<PAGE> 1
PRICEWATERHOUSECOOPERS
COMPLETE AND SELF-CONTAINED
APPRAISAL REPORT
OF
SOUTHBRIDGE
PRINCE WILLIAM COUNTY, VA
AS OF
MARCH 31, 1999
PRICEWATERHOUSECOOPERS
Real Estate Valuation/Consulting Services
615 Franklin Turnpike
Ridgewood, New Jersey 07450
(201) 652-2141
<PAGE> 2
[MAP]
<PAGE> 3
PRICE WATERHOUSECOOPERS
-------------------------------------------------------------------------------
PriceWaterhouseCoopers LFP
615 Franklin Turnpike
Ridgewood NJ 07450
Telephone (201) 652 2141
Facsimile (201) 652 9045
May 17 1999
Mr. Robert B. Cavoto
CFO
Legend Properties, Inc.
13662 Office Place
Suite 201
Woodbridge, Virginia 22192
Re: Southbridge Appraisal
Prince William County, Virginia
Dear Mr. Cavoto:
In accordance with the engagement letter dated March 22, 1999, we have appraised
the Subject property known as Southbridge, located approximately 25 miles south
of Downtown Washington D.C in Prince William County, Virginia. Southbridge is a
2,685-acre, planned mixed-use community that is proposed to contain 5,354
dwelling units, 4,343,310 square feet of commercial space, an 18-hole golf
course and two recreation centers. As of the date of this appraisal, development
in Phase I has commenced with 673 units sold and/or contracted of which 503 are
townhouse and 170 are single family detached dwellings. Further, Phase I roads
have been developed along with a recreation center and three pools. The purpose
of this appraisal report is to estimate market value of the Fee Simple Estate in
the property. The report will he used for internal analysis and decision making
purposes. The effective date of value is March 31, 1999, (As Is), under market
conditions as observed through March 1999. Complete descriptions of the
property, together with the sources of information and the bases of our
estimates, are stated in the accompanying sections of this report.
The report is a Complete, Self-Contained Appraisal Report that complies with the
reporting requirements set forth in Standards Rule 2-2 (a) of the Uniform
Standards of Professional Appraisal Practice.
Based upon our analyses, we estimate that the market value of the defined
interest in the subject property as of March 31, 1999, (As Is) was:
THIRTY EIGHT MILLION DOLLARS
$38,000,000
Subject to the Certification, Standard Conditions and Special Conditions
The accompanying prospective analyses are based on estimates and assumptions
developed in connection with the appraisal. However, some assumptions inevitably
will not materialize, and unanticipated events and circumstances may occur;
therefore, actual results achieved during the period covered by our prospective
analyses will vary from our estimates and the variations may be material.
<PAGE> 4
Mr. Robert B. Cavoto
May 17, 1999
Page 2
This report and the final estimates of value are intended solely for your
information and assistance for the function stated above, and should not be
relied upon for any other purpose. Neither our report nor any of its contents
nor any reference to the appraisers or our firm, may be included or quoted in
any document, offering circular or registration statement, prospectus, sales
brochure, other appraisal, loan or other agreement without
PriceWaterhouseCoopers LLP's prior written approval of the form and context in
which it will appear.
Respectfully submitted,
/s/ PriceWaterhouseCoopers LLP
-------------------------------
PriceWaterhouseCoopers LLP
By: Robert K. Ruggles, III, Ridgewood, NJ
<PAGE> 5
CERTIFICATION
o We certify that, to the best of our knowledge and belief:
o The statements of fact contained in the accompanying report are to the
best of our knowledge true and correct.
o The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
unbiased professional analyses, opinions, and conclusions.
o We have no present or prospective interest in the property that is the
subject of this report, and we have no personal interest or bias with
respect to the parties involved.
o Our 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.
o Our analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the requirements of the Code of
Professional Ethics and the Standards of Professional Appraisal Practice
of the Appraisal Institute and in conformity with the Uniform Standards of
Professional Appraisal Practice.
o The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
o As of the date of this report Robert K. Ruggles, MAI, CRE and Michael J.
Mihalek, all have completed the requirements of the continuing education
program of-the Appraisal Institute.
o Michael J. Mihalek, MA!, Frank G. Greco and David Birkhahn and Dave L.
Cherkas have made a personal inspection of the property that is the
subject of this report. Robert K. Ruggles, MAI, CRE did not inspect the
property but reviewed the report and concurs with the analysis and
conclusions.
Subject to all conditions and explanations contained in this report, and based
upon our analyses of the subject property and the market, our estimate of the
market value of the defined legal interest in the Subject property as of March
31, 1999 (As Is) is as follows:
THIRTY EIGHT MILLION DOLLARS
38,000,000
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Robert K. Ruggles /s/ Frank G. Greco /s/ Dave L. Cherkas
------------------------------------------ ----------------------------- ------------------------------------
Robert K. Ruggles, MAI, CRE Frank G. Greco Dave L. Cherkas
Principal Senior Associate Associate
/s/ Michael J. Mihalek /s/ David Birkhahn
------------------------------------------ -----------------------------
Michael J. Mihalek, MAI David Birkhahn
Director Associate
</TABLE>
<PAGE> 6
COMPLETE AND SELF-CONTAINED APPRAISAL REPORT
SOUTHBRIDGE
PRINCE WILLIAM COUNTY, VIRGINIA
TABLE OF CONTENTS
PAGE [SIC]
----
I. EXECUTIVE SUMMARY......................................5
II. INTRODUCTION...........................................8
III. DESCRIPTIVE DATA......................................11
IV. MARKET ANALYSIS.......................................19
V. HIGHEST AND BEST USE..................................42
VI. SALES COMPARISON APPROACH.............................45
VII. INTRODUCTION..........................................47
XL ADDENDA [SIC]
Comparable Bulk Land Sales
Zoning Ordinance
Cherry Hill Comprehensive Plan
Master Planned Community Sales
Senior Life Style Report
Appraiser's Qualifications
i
<PAGE> 7
ASSUMPTIONS AND LIMITING CONDITIONS
1. The following Standard Conditions apply to real estate appraisals by
PriceWaterhouseCoopers LLP. Special conditions are added as required.
Appraisals are performed and written reports are prepared in accordance
with the Appraisal Institute's Standards of Professional Appraisal
Practice ("USPAP") of the Appraisal Foundation as outlined within Title
XI of FIRREA.
2. The general assumptions and limiting conditions pertaining to the value
estimate conclusion(s) stated in this Appraisal report are summarized
below. If applicable, "special assumptions" are cited elsewhere in this
report.
3. To the best of our knowledge and belief, the statements of facts
contained in the Appraisal report, upon which the analysis and
conclusion(s) expressed are based, are true and correct. Information,
estimates and opinions furnished to us and contained in the report or
utilized in the formation of the value conclusion(s) were obtained from
sources considered reliable and believed to be true and correct.
However, no representation, liability or warranty for the accuracy of
such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
4. The legal description of the appraised Property, if exhibited in the
report, is assumed correct.
5. This valuation may not be used in conjunction with any other appraisal
or study. The value conclusion(s) stated in this Appraisal is based on
the program of utilization described in the report. and may not be
separated into parts. The Appraisal was prepared solely for the
purpose, function and party so identified in the report. The Appraisal
report may. not be reproduced, in whole or in part, and the findings of
the report may not be utilized by a third party for any purpose,
without the prior express written consent of PriceWaterhouseCoopers
LLP.
6. No change of any item in any of the Appraisal report shall be made by
anyone other than PriceWaterhouseCoopers LLP and we shall have no
responsibility for any such unauthorized change.
7. The Property has been appraised as though free and clear of mortgages,
liens, servitude and encumbrances, except as may be described in the
report.
8. We are not required to give testimony or be in attendance at any court
or administrative proceeding with reference o the Property appraised
unless additional compensation is agreed to and prior arrangements have
been made.
9. The working papers for this engagement are being retained in our files
and are available for your reference. We would be available to support
our valuation conclusion(s) as required. Those services would be
performed for an additional fee.
10. Unless specifically stated, the value conclusion(s) contained in the
Appraisal applies to the real estate only, and does not include
personal property, machinery and equipment, trade fixtures, business
value, goodwill or other non-realty items. Income tax considerations
have not been included or valued unless so specified in the Appraisal.
We make no representations as to the value changes which may be
attributed to such considerations.
1
<PAGE> 8
11. Neither all nor any part of the contents of the report shall be
disseminated or referred to the public through advertising, public
relations, news or sales media, or any other public means of
communication or referenced in any publication, including any private
or public offerings including but not limited to those filed with
Securities and Exchange Commission or other governmental agency; except
that all required disclosure may be made to insurance regulatory
authorities and as otherwise required by law.
12. In completing the Appraisal, it is understood and agreed that the
report is not now intended to be, and will not be used in connection
with, a real estate syndication.
13. Good and marketable title to the interest being appraised is assumed.
We are not qualified to render an "opinion of title," and no
responsibility is assumed or accepted for matters of a legal nature
affecting the property being appraised. No formal investigation of
legal title was made, and we render no opinion as to ownership of the
property or condition of its title.
14. Unless otherwise noted in the Appraisal, it is assumed that there are
no encroachments, zoning, building, lire or safety code violations, or
restrictions of any type affecting the subject property. It is assumed
that the Property is in full compliance with all applicable federal,
state, local and private codes, laws, consents, licenses and
regulations, and that all licenses, permits, certificates, approvals,
franchises, etc. have been secured and can be freely renewed and/or
transferred to a purchaser.
15. It is assumed that the utilization of the land and any improvements
were within the boundaries or property lines of the Property described,
and that there are no encroachments, easements, trespass, unless noted
within the report. We have not made a survey of the Property, and no
responsibility is assumed in connection with any matter that may be
disclosed by a proper survey. If a subsequent survey should reflect a
differing land area and/or frontages, we reserve the right to review
our final value estimate.
16. All maps, plats, building diagrams, site plans, floor plans or
photographs incorporated into the Appraisal are for illustrative
purposes only, to assist the reader in visualizing the Property, but
are not guaranteed to be exact. Dimensions and descriptions are based
on public records and/or information furnished by others and are not
meant to be used as a reference in legal matters of survey.
17. Management is assumed to be competent, and the ownership to be in
responsible hands. The quality of property management can have a direct
effect on a property's economic viability and value. The prospective
financial analyses contained in the Appraisal assume both responsible
ownership and competent management unless noted otherwise. Any variance
from this assumption could have a significant impact on the final
estimates or conclusions.
18. We assume that there are no hidden or unapparent conditions of the
Property's soil, subsoil or structures which would render them more or
less valuable. No responsibility is assumed for such conditions, or for
engineering which might be required to discover such factors.
Statements regarding soil qualities, if made in the report, are not
conclusive but have been considered with information available to us
and provided by others. In addition, unless stated otherwise in the
Appraisal, the land and soil of the are under appraisement appears firm
and solid, but the Appraisal does not warrant this condition.
2
<PAGE> 9
19. The Appraisal report covering the subject is limited to surface rights
only, and does not include any inherent subsurface or mineral rights.
20. The Appraisal is made for evaluation purposes only. It is not intended
nor to be construed to be an engineering report. We are not qualified
as structural or environmental engineers, therefore we are not
qualified to judge the structural or environmental integrity of the
improvements, if any. Consequently, no warranty or representations are
made nor any liability assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services,
including the construction materials, particularly the roof,
foundations, and equipment, including the HVAC systems, if applicable.
