by J. Michael Burroughs.
_____ Eve L. Burroughs provided valuable assistance in compiling
data for this report. No one else provided significant
professional assistance to the undersigned. The appraiser
gratefully acknowledges the contribution of data from several
sources.
_____ The appraiser has complied with the USPAP competency provision.
_____ The USPAP departure provision does not apply.
_____ This appraisal assignment was not based on a requested minimum
or maximum valuation, a specific valuation, or the approval of
a loan.
4
<PAGE>
I do not authorize the out-of-context quoting from or partial reprinting of this
appraisal report. Further, neither all nor any part of this appraisal report
shall be disseminated to the general public by the use of media for public
communication without the prior written consent of the appraiser(s) signing this
appraisal report.
----------------------------------
J. MICHAEL BURROUGHS, MAI, SRA
5
<PAGE>
GENERAL LIMITING CONDITIONS
1. No responsibility is assumed by the appraiser for matters legal in nature,
nor is an opinion of title rendered herewith. Good title to The Sandybrook
Center is assumed.
2. The commissioning and/or possession of this report does not carry with it
the right of publication, nor does it oblige the appraiser to appear in
court, commission, or in any other capacity without prior arrangements and
additional compensation.
3. This appraisal report has been prepared for the exclusive benefit of its
intended user, Capitol Senior Living, Inc. It may not be used or relied
upon by any other party. Any party who uses or relies upon any information
in this report, without the preparer's written consent is an unintended
user, and does so at his own risk.
4. The factual information in this report--furnished by others or taken from
public records--is believed to be reliable, but no responsibility is
assumed for its accuracy. We do not guarantee the correctness of estimates,
opinions, sketches and other exhibits.
5. One (or more) of the signatories of this appraisal report is a Member of
the Appraisal Institute. The Bylaws and Regulations of the Institute
require each Member to control the use and distribution of each appraisal
report signed by such Member. Therefore, except as hereinafter provided,
the party for whom this appraisal report was prepared may distribute copies
of this appraisal report, in its entirety, to such third parties as may be
selected by the party for whom this appraisal report was prepared; however,
selected portions of this appraisal report shall not be given to third
parties without prior written consent of the signatories of this appraisal
report. Further, neither all nor any part of this appraisal report shall be
disseminated to the general public by use of advertising media, public
relations media, news media, sales media, or other media for public
communication without the prior written consent of the signatories of this
appraisal report.
6. The soil and subsoil, unless otherwise detailed, appear firm and solid. No
engineering study has been made and the appraiser is not to be held
responsible for any adverse condition that may be found in these matters.
7. The appraiser is not an expert in pest detection or control. The value
estimate tendered, unless qualified, assumes these matters, including but
not limited to termites, dry rot, wet rot, and other wood destroying
organisms, are not present or have been detected and properly corrected.
8. Any description of improvements is intended to be general, for descriptive
purposes only, and based primarily upon observation. All foundations,
mechanical, plumbing, electrical, heating, ventilation, air conditioning,
and roof systems are assumed to be adequate, in good working order and
capable of performing the function for which they were designed. The
appraiser has no expertise in this area, and cannot certify the condition
or functional adequacy of these items. A qualified inspector should be
utilized for that purpose. The
6
<PAGE>
appraiser assumes no responsibility for any hidden or unapparent conditions
of the property, soil, subsoil, or structures that would affect its value.
9. Any site or building improvement, whether existing or proposed, is
assumed by the appraiser to comply with all applicable building codes,
zoning and environmental regulations for this jurisdiction and is assumed
to be a legal structure. The appraiser has not verified the accuracy of
this assumption. We recommend an attorney be retained for verification
purposes.
10. The existence (if any) of potentially hazardous material (such as, but not
limited to, formaldehyde foam insulation, radon, asbestos, or toxic waste)
was not considered. The appraiser is not qualified to detect such
substances and we urge the client to retain an expert in this field.
11. The appraiser has not researched the subject property for liens, nor
reviewed any mortgage documents. Our analysis is based upon the assumption
that any mortgages encumbering subject are of such amount, rates, and terms
as to be considered typical in the market place and would neither
contribute to nor detract from the property's market value, and the
property is therefore appraised as though it were free and clear of any
debt encumbrances or subject to financing which is generally acceptable in
the market.
12. The value estimate, and estimated income and expenses assumes responsible
ownership and typical, competent management.
13. Gross area of land and improvements is estimated by methods and from
sources considered reliable, and the data is believed to be accurate.
However, no responsibility is assumed for its accuracy and it is
recommended that a licensed surveyor be employed for that purpose. Any
statement by the appraiser contained herein as to the size of land or
building improvements is for descriptive purposes and is a statement of the
appraiser's opinion as to the property's functional utility and not a
statement of fact as to its physical size.
14. To the best of the appraiser's knowledge, the subject property is not
currently under any option, listing or agreement of sale. There may have
been transactions of this type, but the relevant details were not
available. While any present or past listing, option or sales data on the
subject available to the appraiser have been considered in this analysis,
the Final Market Value was estimated as though subject were available for
sale on the open market.
15. To the best of my knowledge, this report conforms to the current
requirements prescribed by the Uniform Standards of Professional Appraisal
Practice of the Appraisal Standards Board of the Appraisal Foundation (as
required by the Financial Institutions Reform, Recovery and Enforcement Act
- FIRREA) and the Appraisal Institute.
16. The Americans with Disabilities Act (ADA) became effective January 26,
1992. I (we) have 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
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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 I (we) have no direct evidence
relating to this issue, I (we) did not consider possible noncompliance with
the requirements of ADA in estimating the value of the property.
17. The final value conclusions in this report are predicated upon the
assumption that the property is not subject to any management contract or
lease and that the property would be available for negotiation of a new
lease or management contract at this time.
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