Should there be any question concerning same, it is strongly
recommended that an engineering, construction and/or environmental
inspection be obtained. The value estimate(s) stated in this Appraisal,
unless noted otherwise, is predicated on the assumptions that all
improvements, equipment and building services, if any, are structurally
sound and suffer no concealed or latent defects or inadequacies other
than those noted in the Appraisal. We will call to your attention any
apparent defects or material adverse conditions which come to our
attention.
21. Any proposed construction of rehabilitation referred to in the
Appraisal is assumed to be completed within a reasonable time and in a
workmanlike manner according to or exceeding currently accepted
standards of design and methods of construction.
22. Any inaccessible portions of the Property or improvements not inspected
are assumed to be as reported or similar to the areas which are
inspected.
23. Unless specifically stated in the report, we found no obvious .evidence
of insect infestation or damage, dry or wet rot. Since a thorough
inspection by a competent inspector was not performed for us, the
subject improvements, if any, are assumed to be free of existing insect
infestation, wet rot, dry rot, and any structural damage which may have
been caused by pre-existing infestation or rot which was subsequently
treated.
24. In the Appraisal assignment, the existence of potentially hazardous
material used in the construction, maintenance or servicing of the
improvements, such as the presence of urea-formaldehyde foam
insulation, asbestos, lead paint, toxic waste, underground tanks, radon
and/or any other prohibited material or chemical which may or may not
be present on or in the Property, was, unless specifically indicated in
the report, not observed by us, nor do we have any knowledge of the
existence of such materials on or in the property. We, however, are not
qualified to detect such substances. The existence of these potentially
hazardous materials may have a significant impact on the value of the
Property. The client is urged to retain an expert in this field, if
desired. The value conclusion(s) assumes the Property is "clean" and
free of any of these adverse conditions unless we have been notified to
the contrary in writing.
25. Unless otherwise stated, no effort has been made to determine the
possible effect, if any, on the subject Property of energy shortage or
future federal, state or local legislation, including any environmental
or ecological matters or interpretations thereof.
26. We take no responsibility for any events, conditions or circumstances
affecting the subject Property or its value, that take place subsequent
to either the effective date of value cited in the Appraisal or the
date of our field inspection, whichever occurs first.
3
<PAGE> 10
27. The estimate(s) of value stated in the Appraisal applies only to the
effective date of value stated in the report. Value is affected by many
related and unrelated economic conditions within a local, regional,
national, and/or world context, which might necessarily affect the
prospective value of the Property. We assume no liability for an
unforeseen change in the economy, or at the Property, if applicable,
the inability to find a buyer.
28. 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. In
estimating the value of the Property, we took into account such
information and evidence regarding compliance with ADA requirements as
was provided to us.
29. This valuation is based on historical and prospective financial
information. Some assumptions or estimates inevitably will not
materialize and unanticipated events and circumstances may occur during
the forecast period. These could include major changes in the economic
environs; significant increases or decreases in current mortgage
interest rates and/or terms of availability of financing altogether;
property assessment; and/or major revisions in the current state and/or
federal tax or regulatory laws. Therefore, the actual results achieved
during the assumed holding period and investor requirements relative to
anticipated annual returns and overall yields could vary from the
estimates. Thus, variations could be material and have an impact on the
value conclusion(s) stated herein.
30. The accompanying appraisal does not constitute an audit, examination,
review or compilation of historical or prospective financial
information conducted in accordance with Generally Accepted Auditing
Standards or with standards established by the American Institute of
Certified Public Accounts ("AICPA"). Accordingly, we are unable to
express any opinion or any other form of assurance with respect to any
of the historical financial information or, whether the prospective
financial information is presented in conformity with AICPA
presentation guidelines.
4
<PAGE> 11
I. EXECUTIVE SUMMARY
[SIC] commenced. To date, 673 units
of which 503 are townhouse and 170
are single family detached dwellings
are under contract or have been
sold. Further, Phase I roads have
been developed along with a
recreation center and three pools
PHASE ACRES % OF TOTAL
-------------- ------- -----------
Phase I 955 35.6%
Phase II 619 23.0%
Phase III 286 10.6%
Phase IV 119 4.4%
Phase V 196 7.3%
Phase VI 235 8.8%
PHASE VII 274 10.2%
--------- ----- -----
TOTAL 2,685 100.0%
Status of
Approvals: Southbridge has received all
approvals for development of a
planned unit development. However,
the site is being developed in
Phases that are further divided into
sections. Site plan approval is
required at the commencement of
each section allowing the developer
to reprogram sections to varying
product type. We have assumed that
all site plan approvals will be
granted as per the development plan
outlined herein.
HIGHEST AND BEST USE: As if Vacant: Development of a mixed-use community
As Improved: Not Applicable
DATE OF INSPECTION: April 8, 1999
EFFECTIVE DATE OF
APPRAISAL: March 31, 1999
VALUE CONCLUSION: $38,000,000
5
<PAGE> 12
[GRAPH]
6
<PAGE> 13
SOUTHBRIDGE
ABSORPTION AND LOT PRICING SCHEDULE
<TABLE>
<CAPTION>
===================================================================================================================================
MASTER PLAN YEAR ABSORPTION
NO. OF -------------- ------------- ------------------------- 1999
PROPOSED LOTS LOTS UNITS/ UNITS/ UNITS/ UNIT
PHASE LAND BAY USE SOLD/UC REMAIN UNITS SF START FINISH YEAR MONTH QTR PRICE
------------------- -------- -------- ------- ------ ----- ---- ----- ------ ------ -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
I 6 TH 143 0 143
8 TH 130 0 130
9 TH 160 0 160
11 TH 70 0 70
2
3 SFD 0 235 235 2002 2005 53 4 18 $46,550
18
4 SFD 33 39 72 2000 2001 20 2 7 $46,550
5 SFD 0 17 17 2000 2000 17 1 6 $46,550
7 SFD 9 13 22 2002 2002 13 1 4 $46,550
15 SFD 0 26 26 2002 2002 26 2 9 $46,550
10 SFD 15 0 15
12 SFD 9 0 9
13 SFD 37 0 37
14 SFD 18 0 18
19 SFD 0 13 13 2003 2003 13 1 4 $46,550
20 SFD 49 61 110 2002 2004 20 2 7 $46,550
21 SFD 0 140 140 2003 2006 23 2 8 $46,550
22 SFD 0 176 176 2003 2005 59 5 20 $46,550
1a Office 114,000 2001 2002 57,000 4,750 19,000 $15.00
1b Pad 20,000 2000 2002 6,667 556 2,222 $25.00
1c Retail/Office 155,000 2002 2003 77,500 6,458 25,833 $35.00
Lyman Self 81,600 2000 2000 81,600 6,800 27,200 $5.00
Storage
Hampstead 1 SFD 0 42 42 2000 201 21 2 7 $46,550
Hampstead 2 SFD 0 78 78 2000 2001 39 3 13 $46,550
Hampstead 3 SFD 0 15 15 2000 2002 5 0 2 $46,550
Hampstead 4 SFD 0 42 42 2000 2000 42 4 14 $46,550
Swan Creek SFD 0 52 52 2000 2001 26 2 9 $46,550
Spy Glass SFD 0 200 200 2001 2001 200 17 67 $37,240
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
Total Phase I 673 1149 1822 370,600 2000 2005
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
II SN-3a SFD 57 2005 2006 29 2 10 $46,550
SN-3b SFA 88 2006 2007 44 4 15 $28,481
SN-3b SFD 40 2006 2006 40 3 13 $46,550
SN-4 SFA 39 2006 2006 39 3 13 $28,481
SN-5 SFD 506 2003 2006 127 11 42 $46,550
SN-6 SFD 56 2004 2005 28 2 9 $46,550
SN-8 SFD 32 2005 2005 32 3 11 $46,550
SN-9 Publix
SN-10 SFD SENIOR 316 2006 2006 316 $28,481
SN-11 O 305,000 2003 2005 101,667 8,472 33,889 $15.00
SN-12 O 200,000 2003 2005 66,667 5,556 22,222 $15.00
SN-12 R 100,000 2003 2005 33,333 2,778 11,111 $25.00
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
SUB-TOTAL 1,134 605,000 2003 2009
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
III SN-1A R.O. 566,280 2006 2010 113,256 9,438 37,752 $35.00
SN-1B
SN-2 SFA/TC 74 2007 2007 74 6 25 $31,329
SN-2 SFA/TC 64 2007 2007 64 5 21 $31,329
SN-2 MF/TC 440 2007 2007 440 $8,500
SN-2 RTC 235,000 2006 2008 75,000 6,250 25,000 $35.00
SN-2 OTC 600,000 2007 2010 150,000 12,500 50,000 $35.00
SN-2 Public
SN-13 O 68,000 2006 2006 68,000 5,667 22,667 $15.00
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
SUB-TOTAL 578 1,459,280 2006 2010
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
IV SS-1 FI 518,000 2008 2010 172,667 14,389 57,556 $5.00
SS-2 FI 544,000 2008 2010 181,333 15,111 60,444 $5.00
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
SUB-TOTAL 1,062,000 2008 2010
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
V SS-5 FI 122,000 2009 2009 122,000 10,167 40,667 $5.00
SS-6A SFA 50 2008 2008 50 4 17 $28,481
SS-7 SFA 57 2008 2008 57 5 19 $28,481
SS-7 SFD 22 2008 2008 22 2 7 $46,550
SS-8 SFA 21 2008 2008 21 2 7 $28,481
SS-9 MF 253 2009 2009 253 0 $8,500
SS-16 SFD 88 2008 2010 29 2 10 $46,550
SFA 2009 2009 23 2 8 $28,481
SS-21 FI 40,000 2009 2009 40,000 3,333 13,333 $5.00
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
SUB-TOTAL 514 162,000 2008 2010
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
VI SS-15 R 294,430 2010 2011 147,215 12,268 49,072 $25.00
SS-17 SFD 98 2009 2010 49 4 16 $51,205
SS-18 SFD 56 2010 2010 56 5 19 $51,205
SS-19 SFD 316 2010 2014 63 5 21 $51,205
SS-20 SFD 246 2011 2012 123 10 41 $51,205
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
SUB-TOTAL 716 294,430 2009 2012
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
VII SS-3 FI 100,000 2011 2011 100,000 8,333 33,333 $5.00
SS-3A FI 87,000 2012 2012 87,000 7,250 29,000 $5.00
SS-4 FI 75,000 2013 2013 75,000 6,250 25,000 $5.00
SS-10 SFD 255 2013 2016 64 5 21 $46,550
SS-10 SFD 61 2012 2013 31 3 10 $46,550
SS-11 Public
SS-12 FI 60,000 2013 2013 60,000 5,000 20,000 $5.00
SS-13 FI 68,000 2014 2014 68,000 5,667 22,667 $5.00
SS-14 SFD 221 2014 2018 14 4 15 $46,550
SFA 53 2016 2017 27 2 9 $28,481
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
SUB-TOTAL 590 390,000 2011 2018
------------------- ----------- ------------ ------ -------- -------- --------- ------- ------
------------------- ----------- ------------ ------ -------- -------- ---------
TOTAL 5,354 4,343,310
------------------- ----------- ------------ ------ -------- -------- ---------
------------------------------- ------------ ------ -------- --------
Lots Sold/Under Contract 1,008
------------------------------- ------------ ------ -------- --------
------------------- ----------- ------------ ------ -------- --------
Total Lots Remaining 4,346
------------------- ----------- ------------ ------ -------- --------
</TABLE>
SOUTHBRIDGE
ANNUAL CASH FLOW PROJECTION
BEGINNING APRIL 1, 1999
<TABLE>
<CAPTION>
1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
4,980,850 8,836,278 11,777,871 10,002,927 20,089,572 22,017,567 24,218,728
(74,713) (132,544) (76,668) (150,044) (301,343) (330,263) (363,280)
-------------------------------------------------------------------------------------------------------------------------
___ 4,906,137 8,703,734 11,601,203 9,852,883 19,788,229 21,687,304 23,855,448
Costs
0 0 937,322 0 0 0 0
-------------------------------------------------------------------------------------------------------------------------
0 0 937,322 0 0 0 0
4,906,137 8,703,734 12,538,525 9,852,883 19,788,229 21,687,304 23,855,448
2,535,900 3,019,143 937,457 2,435,358 6,257,190 9,153,189 10,750,206
686,000 1,029,000 1,715,000 1,715,000 1,029,000 686,000
1,800,000
-------------------------------------------------------------------------------------------------------------------------
___ 686,000 1,029,000 1,715,000 1,715,000 1,029,000 686,000 1,800,000
Costs
132,500 132,500 132,500 132,500 132,500 132,500 132,500
174,330 309,270 412,225 350,102 703,135 770,615 847,655
756,200 756,200 756,200 756,200 756,200 756,200 756,200
569,145 559,612 550,238 541,022 531,960 523,049 514,288
-------------------------------------------------------------------------------------------------------------------------
___ 1,632,175 1,757,582 1,851,163 1,779,824 2,123,795 2,182,364 2,250,643
Costs
4,854,075 5,805,725 4,503,620 5,930,182 9,409,985 12,021,553 14,800,849
-------------------------------------------------------------------------------------------------------------------------
52,062 2,898,009 8,034,905 3,922,701 10,378,244 9,665,751 9,054,599
</TABLE>
<TABLE>
<CAPTION>
2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
41,757,070 27,857,788 25,863,537 25,341,530 35,661,031 27,738,701 17,366,574
(626,357) (417,867) (387,953) (380,122) (534,918) (416,080) (260,282)
--------------------------------------------------------------------------------------------------------------------------------
___ Costs 41,130,713 27,439,921 25,475,584 24,961,408 35,126,113 27,322,621 17,106,075
0 0 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------------------------
0 0 0 0 0 0 0
41,130,713 27,439,921 25,475,584 24,961,408 35,126,113 27,322,621 17,106,075
9,747,823 3,235,400 3,550,212 2,744,743 6,712,648 9,311,205 7,857,941
2,400,000 _,__,000 2,400,000 1,800,000
1,030,500 _,__,000 2,061,000 1,374,000 1,030,500
885,000 1,180,000 1,770,000 1,180,000 885,000
1,180,000 1,770,000 1,770,000 1,180,000
175,000 201,250 236,250
2,151,197
--------------------------------------------------------------------------------------------------------------------------------
___ Costs 6,466,697 _,__,000 7,411,000 6,124,000 3,860,500 1,381,250 236,250
132,500 132,500 132,500 132,500 132,500 132,500 132,500
1,461,497 975,027 905,224 886,954 1,248,136 970,855 607,830
756,200 756,200 756,200 756,200 756,200 756,200 756,200
505,674 497,200 488,876 455,388 424,194 395,136 368,070
--------------------------------------------------------------------------------------------------------------------------------
___ Costs 2,855,871 2,360,927 2,282,800 2,231,042 2,561,030 2,254,691 1,864,600
19,070,391 11,750,327 13,244,012 11,099,785 13,134,178 12,947,146 9,958,791
--------------------------------------------------------------------------------------------------------------------------------
22,060,322 689,500 12,231,572 13,861,623 21,991,935 14,375,475 7,147,284
</TABLE>
<TABLE>
<CAPTION>
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 TOTALS
------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
16,418,855 11,565,855 9,282,461 8,346,509 4,368,233 2,058,326 355,550,263
(246,282) (173,487) (139,237) (125,198) (65,524) (30,875) (5,333,254)
-------------------------------------------------------------------------------------------------------------------------------
___ Costs 16,172,573 11,392,368 9,143,224 8,221,311 4,302,709 2,027,451 350,217,009
0 0 0 0 0 0 937,322
-------------------------------------------------------------------------------------------------------------------------------
0 0 0 0 0 0 937,322
16,172,573 11,392,368 9,143,224 8,221,311 4,302,709 2,027,451 351,154,331
7,442,434 5,598,514 4,725,979 4,202,771 2,173,820 1,047,955 103,439,888
6,860,000
12,000,000
6,870,000
5,900,000
5,900,000
262,500 262,500 236,250 201,250 175,000 1,750,000
2,151,197
-------------------------------------------------------------------------------------------------------------------------------
___ Costs 262,500 262,500 236,250 201,250 175,000 0 41,431,197
132,500 132,500 132,500 132,500 132,500 132,500 2,650,000
574,660 404,805 324,886 292,128 152,888 72,041 12,444,259
756,200 756,200 756,200 756,200 756,200 756,200 15,124,000
342,857 319,371 297,494 277,116 258,133 240,451 8,659,278
-------------------------------------------------------------------------------------------------------------------------------
___ Costs 1,806,217 1,612,876 1,511,080 1,457,944 1,299,721 1,201,192 38,877,537
9,511,151 7,473,890 6,473,309 5,861,965 3,648,541 2,249,147 183,748,622
-------------------------------------------------------------------------------------------------------------------------------
6,661,422 3,918,478 2,669,915 2,359,346 654,168 (221,696) 167,405,709
</TABLE>
7
<PAGE> 14
II. INTRODUCTION
PROPERTY IDENTIFICATION
The Subject property is a 2,685-acre parcel of mostly undeveloped land fronting
the Potomac River in Prince William County, Virginia, approximately 25 miles
south of Washington D.C. The site is situated east of Interstate 95 at the
intersection of Route 234 and Route One. Zoning approval has been granted for a
mixed-use residential and commercial development known as Southbridge.
Southbridge is a mixed-use master planned community planned for 5,354 housing
units and 4,343,310 square feet of non-residential uses. The housing units will
inc1ude.~ estate homes, country homes, village homes, cottage homes, townhouses,
plaza homes, mid-rise condominiums, urban homes, apartments, mixed use buildings
with lifestyle homes and senior homes. The non residential mix will include
traditional offices, mixed use office, flex tech, neighborhood retail, power
center retail, mixed use festive retail, commercial campus, and a possible
entertainment complex. The residents of the Subject will have access to an
18-hole golf course, pools, tennis Courts, recreation centers, hiking trails,
and bike trails that connect with the waterfront bike trail. Southbridge's Town
Square will further solidify the self-sufficient aspect of the planned
community.
SCOPE OF THE APPRAISAL
Standards Rule 2-2 (f) of USPAP requires that each written real property
appraisal report must describe the extent of the process of collecting,
confirming and reporting data. The report is a Complete and Self-Contained
Appraisal Report that complies with the reporting requirements set forth in
Standards Rule 2-2 (b) of the Uniform Standards of Professional Appraisal
Practice.
The method of appraisal considers the Sales Comparison and Income approaches.
The Income Approach will rely on the subdivision analysis development approach
to value with corroborative support gleaned from the Sales Comparison Approach.
These methods most accurately estimate the economic potential and value of the
site under current market conditions and is most widely used by investors for
this type of property. The subdivision development method is defined in The
Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute, as:
A METHOD OF ESTIMATING LAND VALUE WHEN SUBDIVISION AND
DEVELOPMENT ARE THE HIGHEST AND BEST USE E OF THE PARCEL
OF/AND BEING APPRAISED. ALL DIRECT AND INDIRECT COSTS AND
ENTREPRENEURIAL PROFIT ARE DEDUCTED FROM AN ESTIMATE OF
ANTICIPATED GROSS SALES PRICE OF THE FINISHED LOTS: THE
RESULTANT NET SALES PROCEEDS ARE THEN DISCOUNTED TO PRESENT
VALUE AT A MARKET-DERIVED RATE OVER THE DEVELOPMENT AND
ABSORPTION PERIOD TO INDICATE THE VALUE OF THE RAW LAND.
Anticipation of profit motivates an investor's equity purchase; therefore, we
will focus our attention in the development approach on excess sales income over
expenses generated and associated in the development of the inventory of sites.
These methods, with consideration for investor requirements, most accurately
simulate current market investment activity and represent the most reasonable,
supportable, and accurate approach to the estimation of market value.
To determine investor requirements as they relate to the subject property, and
thereby evaluate the appropriateness of our value estimate derived via
8
<PAGE> 15
discounted cash flow (DCF) analysis, we will review recent sales of similar
properties for their indicated rates and purchaser assumptions. The unit values
derived via the Sales Comparison Approach will provide an indication of the
income that can be generated from the future sale of the subject parcels. We
have reviewed recent sales of other residential development transactions for
their indicated rates and purchaser assumptions. Further support was provided
from recent investor surveys and alternative investment yields and parameters.
PURPOSE AND FUNCTION OF THE APPRAISAL
The purpose of this appraisal is to estimate the market value of the defined
real property interest in the Subject property as of the date specified below.
The function of the report is to assist the client making decisions with respect
to their investment in the property.
Market value, as approved and adopted by the Appraisal Foundation and Appraisal
Institute and endorsed by NCREIF, is as follows:
...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 SPEC~F1ED 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 US. DOLLARS OR IN
TERMS OF FINANCIAL ARRANGEMENTS COMPARABLE. THERETO;
AND,
5. THE PRICE REPRESENTS THE NORMAL CONSIDERATION FOR THE
PROPERTY SOLD, UNAFFECTED BY SPECIAL OR CREATIVE
FINANCING OR SALES CONCESSIONS GRANTED BY ANYONE
ASSOCIATED WITH THE SALE.'
Thus, transfer of marketable title is assumed in an "arm's length" transaction
between an informed buyer and seller. In such a transaction, the buyer acquires
title to the subject property along with all the usual rights and benefits of
ownership.
Motivation for equity purchase is provided by the anticipation of income over a
period of ownership and a return at some future date based on the marketability
of the property at that time. Given the stated motivation for equity purchase,
careful consideration will be given to the future prospects of the area with
particular emphasis on those factors deemed influential in determining the
success of a mixed-use community in Prince William County, Virginia.
9
<PAGE> 16
LEGAL INTEREST APPRAISED
The real property interest appraised is the Fee Simple.
Fee Simple Estate is defined in the Dictionary of Real Estate Appraisal, Third
Edition as "ABSOLUTE OWNERSHIP UNENCUMBERED BY ANY OTHER INTEREST OR ESTATE,
SUBJECT ONLY TO THE LIMITATIONS IMPOSED BY THE GOVERNMENTAL POWERS OF TAXATION,
EMINENT DOMAIN, POLICE POWER, AND ESCHEAT."
EFFECTIVE DATE OF VALUATION
The Subject site was physically inspected on April 8, 1999, by Michael J.
Mihalek, MAI, Frank G. Cjreco, David Birkhahn and David L. Cherkas. The
valuation date is March 31, 1999, and the appraisal is based upon market
conditions observed as of March 1999, the current period of our market research.
USE PREMISE
The subject is being valued herein based on its future use as a master planned
community. The implications relative to this premise on the highest and best use
of the property are addressed in a later section of this report.
[MAP]
10
<PAGE> 17
III. DESCRIPTIVE DATA
NEIGHBORHOOD DESCRIPTION
Located within Prince William County, Virginia, Southbridge is approximately 25
miles south of Washington l).C. The Subject site is bordered to the east by the
Potomac River and a rail line that provides freight, local commuter and national
train service provided by CSX, VRE and Amtrak, respectively. The project is
situated on a peninsula formed by the Potomac River, Powell's Creek and Quantico
Creek with frontage on Powell's Creek and Quantico Creek.
Access to the Subject's neighborhood is garnered from Interstate 95 with direct
access from Route One (Jeff Davis Highway). Southbridge's immediate neighborhood
consists primarily of commercial uses along Route One including gas stations,
shopping centers and restaurants. A shopping center, anchored by Food Lion, is
presently under construction and is situated directly across from the Subject's
entrance along Route One. A Giant's Supermarket is directly north of the Subject
at the entrance to River Oaks, a planned unit development. River Oaks is smaller
in size than the Subject; however it does pose direct competition. Other planned
communities located within the neighborhood are Southlakes at Montclair,
Brittany, Newport and Dawson Landing.
SITE DESCRIPTION
Details regarding the Subject site are derived from the following information
supplied by Legend Development Company: Master Plan prepared by LDR
International dated December 1998, Zoning Submission Plat Maps prepared by
Dewberry & Davis dated August 1998, Transportation Demand Management Program for
Southbridge at Cherry Hill prepared by Patton Harris Rust & Associates dated
November 1998, Commercial Development Plan: Southbridge Town Center prepared by
Tobin Associates dated November 1998, Traffic Impact Study prepared by Patton
Harris Rust & Associates dated January 1999, Wetlands Study, Geotechnical &
Material Testing Inc. prepared dated June 1989 and Integrated Environmental
Asset Management Plan dated June 1998.
SIZE/LOCATION/BOUNDARIES
The Subject site consists of a 2,685-acre tract of land, located on the
peninsula formed by the Potomac River to the east, Powell's Creek to the north
and Quantico Creek to the south, in Prince William County, Virginia. An active
rail line is located between the east boundary and the Potomac River. Cockpit
Point Road traverses the southeastern portion of the site while Possum Point
Road parallels Quantico Creek to the south of the site. There are three
high-voltage powerline right-of-ways that traverse the site.
TOPOGRAPHY
The Subject site is located within the Coastal Plain Physiographic Province of
eastern North America, which is a flat dissected plain that gradually rises from
sea level along the coast to its border with the Piedmont Plain to the west.
According to a geological survey of the site, the area bounded by Powell's
Creek, Quantico Creek, the Potomac River and Route One is underlain by the
deposits of the Potomac Formation. In higher elevations, deposits of the Aquia
Formation are present. Site relief is characterized by the presence of sharp
terrain features varying in elevation from approximately 220 feet above sea
level at the top of the various ridges on the property to sea level along the
edges of Powell's Creek. In general, the site has rolling topography, which at
11
<PAGE> 18
varying points allow for unobstructed vistas of the Potomac River and Powell's
Creek. According to the master plan, supplied by the developer, individual lots
will benefit from these vistas. As such finished lot asking prices will reflect
view premiums.
SOILS
The most predominant soil of the site is Dumfries-Lunt-Marr, which is
characterized by gently sloping to very steep, well drained soils with loamy or
clayvey subsoil; found on terraces. According to a Prince William County survey,
there are eighteen soil series found on the site. We do not have expertise to
determine if the soils are adequate for development purposes. However, based on
PriceWaterhouseCoopers LLP surrounding land uses in the neighborhood as well as
improvements already built in Phase I of the Subject community, soils appear to
be sufficient for development purposes.
DRAINAGE
There are several drainage ways that are located north of Cherry Hill Road that
are tributaries to Powell's Creek. These tributary systems drain eastward to the
Potomac River while the tributary systems located south of Cherry Hill Road
drain southward to Quantico Creek. Two man-made ponds are located north of
Cherry Hill Road on tributaries to Powell's Creek.
ACCESS/INTERNAL ROAD NETWORK
Access into Southbridge will be garnered from two curb cuts located along U.S.
Route One. The entire development will be traversed in an east/west direction by
three primary roads located in the northern, central and southern portions of
the site. The main arterial traversing the center of the development will be the
Potomac Parkway. The Potomac Parkway will allow for east/west travel from US
Route One to the Potomac River. The Potomac Parkway will connect with the
northern-most road, Cherry Hill Road, towards the center of the site.
Congressional Way, the southern most arterial traversing the site, connects with
Potomac Parkway toward the eastern-most boundary. A network of tertiary streets
will be located off of the three primary arterials.
Virginia Railway Express (VRE) will provide commuter rail service on the
Fredericksburg Line, which runs from Fredericksburg to Union Station in
Washington D.C. According to VRE, there are no planned dates or schedules for
the Cherry Hill station, which will be in Phase III of the Subject community.
VRE projects a monthly pass to Union Station from Cherry Hill will cost a
commuter $162.60. The Fredericksburg Line also provides access to the Mariassas
Line, which is a point of interest for some commuters. Amtrak is also accessible
from Fredericksburg Line at Quantico.
EASEMENTS
The site is traversed by several easements including sanitary sewer, electric
and water. Three high-voltage powerline right-of-ways traverse the site. Ample
setbacks have been designed within the master plan, that allow discretion of the
power lines.
12
<PAGE> 19
UTILITIES
All utilities are available to the site including water, sewer, electric,
telephone and gas. The following is a list of the service providers for
Southbridge.
Water - Prince William County Service Authority
Sewer - Prince William County Service Authority
Gas - Washington Gas
Electric - Virginia Power
Telephone - Bell Atlantic
Cable TV - One Point Communications/Jones Communication
LAND USE COMPLIANCE
The Southbridge proposed community was designed in accordance to the Prince
William County Comprehensive Plan. Implemented through the Planning Department,
the primary function of the Comprehensive Plan is to address the County's needs
in terms of growth and development while preserving open space and environmental
resources. Southbridge is identified as being located within the Cherry Hill
sector of the plan. As stated in the following analysis, all proposed uses are
in compliance with the county plan and zoning ordinance.
PROPOSED DEVELOPMENT PLAN
The Southbridge master plan proposes 5,354 residential units, 4.3 million square
feet of mixed commercial space, an 18-hole golf course and public areas that
include two schools, a park and a fire rescue station. Listed on the table below
is a detailed description of the proposed uses from the master plan supplied by
Legend Development Company.
------------------------------------ ------ ----------- --------------
TABLE III.1
PROPOSED USE UNITS SQUARE FEET %
------------------------------------ ------ ----------- --------------
RESIDENTIAL USES
Townhouse 834 -- 15.58%
Single Family Detached 3,373 -- 63.00%
Single Family Detached/Senior 316 -- 5.90%
Single Family Attached/Town Center 138 -- 2.58%
Multi-Family 253 -- 4.73%
Multi-Family/Town Center 440 -- 8.22%
------------------------------------ ------ ----------- --------------
SUBTOTAL 5,354 -- 100.00%
------------------------------------ ------ ----------- --------------
COMMERCIAL USES
Office -- 687,000 15.80%
Office/Town Center -- 600,000 13.80%
Retail -- 414,430 9.50%
Retail/Office -- 721,280 16.60%
Retail/Town Center -- 225,000 5.20%
Self Storage -- 81,600 1.90%
Flex/Industrial -- 1,614,000 37.20%
------------------------------------ ------ ----------- --------------
SUBTOTAL -- 4,343,310 100.00%
------------------------------------ ------ ----------- --------------
TOTAL 5,354 4,343,310 100.00%
==================================== ====== =========== ==============
RESIDENTIAL
Currently planned for development within Southbridge is a total of 5,354
residential units. As is typical with most planned communities, single family
detached units comprise the most significant amount of residential product. As
such, 63.0% of the residential component in Southbridge will comprise single
family detached dwellings. This product will consist of Cottage, Village,
Country and Estate homes. Approximately 39% or 1,319 of the single family
product is located in Phase I. As previously noted, 70 single family deluxe
units have been sold or are under contract. The following chart illustrates the
breakdown of single family detached units in Phase I.
TABLE III.2
SINGLE FAMILY DETACHED
PHASE I BUILD-OUT AS OF 4/1/99
TYPE AMOUNT % SOLD/CONTRACTED
------------------ ------------ ---------------------------
Cottage 349 26.5%
Village 343 26.0%
Country 560 42.5%
Estate 67 5.1%
------------------ ------------ ---------------------------
TOTAL 1,319 100.0%
------------------ ------------ ---------------------------
Townhouse units will consist of two varying product lines -- 18-foot and a
larger Executive unit. A total of 834 are programmed for development in the
Subject community. As of the effective date of valuation, 503 or 60% of the
total planned townhouse units were sold. Of the total sold, 343 were Executive
and 160 were 18-foot. The townhouse units along with the single family detached
product already sold account for 34% of the total planned residential product,
collectively.
The single family attached product and the multi-family product located in the
Town Center are both classified separately since they command a premium for
13
<PAGE> 20
location. Both, the single family detached and townhouse products planned with a
Town Center location comprise 11% of the total planned residential product.
The 316-units planned for the senior housing product will comprise approximately
6% of the total planned residential product and 9% of the total single family
detached product. The multi-family product located in the Town Center will
comprise 440-units or approximately 1% less than the senior product. The single
family attached, located in the Town Center, will comprise the least amount of
the total planned residential product as less demand for these units is
forecast.
COMMERCIAL
Within Southbridge, approximately 4.3 million square feet is planned for
non-residential space. As illustrated in a Table 111.1, Flex/Industrial space
represents the largest concentration of commercial space in the entire
development. Office space comprises 30% of the total commercial space; however,
when further analyzed, the breakdown of office space located in the Town Center
amounts to approximately 14%, while the amount of office space located outside
of the Town Center amounts to approximately 16%. More than half of the retail
space in Southbridge will be located in the Town Center. providing further
evidence of the developer's efforts to make the Town Center a focal point of the
community.
PUBLIC/OPEN SPACE
As displayed in Table 111.3, approximately 154 acres of the Southbridge
community will be utilized for schools, fire and police, and a park. Such
amenities are important to a planned community because of the self-sufficient
lifestyle many residents demand as well as the age composition of the residents.
------------------------------------------------------
TABLE III.3
PUBLIC LAND USE
USE ACRES PHASE
----------------------------- ---------- -------------
Fire/Police 7 II
Elementary School 20 II
Private School 40 V
School 34.5 VII
Park 52.4 VII
----------------------------- ---------- -------------
TOTAL 153.9
A total of 175 -acres is programmed for an I 8-hole golf course with a
clubhouse. Other amenities include two recreation centers, tennis courts a
16-mile walking path, 11-mile equestrian trail and a 9-mile bicycle path. In
addition, another Southbridge development plan sites a self storage facility as
one of its amenities. While there are existing self storage facilities in the
surrounding neighborhood along Route One, the developer is planning a facility
for residents to use as part of a continued effort to provide a self-sufficient
environment to the residents.
ZONING AND LAND USE RESTRICTION
PRINCE WILLIAM COUNTY COMPREHENSIVE PLAN
The Prince William Board of County Supervisors adopted the 1998 comprehensive
plan following a two-year review period of its 1990 plan. The comprehensive plan
contains the county's strategy for managing future growth in Prince William
County. In turn, the comprehensive plan sets forth guidelines for development
and open space. The master plan developed for Southbridge is in conformance to
the comprehensive plan.
The plan divides the County into two general land use areas: the development
area and the rural area. Infill of the development area is encouraged to
"maximize the opportunities to provide public services in a cost-efficient
manner". The rural area is designated for 10-acre residential lots and clusters
in order to preserve the County's agricultural economy and resources.
14
<PAGE> 21
One of the concerns of the 1998 comprehensive plan is the cost of providing
quality county service, particularly schools, to a burgeoning population: the
plan projects that the population of Prince William County will increase to
450,000 by year 2020 from the 1997 population of 265,000. To meet time level of
service (LOS) standards demanded by the government and its citizens, the 1998
Comprehensive plan limits the amount of new residential development where new
services will be required. Instead, the County plans to concentrate its spending
to catch up with existing demand, fully utilizing the existing infrastructure
within the development area, and target new infrastructure to designated quality
development areas. Under the 1998 comprehensive plan, it is anticipated that
about 50,000 new dwelling units can be built.
CHERRY HILL SECTOR PLAN
The Cherry Hill Sector Plan supplements the comprehensive plan and has been
developed to augment the relevant components of the plan as well as those of the
County's strategic plan that was adopted by the Board of the County Supervisor
on October 1992.
Out of 2,280 acres encompassed by the Cherry Hill Sector Plan, Legend
Development Company owns 1,780 acres or 78%. The remaining 405 acres (22%) are
under multiple ownership. The components of the sector plan are based upon the
assumption that Legend Development Company will serve as the "lead applicant".
Since ownership lines have little impact upon land use and planning, the "lead
applicant" has the responsibility of undertaking the research to support all
future rezoning and special permit requests for the entire sector plan acreage.
Details of the plan are located in the Addenda.
The key components of the Cherry Hill Sector Plan set forth stipulated
requirements for the following: Cultural Resources, Environmental, Fire and
Rescue, Housing, Long-range Land Use, Parks and Open Space, Potable Water,
Schools, Sewer and Transportation.
PRINCE WILLIAM COUNTY ZONING ORDINANCE
Below is an overview of the Prince William County Zoning Ordinance, which
governs the Subject site. The Prince William County Zoning Map indicates that
Southbridge falls within four zoning districts, including R-20 (Suburban
Residential), PMR (Planned Mixed Residential), PMD (Planned Mixed District) and
PBD (Planned Business District).
A breakdown by zoning district is as follows:
-------- -------------------------- --------------------------------
PROPOSED DWELLING UNITS (DU)/
ZONE LAND BAY AREA ACREAGE PROPOSED SF
-------- -------------------------- --------------------------------
R-20 955.1 1822 du/ 370,600SF
PMR 1060.3 2804 du/ 294,430SF
PMD 473.5 706 du/ 2,064,280SF
PBD 196.1 1,459,000SF
-------- -------------------------- --------------------------------
The following uses have been approved for development at the Subject site:
o Single Family Attached Residential
o Single Family Detached Residential
o Fire and Rescue House
o Elementary School
o Senior Center
o Elementary School
o Private School
15
<PAGE> 22
o Park
o Retail and Commercial
PMR (PLANNED MIXED RESIDENTIAL DISTRICT)
The Planned Mixed Residential District (PMR) district is designed to establish
communities of varied housing types incorporating public, community and
supportive commercial and employment services. Maximum density requirement and
type of housing allowed for the PMR district is as follows:
-------------------- ------------------- -------------------------------
ZONE DESIGNATION MAXIMUM DENSITY TYPE OF HOUSING ALLOWED
-------------------- ------------------- -------------------------------
PMR low 4 du/acre A,B,C,D,E,F,G,H
PMR Medium Low 8 du/acre A,B,C,D,E,F,G,H,I
PMR Medium 12 du/acre All Housing Types
PMR High 20 du/acre All Housing Types
PMR Urban 30 du/acre All Housing Types
-------------------- ------------------- -------------------------------
In addition to the above, the PMR zoning regulations requires a minimum mix of
housing types within the type of housing allowed for the PMR zone designation.
The chart below reflects the number of acres and the number of unit types
required.
a) 5 -- 25 acres : one unit type
b) 25 -- 75 acres : two unit types
c) over 75 acres : three unit types
The following housing types are permitted in the PMR:
A. Cluster Houses
B. Reduced Setback House
C. Village House
D. Patio House
E. Duplex House
F. Weak-link House
G. Town House
H. Deck Town House
I. Terrace House
J. Multiplex
K. Multifamily Building
L. Mid-to High-Rise Residential Buildings
PMD (PLANNED MIXED USE DISTRICT)
The Planned Mixed Use District (PMD) is designed to "encourage and accommodate a
mix of commercial, office, and residential development in conformance with land
use and economic development goals and objectives as set forth in the
comprehensive plan".
The PMD zone is typical for properties suitable for large scale projects. In the
case of the Subject, a mixed-use development to include single family attached
and detached dwellings, office, multi-family dwellings, library, community park
and police station.
For nonresidential areas, PMD development standards limit the maximum coverage
to 80%, with a minimum of 20% maintained as open space. The development
standards applicable to Part 306 govern residential development in the PMD. The
following table reflects the density as considered to he appropriate with
industry standards.
16
<PAGE> 23
<TABLE>
<CAPTION>
-------------------------------- ----------------------- ------------------ -------------
TABLE III.4
COMMERCIAL ACREAGE
PROPOSED
PHASE LAND BAY USE SF ACRES
----- -------- --- -- -----
<S> <C> <C> <C> <C>
I 1a Office 114,000 9
1b Pad 20,000 2
1c Retail/Office 155,000 12
Lyman Self Storage 81,600 6
II SN-11 O 305,000 23
SN-12 O 200,000 15
SN-12 R 100,000 8
III SN-1A R/O 566,280 43
SN-2 R/TC 225,000 17
SN-2 O/TC 600,000 46
SN-13 O 68,000 5
IV SS-1 F/I 518,000 59
SS-2 F/I 544,000 62
V SS-5 F/I 122,000 14
SS-21 F/I 40,000 5
VI SS-15 R 294,430 23
VII SS-3 F/I 100,000 11
SS-3A F/I 87,000 10
SS-4 F/I 75,000 9
SS-12 F/I 60,000 7
SS-13 F/I 68,000 8
Total ----------
4,343,310
Total ==========
</TABLE>
Acres has been calculated based on a .3 FAR for retail and office and a .25
for flex/industrial space.
PBD (PLANNED BUSINESS DISTRICT)
The Planned Business District (PBD) is "intended to provide for the flexibility
of design necessary to implement the economic development goals and objectives
of the county as set forth in the comprehensive plan".
Land bay designations "RC1", "RC2", "OCI", "0C3" and "Id" are permitted within
PBD designation except that no more than 50% of the total land area in the
proposed PBD may be designated "RC1" or "RC2" or both. PBD development standards
limit the maximum coverage to 80%, with a minimum of 20% maintained as open
space. In the case of the Subject, a business development includes OC 1, IC 1
and RC 1.
ASSESSMENT AND TAX DATA
REAL ESTATE TAXES
The County levies real estate annually on all taxable land, improvements, and
leasehold interest on land. The Board of Supervisors sets annually a countywide
tax rate plus special-district tax rates. The special district levies fund the
operations of the volunteer fire and rescue companies, the stormwater management
program, and certain public services requested by the property owners to be
funded through special real property levies.
[MAP]
The tax rate for 1998 was $1.36 per $100 of assessed value. The 1999 tax rate
was not available as of the date of this report. The total real estate tax
amount is due in two installments. First half real estate taxes are due July 15,
and the second-half due on December 5. The county levies all new construction at
the beginning of each year.
In the subdivision analysis of Southbridge, real estate taxes are an expense to
be deducted from lot sales revenues. As land inventory is sold, the quantity of
land under assessment declines, hence the tax expense will decline
simultaneously. Partially offsetting the declining costs is the anticipated
increased value of the land as subdivision plats are recorded and as
infrastructure throughout the site increases the value of unsold land inventory
through reclassification of its taxable status (i.e., raw land vs. finished
lots).
Real estate taxes are treated as a cost center within the cash flow. We have
based future real estate taxes on the current estimate with a 10% increase,
reflecting an assumed sale of the property at our appraised value. The current
assessment of $544,639 is assumed to increase to $599,100. The tax rate of SI
.36 per $100 of assessed value is applied to estimate year one's expenditure.
For future years, we have deducted 5% of the initial tax liability, increasing
to 10% in year 11, representing the average absorption over the 20-year sell out
period.
REAL ESTATE TAX ANALYSIS
ASSESSED VALUE
<TABLE>
<CAPTION>
1998
PARCEL NO. ACREAGE VALUE PER ACRE TAXES
---------- ------- ----- -------- -----
<S> <C> <C> <C> <C>
1 637.0511
2 113.8137 $2,990,000 $26,271 $40,664
3 79.3890 $2,530,000 $31,868 $34,408
3A 2.9280 $0 $0
4 234.2132 $3,765,000 $16,075 $51,204
5 74.4453 $1,860,000 $24,985 $25,296
6 125.5462 $2,275,000 $18,121 $30,940
7 89.1044 $1,340,000 $15,039 $18,224
8 13.6387 $171,000 $12,538 $2,326
9 100.0134 $1,820,000 $18,198 $24,752
10 32.0997 $477,000 $14,860 $6,487
11A 37.0414 $1,470,000 $39,685 $19,992
11B 98.2816 $430,000 $4,375 $5,848
12 91.1255 $494,000 $5,421 $6,718
13 17.7655 $213,000 $11,990 $2,897
14 7.4254 $92,000 $12,390 $1,251
15 538.4729 $10,900,000 $20,242 $148,240
16 2.3899 $78,000 $32,637 $1,061
17 299.3574 $4,570,000 $15,266 $62,152
18 8.2518 $765,000 $92,707 $10,404
19 69.2043 $3,130,000 $45,228 $42,568
-------------
20 3.4972 $117,000 $33,455 $1,591
-------------
21 5.7224 $560,000 $97,861 $7,616
-------------
21A 0.1763 $0 $0
-------------
21B 0.0637 $0 $0
-------------
22 0.3550 $0 $0
-------------
23 0.5500 $0 $0
-------------
24 3.5000 $0 $0
---------------- -------------
-------------
-------------
Total 2,685.43 $40,047,000 $14,913 $544,639.00
</TABLE>
17
<PAGE> 24
[MAP]
18
<PAGE> 25
IV. MARKET ANALYSIS
METROPOLITAN AREA
Prince William County is located approximately 25 miles southwest of Washington
D.C. in Northern Virginia. It. is bounded on the north by Fairfax and Loudoun
Counties, on the east by the Potomac River, on the south by Stafford County and
on the west by Fauquier County. The County encompasses approximately 360 square
miles, of which 18% is federally owned land.
Prince William County is located within the Washington D.C. MSA. The Washington
D.C. MSA contains more than 6,500 square miles of land area, and is comprised of
the District of Columbia, five counties in Maryland (Frederick, Montgomery,
Prince George's, Calvert and Charles), 11 counties in Virginia (King George,
Fairfax, Loudoun, Clarke, Warren, Fauquier, Culpeper, Prince William, Arlington,
Stafford and Spotsylvania) and two counties in West Virginia (Jefferson and
Berkeley).
Prince William County is served by several major thoroughfares allowing easy
access and commutation to surrounding areas as well as Washington D.C., which is
approximately 25 miles north of the subject. Route 95 and Route One run in a
north-south direction through the eastern part of the County and Route 66 runs
in an east-west direction through the northern part of the County. Other
arterials include: Route 663, Route 234, and Route 28. Airports in the vicinity
include Washington Dulles International Airport and Washington National Airport.
Rail service in the County includes both passenger and freight lines, providing
service into Washington D.C.
POPULATION
Prince William County has witnessed tremendous population growth during the past
two decades. The County's population has grown almost 80% since 1980 with an
average annual increase of 4.1% during the 1980s and 1.8% thus far this decade.
The increase has been largely a result of the County's close proximity to
Washington D.C. and its immediate suburbs. Many residents have chosen Prince
William County because of its affordable housing, a relatively low tax rate, and
its proximity to the major employment centers in Washington D.C. and its
immediate suburbs.
Population growth rates in Prince William County are estimated to remain above
MSA, state and national rates through 2003 (Table N. 1).
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
TABLE IV.I
POPULATION TRENDS
COMPOUND ANNUAL
GROWTH RATE (%)
GEOGRAPHIC AREA 1980 1990 1998 2003 80-90 90-98 98-03
-------------------------------- ---------------- -------------- -------------- -------------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Alexandria City, VA* 101,640 111,183 119,024 122,604 0.9% 0.9% 0.6%
Arlington County, VA 152,179 170,936 176,264 177,916 1.2% 0.4% 0.2%
Fairfax County, VA* 598,809 818,584 922,659 976,628 3.2% 1.5% 1.1%
Fairfax City, VA* 19,481 19,622 21,327 22,173 0.1% 1.0% 0.8%
Loudoun County, VA 57,484 86,129 135,540 167,159 4.1% 5.8% 4.3%
Manassas City, VA* 15,438 27,957 34,473 38,041 6.1% 2.7% 2.0%
Montgomery County, MD 579,055 757,027 829,629 857,205 2.7% 1.2% 0.7%
Prince George's County, MD 665,073 729,268 782,114 798,241 0.9% 0.9% 0.4%
Prince William County, VA 144,646 215,686 257,813 281,050 4.1% 2.3% 1.7%
-------------------------------- ---------------- -------------- -------------- -------------- -------- ------- ---------
Washington, DC-MD-VA-WV 3,477,875 4,223,485 4,634,958 4,829,186 2.0% 1.2% 0.8%
Virginia 1,089,677 1,450,097 1,667,100 1,785,571 2.9% 1.8% 1.4%
Nation 226,545,768 248,709,873 269,412,836 280,885,064 0.9% 1.0% 0.8%
</TABLE>
* Designates an Independent City, which is not part of a defined County
Source: Claritas, PricewaterhouseCoopers L.L.P.
HOUSEHOLDS
Total households in Prince William County have increased 4.8% from 1980 to 1990.
Annual household growth within the county outpaced the MSA, Virginia and the
nation during this period. Between 1990 and 1998, growth slowed to 2.6% lagging
behind neighboring Loudoun County's rate by 370 basis points. Nevertheless,
Prince William County still outpaced the MSA, Virginia and the nation.
Projection to 2003, shows that growth will slow further from the pace indicated
between 1990 and 1998, but will remain stronger than the MSA, Virginia and the
nation.
19
<PAGE> 26
[MAP]
20
<PAGE> 27
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
TABLE IV.2
HOUSEHOLDS
COMPOUND ANNUAL
GROWTH RATE (%)
TRADE AREA 1980 1990 1998 2003 80-90 90-98 98-03
-------------------------------- ---------------- -------------- -------------- -------------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Alexandria City, VA* 48,342 53,280 55,850 57,425 1.0% 0.6% 0.6%
Arlington County, VA 71,364 78,520 81,037 81,974 1.0% 0.4% 0.2%
Fairfax County, VA* 205,990 292,345 330,344 350,914 3.6% 1.5% 1.2%
Fairfax City, VA* 6,967 7,362 8,113 8,515 0.6% 1.2% 1.0%
Loudoun County, VA 18,670 30,490 49,776 62,691 5.0% 6.3% 4.7%
Manassas City, VA* 5,048 9,481 11,636 12,872 6.5% 2.6% 2.0%
Montgomery County, MD 207,200 282,228 309,276 320,404 3.1% 1.2% 0.7%
Prince George's County, MD 224,788 258,011 277,714 284,529 1.4% 0.9% 0.5%
Prince William County, VA 43,773 69,709 85,454 94,600 4.8% 2.6% 2.1%
-------------------------------- ---------------- -------------- -------------- -------------- -------- ------- ---------
Washington, DC-MD-VA-WV 1,250,372 1,566,134 1,722,683 1,801,508 2.3% 1.2% 0.9%
Virginia 1,863,072 2,291,830 2,561,555 2,723,396 2.1% 1.4% 1.2%
Nation 80,389,592 91,947,408 100,657,536 105,888,880 1.4% 1.1% 1.0%
</TABLE>
Source: Claritas, PricewaterhouseCoopers L.L.P.
HOUSING UNITS
In 1998, the Washington D.C. MSA had approximately 1.86 million housing units.
From 1990 to 1998, the number of housing units in the MSA grew at an annual
compound rate of 1.3%, compared to 1.8% for the state and 1.2% for the nation
(Table IV.2). 1-lowing units in Prince William County have historically grown at
rates above the state and nation, and are expected to average 2.1% compounded
annually through 2003, compared to 0.9% for the MSA, 1.5% for the state and 1.0%
for the nation over the same period.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
TABLE IV.2
HOUSING UNITS
COMPOUND ANNUAL
GROWTH RATE (%)
TRADE AREA 1980 1990 1998 2003 80-90 90-98 98-03
-------------------------------- ---------------- -------------- -------------- -------------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Alexandria City, VA* 51,387 58,252 61,445 63,178 1.3% 0.7% 0.6%
Arlington County, VA 74,892 84,847 88,117 89,136 1.3% 0.5% 0.2%
Fairfax County, VA* 216,543 307,966 350,182 371,987 3.6% 1.6% 1.2%
Fairfax City, VA* 7,186 7,677 8,487 8,907 0.7% 1.3% 1.0%
Loudoun County, VA 19,761 32,932 54,100 68,137 5.2% 6.4% 4.7%
Manassas City, VA* 5,511 10,232 12,637 13,979 6.4% 2.7% 2.0%
Montgomery County, MD 216,222 295,723 328,046 339,849 3.2% 1.3% 0.7%
Prince George's County, MD 236,465 270,090 294,287 301,509 1.3% 1.1% 0.5%
Prince William County, VA 46,473 74,759 92,220 102,091 4.9% 2.7% 2.1%
-------------------------------- ---------------- -------------- -------------- -------------- -------- ------- ---------
Washington, DC-MD-VA-WV 1,332,926 1,674,507 1,862,858 1,946,013 2.3% 1.3% 0.9%
Virginia 421,753 576,665 667,188 714,415 3.2% 1.8% 1.5%
Nation 88,411,280 102,263,680 112,133,680 118,018,352 1.5% 1.2% 1.0%
</TABLE>
* Designates an Independent City, which is not part of a defined County
Source: Claritas, PricewaterhouseCoopers L.L.P.
AVERAGE HOUSEHOLD INCOME
In 1998, the Washington D.C. MSA had an average household income of $75,519
compared to $53,863 for the nation. Average household income growth for the MSA
is expected to continue at an annual compound growth rate of 3.5% through 2003,
compared to 3.7% for the state and 3.8% for the nation (Table IV.3). Average
household income for Prince William County was $63,957 in 1998, above that for
the nation but below that for the MSA. Growth rates for Prince William County
are estimated to continue trending below those for the MSA, state and nation,
averaging 2.7% per year through 2003.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
TABLE IV.3
Average Household Income Trends
GEOGRAPHIC AREA 1980 1990 1998 2003 80-90 90-98 98-03
------------------------------------- ------------- ---------- ------------ ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alexandria City, VA* $25,265 $59,038 $89,243 $111,448 8.9% 5.3% 4.5%
Arlington County, VA $27,295 $60,709 $87,250 $107,194 8.3% 4.6% 4.2%
Fairfax County, VA $31,800 $68,113 $95,421 $115,738 7.9% 4.3% 3.9%
Fairfax City, VA* $22,762 $42,742 $65,103 $78,657 6.5% 5.4% 3.9%
Loudoun County, VA $27,852 $59,603 $71,789 $80,114 7.9% 2.4% 2.2%
Manassas City, VA* $16,120 $31,639 $40,474 $46,015 7.0% 3.1% 2.6%
Montgomery County, MD $35,363 $72,774 $96,722 $113,750 7.5% 3.6% 3.3%
Prince George's County, MD $26,069 $49,556 $63,007 $71,949 6.6% 3.0% 2.7%
Prince William County, VA $26,013 $51,570 $63,975 $71,609 7.1% 2.7% 2.3%
------------------------------------- ------------- ---------- ------------ ----------- ---------- --------- ----------
Washington, DC-MD-VA-WV $27,102 $55,685 $75,519 $89,599 7.5% 3.9% 3.5%
Virginia $28,569 $61,114 $84,481 $101,463 7.9% 4.1% 3.7%
Nation $20,564 $38,941 $53,863 $64,948 6.6% 4.1% 3.8%
</TABLE>
*Designates an Independent City, which is not part of a defined County
Source: Claritas, PricewaterhouseCoopers LLP
EMPLOYMENT
Employment in the Washington D.C. MSA approximated 2.5 million jobs in 1998.
Employment growth in the MSA has historically trended below that for the nation,
with the MSA's growth rate averaging 1.5% per year from 1992 to 1998 compared to
2.0% per year for the nation over the same period. The MSA's employment growth
rate is estimated to increase slightly, averaging 1.8% through the next five
years, as the area's telecommunications industry continues to expand. The MSA's
unemployment rate is currently below that for the nation at 3.2%, compared with
4.5% for the nation as of year-end 1998. Unemployment is expected to remain
below that for the nation through 2002.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
TABLE IV.4
UNEMPLOYMENT RATES
1990 1991 1992 1993 1994 1995 1996 1997 1998
------------------------------ --------- --------- --------- -------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCE WILLIAM COUNTY 2.3 4.0 4.8 3.5 3.3 3.3 2.8 2.7 2.2
VIRGINIA 4.3 5.9 6.4 5.1 4.9 4.5 4.4 4.0 2.9
WASH D.C. 6.6 7.8 8.6 8.6 8.2 8.9 8.5 7.9 8.8
WASH. D.C. MSA 3.2 4.5 5.3 4.7 4.1 4.2 3.9 3.7 3.2
USA 5.6 6.8 7.5 6.9 6.1 5.6 5.4 4.9 4.5
------------------------------ --------- --------- --------- -------- --------- --------- --------- -------- --------
</TABLE>
Prince William County has made a transition in its employment composition over
the past two decades. Between 1970 and 1990, government employees composed the
highest percentage of workers in Prince William County. In 1990, this number was
exceeded by employees in trade and services. The largest employers in the
Washington D.C. MSA are listed in the chart below.
---------------------------------------------------------------
LARGEST EMPLOYERS IN WASHINGTON MSA
---------------------------------------------------------------
Giant Food 21,422
McDonald's 19,100
Marriott 15,000
Bell Atlantic 14,000
Inova HealthSystems 11,000
Safeway 11,000
Lockheed Martin 9,000
Hecht's 8,000
--------------------------------------- -----------------------
21
<PAGE> 28
[CHART]
22
<PAGE> 29
[GRAPH]
23
<PAGE> 30
[MAP]
24
<PAGE> 31
ECONOMIC CONDITIONS
The amount of Gross Regional Product (GRP) in the Washington MSA continues to
shift to Northern Virginia. which accounted for 40% of the GRP ($75.7 billion)
in 1998. This is the largest percentage of GRP among the areas mentioned below.
The region is gaining jobs and the economy is healthy. The chart below
illustrates the percentage change in the Gross Regional Product for the areas
that constitute the Washington MSA.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
TABLE IV.5
WASHINGTON MSA
GROSS REGIONAL PRODUCT (% CHANGE)
1996 1997 1998 1999(E)
----------------------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
D.C. -0.46% -1.36% 0.45% 0.35%
Suburban Md. 2.95% 1.80% 2.20% 2.10%
NORTHERN VA. 3.40% 3.20% 2.80% 3.10%
MSA 2.26% 1.60% 2.10% 1.88%
----------------------------- ------------- -------------- -------------- -------------
</TABLE>
Location quotients are frequently used to compare concentrations of employment
within major industries at the local and national levels. Ratios greater than
1.0 suggest a local economy is a net exporter of goods or services, or that
local production exceeds consumption. Analyzing the location quotients for the
nine major employment sectors indicates that the government and
services-industries arc the primary drivers for economic growth, or economic
base, in the MSA. Finance, insurance and real estate, however, also contributes
to the local economic base. While the construction industry has a relatively
high location quotient, it is not considered an industry that drives economic
growth, but rather an industry that responds to economic growth.
-----------------------------------------------------------------
PRIMARY INDUSTRIES BY LOCATION QUOTIENT
WASHINGTON D.C. MSA
-----------------------------------------------------------------
Government 1.47
Services 1.32
Construction 1.11
Finance, Ins., Real Estate 0.93
Retail Trade 0.87
Trans., Comm., Utilities 0.85
Wholesale Trade 0.61
Manufacturing 0.26
Mining 0.00
------------------------------------------ ----------------------
COST OF BUSINESS/LIVING
The cost of doing business in the Washington D.C. MSA is 4% higher than the
national average (Table IV.6). While the average home price and costs of
transportation and property taxes are above the national average, the cost of
utilities is below average, and the average household income is 40% above the
national average.
-----------------------------------------------------------------
TABLE IV.6
COST OF BUSINESS/LIVING INDICATORS (NATION = 100)
WASHINGTON DC MSA
Cost of Doing Business 104
Average Household Income: 140
Average Home Price: 170
Utilities: 96
Property Taxes: 175
Transportation: 114
Source: Claritas, Regional Financial Associates & Places Rated
DISTRIBUTION OF RECENT CONSTRUCTION
The following table illustrates the recent construction trend for commercial and
residential properties in the Washington D.C. MSA as of the third quarter 1998
provided by F.W. Dodge REAPS Report. Prince William County's residential
construction trails that of Fairfax, Prince George, Loudoun, and Montgomery
Counties. Loudoun County's strength in the residential market is tied directly
to the recent commercial increase. The office market along the Dulles Toll Road
and the attraction of techno1o~y companies along Route Seven has increased the
need for both the single-family and multi-family products. From a locational
standpoint, both Loudoun and Prince William Counties have similar location
attributes. Although Prince William County offers two major thoroughfares,
Interstates 95 and 66, recent commercial development has been lagging directly
resulting in lower residential growth.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Table IV.7
----------------------------------------------------------------------------------------------------------------
DISTRIBUTION OF RECENT CONSTRUCTION
COUNTY % OF MSA
THIRD QUARTER 1998
SINGLE- MULTI-
COUNTY OFFICE RETAIL INDUSTRIAL HOTEL FAMILY FAMILY
------------ ----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
District of Columbia, DC 19.9% 1.3% 0.4% 58.8% 0.4% 2.3%
Calvert, MD 0.1% 0.6% 0.3% 0.0% 3.5% 0.2%
Charles, MD 0.6% 3.0% 1.3% 0.0% 3.9% 1.2%
Frederick, MD 3.4% 10.9% 13.2% 2.7% 5.7% 3.4%
Montgomery, MD 1.0% 11.5% 8.4% 3.1% 11.8% 0.3%
Prince Georges, MD 6.0% 8.8% 9.9% 1.2% 14.1% 17.5%
Arlington, VA 11.1% 5.8% 2.6% 20.3% 1.8% 12.3%
Clarke, VA 0.0% 0.0% 0.0% 0.0% 0.4% 0.0%
Culpeper, VA 0.2% 0.1% 0.2% 0.0% 1.4% 0.1%
Fairfax, VA 38.9% 10.0% 29.3% 9.1% 22.6% 37.0%
Fauquier, VA 0.3% 9.3% 0.5% 0.0% 1.9% 0.6%
King George, VA 0.0% 0.0% 0.0% 0.0% 0.7% 0.1%
Loudoun, VA 10.1% 15.4% 6.1% 3.3% 13.1% 6.2%
PRINCE WILLIAM, VA 5.2% 7.7% 4.2% 0.5% 7.1% 6.3%
Spotsylvania, VA 0.6% 11.9% 3.7% 0.4% 5.0% 7.9%
Stafford, VA 1.0% 0.0% 1.1% 0.5% 4.2% 2.8%
Warren, VA 0.1% 0.1% 11.2% 0.1% 0.8% 0.1%
Berkeley, WV 1.6% 2.4% 7.6% 0.0% 0.3% 1.7%
Jefferson, WV 0.0% 1.1% 0.0% 0.0% 1.2% 0.0%
---------------------------------- ------------ ----------- ------------ ------------ ------------ -------------
MSA Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----------------------------------------------------------------------------------------------------------------
</TABLE>
SOURCE: F.W. DODGE REAPS-3RD QTR 1998
CONCLUSION
The outlook for the Washington D.C. metro economy is for continued growth, as
the economic constraint caused by the federal employment and spending cutbacks
appears to be diminishing in light of the improved financial health of the
federal government. Meanwhile, the metro area's growing high-tech industries.
particularly telecommunications and information techno1ogy, are increasingly
offsetting the reliance on government employment.
25
<PAGE> 32
RESIDENTIAL MARKET OVERVIEW
INTRODUCTION
The residential market and development feasibility analysis that follows is
based primarily on the residential market report prepared by Rosentein Baker
Associate's Southbridge Residential Development Plan dated June 1998. We
carefully reviewed their findings and selectively verified the supporting data.
As a result of our investigation, we concur with most of the reports' findings
and recommendations about market feasibility, product mix, lot pricing and
absorption within the Subject and Prince William County.
Prince William County's residential market is currently following the growth
trend of Northern Virginia. Activity is concentrated in the east in Woodbridge,
along the Route One and Interstate 95 corridor and the west within the Manassas
area. Southbridge's Potomac River focus and both current and future commuting
conveniences are positive factors. Although the Subject's neighborhood has a
large amount of competition of similar residential products, there are no
mixed-use developments the size of the Southbridge within the immediate
vicinity.
RESIDENTIAL DEMAND ANALYSIS
DEMOGRAPHICS HIGHLIGHTS
Demand for residential housing is generated from growth in the area.
Measurements of this are evident within population, household formations and
employment statistics. Within a previous section, we have detailed economic and
demographic trends in the area as well as projections through 2003. We have
concluded that there will be positive growth in Prince William County throughout
the foreseeable future. In addition, Rosenstein cites the following demand
generators for residential housing in Price William County.
o Annual households are projected to increase by an average of 2,860
households between 2000 and 2010, while annual households are projected to
slow to an average of 2,050 households between 2010 and 2020.
o Prince William County has a younger population with 31.9% of the
population falling in the 18 and younger category compared to 24.9% for
northern Virginia as a whole.
o Employment growth rate is projected to be 3.7% per annum over the next 10
years, then increase at a slightly lower rate of 3.4% per annum over the
following L0-year period.
o Prince William County is primarily considered a bedroom community. An
estimated 64% of working residents have jobs outside the County.
o The County has a significantly greater proportion of retail workers than
the Northern Virginia region as a whole, which reflects the fact it is a
bedroom community. The County also accounts for a greater percentage of
government workers than northern Virginia as a whole.
o In 1996, the median income was estimated at $58,126, slightly lower than
the average for the region. In 1998, the median income was estimated at
$63,975, still below that of the region.
26
<PAGE> 33
o According to the 1990 census, 52.4% of the county's population was either
living in the same house or had moved within the county over the previous
five years. Of the remaining 47.6%, 31.7% migrated from other counties or
from another southern state.
COMPETING MARKET AREA
Rosenstein's market study defines Southbridge's competitive submarket as the
Route One corridor along the eastern portion of the County along Route One and
Interstate 95. Single-family communities dominate the Prince William County
competitive market. The highest concentration is located in the Mid-County
corridor or the Route 234 market.
RESIDENTIAL BUILDING PERMITS
Residential permits issued over the past decade have averaged about 3,040 units
annually in Prince William County. However, on a year to year basis the number
varied greatly from a low of 1,435 permits in 1980 to a high of 5,304 permits in
1986. Between 19~0 arid 1998, permit activity averaged 2.265 residential permits
per year, a 25% decline over the 1980's. The amount of permits issued was 1,240
in 1991 as compared to the high of 3,070 permits posted in 1997. The trend in
building permits within Prince William County is generally following that of
Northern Virginia as a whole.
Since 1990, the combined single family and townhome sales have increased
annually. During the 1980's. townhomes accounted for 55% of the total
residential sales volume. Due to weak demand for single family detached homes
during the early 1990's recession, townhome sales increased to 70% of total
sales volume. However, as the single family detached market in the County
improved, the townhome share has dropped steadily, and since 1995, penetration
has been below 50 percent.
EASTERN PRINCE WILLIAM COUNTY MARKET
Eastern Prince William County is divided into three residential submarkets:
Route One Corridor, Route 234 and the Lake Ridge market. Southbridge is located
in the Route One residential submarket. The following statistics (Table IV. 8)
reflect active new home developments in Eastern Prince William County's three
competing submarkets.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
TABLE IV.8
ACTIVELY MARKETED SUBDIVISIONS
WITH LOT INVENTORY AS OF YEAR END 1997
SINGLE FAMILY DETACHED TOWNHOMES
------------------------------------------- --------------------------------- ------------------------------
<S> <C> <C>
Total Projects 44 34
Total Units Planned 2,850 3,336
Total Sold 1,696 2,335
Project Pace per Builder/Month 2.01 1.89
Planned but Unsold 1,154 1,001
------------------------------------------- --------------------------------- ------------------------------
</TABLE>
SOURCE: ROSENSTEIN-BAKER
Rosenstein Baker Associates research presents builder sales pace data on 44
single family projects and 34 townhouse projects within Prince William County.
This comprehensive survey shows that builders sales pace varies widely from
project to project. These range from a high of 6.9 units per month for Richmond
American in Madison Farm in the Lake Ridge Corridor of Eastern Prince William
County to 0.10 per unit by both, Koury Communities at Montclair Point and Long
Shaker of the Hollows of Occoquan. Both are within the Route 234, Mid-County
corridor of Eastern Prince William County. Overall, the average sales pace for
the single-family units is 2.01 units per project per month.
Absorption of the townhouse product has a median pace of approximately two units
per project in Eastern Prince William County based on the average overall rate
for the 34 competing townhouse projects. A large planned community like
Southbridge, typically has five to seven builders selling simultaneously,
27
<PAGE> 34
sometimes at overlapping price points. While absorption per builder may be as
few as one to two sales per month each, several builders together could generate
as many as 10 to 20 sales per month community wide.
The entire market over the past few years has exhibited increasing absorption of
single family product from approximately 346 units in 1995 to 600 units and 626
units in 1996 and 1997, respectively. With several builders working on the same
projects simultaneously, this correlates to an average of two sales per month
per builder per project. The following table shows that activity in the Route
234 submarket far outpaces the Route One and Lake Ridge submarkets.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
TABLE IV.9
EASTERN PRINCE WILLIAM COUNTY
SINGLE FAMILY ABSORPTION
LOTS LOTS
SUBMARKET AVAILABLE SOLD 1995 SALES/PACE 1996 SALES/PACE 1997 SALES/PACE
------------------------ ------------------ ------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rt. 1 Market 541 239 57/1.9 64/1.2 85.1/1.1
Rt. 234 Market 2,555 666 289/1.7 536/2.0 503/1.2
Lake Ridge Market 305 38 NA NA 38/3.9
TOTAL 3,404 943 346/1.8 600/1.6 626/2.1
------------------------ ------------------ ------------------ ----------------- ------------------ ------------------
</TABLE>
Currently within the eastern region of Prince William County there are 53 active
single-family developments and 19 active townhome developments that compete
directly with Southbridge. Within these communities there are 26 homebuilders
and 19 townhome builders active.
-------------------------------------------------------------------------------
TABLE IV.10
SINGLE FAMILY DETACHED PRODUCT
EASTERN PRINCE WILLIAM COUNTY
Base Price Range: $134,990-$364,900
Average Base Price: $211,550
Square Footage Feet: 1,265-3,794
Average Square Feet: 2,215
Price/Square Foot Range: $75.09-$172.45
Average Price per Square Foot: $95.51
-------------------------------------------------------------------------------
The single family detached product ranges in price from Sl34.990 to $364,900 per
unit, with an average price of $211,500. The sizes of the homes range from 1,265
to 3,794 square feet averaging 2,215 square feet.
-------------------------------------------------------------------------------
TABLE IV.11
SINGLE FAMILY SALES VELOCITY
EASTERN PRINCE WILLIAM COUNTY
1995 346 units, 1.8 sales per month average per builder-in-project
1996 600 units, 1.6 sales per month average per builder-in-project
1997 626 units, 2.1 sales per month average per builder-in-project
Overall 1,572 units, 1.8 units per month average
-------------------------------------------------------------------------------
The sales velocity of the single-family detached product has steadily increased
within the Subject's competitive market. During 1996 and 1997, 600 and 626
units, respectively were sold to homebuyers. Over the three-year period from
1995 to 1997, builders averaged 1.8 units per month per project. At the end of
1997. there were 3,404 lots released of which 1,938 or 56.9% were sold in
communities that were actively being marketed. Hylton Enterprises, Ryan Homes,
Richmond American, Pulte Home Corporation, and P.C. Homes accounted for 57.4% of
the product sold.
The Eastern Prince William Country single family attached product, also known as
a townhome, has contributed an average of 696 sales from 1994 to 1997. This
represents an average penetration of 15% per year of the overall townhome sales
in Northern Virginia.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
TABLE IV.12
TOWNHOME SALES
EASTERN PRINCE WILLIAM COUNTY VS. NORTHERN VIRGINIA
1994/MKT % 1995/MKT % 1996/MKT % 1997/MKT %
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Eastern Prince William County 740/14.6% 759/15.4% 644/14.3% 641/14.6%
Northern Virginia 5.065/100% 4.915/100% 4,514/100% 4,400/100%
---------------------------------------------------------------------------------------------------------------------
</TABLE>
The most recent figures show that townhomes in Eastern Prince William County
range from $72,990 to $188,900 with an average of $123,015. The size of the
townhomes ranging from 1,040 to 2,500 square feet with an average six of 1,545
square feet.
----------------------------------------------- -------------------------------
TABLE IV.13
TOWNHOME PRODUCT
EASTERN PRINCE WILLIAM COUNTY
Base Price Range $72.990-$188,990
Average Base Price $123,015
Square Footage Range 1,040 to 2,500
Average Square Feet 1,545
Price/Square Foot Range $57.28 to $114.48
Average Price Per Square Foot $79.63
----------------------------------------------- -------------------------------
As mentioned earlier, townhome sales outpaced the single family detached homes
since the 1980's. Over the past three years an average of 522 townhome units
have been constructed totaling 1,566 units. Each builder averaged 1.6 sales per
month over the past three years.
28
<PAGE> 35
------------------------------------------------------------------------------
TABLE IV.14
TOWNHOME SALES VELOCITY
EASTERN PRINCE WILLIAM COUNTY
1995 427 units, 1.4 sales per month average per builder-in-project
1996 499 units, 1.5 sales per month average per builder-in-project
1997 640 units, 1.8 sales per month average per builder-in-project
Overall 1,566 units, 1.6 sales per month average
------------------------------------------------------------------------------
From 1995 to 1997, there were 3,411 lots released in currently marketed
communities; a total of 2.336. or 68.5% were sold during the same time period.
The top five townhouse builders accounted for 55.8% of the product in 1997. They
were Ryan Homes. P.C. Homes, General American, Piccard Homes, and Richmond
American.
DEMAND ANALYSIS
The factors that determine the extent of demand at Southbridge are the project's
strategic location for capturing potential buyers and the long-term demographics
for Prince William County and the Northern Virginia region as a whole. The
project's unique locational characteristics, unobstructed vistas of the Potomac
River, reasonable commute time to Washington, D.C., convenient location along
Route One and Interstate 95, and the Town Center concept, are all positive
factors towards the project's completion. Impacting the overall demand for the
site is the amount of competition located along the Route One corridor, as well
as competition throughout the Northern Virginia region.
There is a clear linkage between population growth and housing market demand.
According to Rosenstein. the projected annual population growth of 2.3% over the
next twenty years is moderate for Prince William County. Approximately 48,800
new households are projected to be created in Prince William County over the
20-year period. The median household income in 1996 was $58,126. This is lower
than the median of Northern Virginia as a whole. According to Claritas, the
average household income in 1998 was $63,975 and in the year 2003, it is
estimated to be $71,609. It is also expected to grow annually by 2.3%, but still
lag that of the region. Again, a developer would regard this as a moderate rate
of growth.
The Eastern Prince William County competitive market is dominated by smaller
single-family and townhouse communities. Single-family houses have averaged 600
units annually since 1996. Builders' sales paces have increased from 1.6 units
per month in 1996 to 2.1 units per month overall per project in 1997. Townhomes
in Eastern Prince William County have accounted for approximately 15% of the
product being constructed in Northern Virginia since 1994. Since its peak at 759
units in 1995, townhomes have remained at the 640-unit level over 1996 and 1997.
In today's current market, builders are faced with a townhome product that shows
little creativity. Therefore, they have created the weak-link and small lot
single-family programs to compete with the townhomes in affordability.
TRADE AREA
[MAP]
METROPOLITAN RETAIL ANALYSIS
INTRODUCTION
The proposed location for Southbridge Town Center is near the intersection of
Route One and Cherry Full Rd.. in Prince William County, VA. Within the planned
community, 639,430 square feet is planned to be developed as retail space with
another 721,280 square feet developed as part retail and part office space. The
following retail market overview outlines supply and demand generators for
retail space in the Subject's market area.
29
<PAGE> 36
Prince William County is one of 11 counties located in the Northern Virginia
portion of the Washington D.C. MSA. Prince William County benefits from two
major interstate highways: 1-95 and 1-66. 1-95 is the primary north-south
highway providing access through the District of Columbia along the Potomac
River to the northeastern US and south through the state of Virginia.
METROPOLITAN RETAIL DEMAND ANALYSIS
Demand for retail space in the Washington D.C. MSA is primarily a function of
the population and income levels of the area as well as retail sales growth. The
demographics of the MSA as described previously indicate continued growth in
population, income levels and employment through the early 2000s. According to
Woods & Poole Economics, total retail sales growth in the Washington DC MSA had
an annual compounded rate of 1.8% from 1990 to 1998 compared to 1.9% for the
state of Virginia and 2.0% for the nation. Retail sales growth is estimated to
slow slightly through 2003 to 1.2% for the MSA, 1.1% for the state and 1.0% for
the nation (Table IV. 15). (General merchandise, apparel, furnishings and other
(GAFO) General merchandise, apparel, furnishings and other (GAFO) sales, a
segment of total retail sales, are highly correlated with the demand for retail
space. From 1990 to 1998, GAFO sales increased at an annual compounded rate of
2.3% for the MSA compared to a compounded rate of 2.7% for the state and 2.5%
for the nation. GAFO sales in the MSA are expected to increase at a compound
annual rate of 1.3% through 2003. This rate is similar to the state and exceeds
the nation.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
TABLE IV.15
RETAIL DEMAND VARIABLES
TOTAL RETAIL SALES (MIL.)
COMPOUND ANNUAL GROWTH RATE (%)
GEOGRAPHIC AREAS 1980 1990 1998 2003 80-90 90-98 98-03
----------------------- ------------ ------------- ------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
WASHINGTON DC MSA $28,685 $37,436 $43,189 $45,773 2.7% 1.8% 1.2%
VIRGINIA STATE $37,777 $49,638 $57,580 $60,821 2.8% 1.9% 1.1%
NATION $1,636,704 $1,925,983 $2,260,196 $2,380,336 1.6% 2.0% 1.0%
GAFO SALES (MIL.)
COMPOUND ANNUAL GROWTH RATE (%)
TRADE AREA 1980 1990 1998 2003 80-90 90-98 98-03
----------------------- ------------ ------------- ------------- ------------ ------------- ------------- ------------
WASHINGTON DC MSA $9,856 $12,477 $15,001 $16,003 2.4% 2.3% 1.3%
VIRGINIA STATE $11,856 $15,453 $19,176 $20,473 2.7% 2.7% 1.3%
NATION $524,032 $611,625 $746,920 $794,438 1.6% 2.5% 1.2%
TOTAL HOUSEHOLD INCOME (MIL.)
COMPOUND ANNUAL GROWTH RATE (%)
TRADE AREA 1980 1990 1998 2003 80-90 90-98 98-03
----------------------- ------------ ------------- ------------- ------------ ------------- ------------- ------------
WASHINGTON DC MSA $34,292 $88,093 $131,577 $163,439 9.9% 5.1% 4.4%
VIRGINIA STATE $39,986 $97,032 $144,773 $181,442 9.3% 5.1% 4.6%
NATION $1,653,114 $3,580,525 $5,421,676 $6,877,240 8.0% 5.3% 4.9%
----------------------- ------------ ------------- ------------- ------------ ------------- ------------- ------------
</TABLE>
GENERAL MERCHANDISE, APPAREL, FURNISHINGS AND OTHER (GAFO)
General merchandise, apparel, furnishings and other (GAFO) sales, a segment of
total retail sales, are highly correlated with the demand for retail space. From
1990 to 1998, GAFO sales increased at an annual compounded rate of 2.3% for the
MSA compared to a compounded rate of 2.7% for the state and 2.5% for the nation.
GAFO sales in the MSA are expected to increase at a compound annual rate of 1.3%
through 2003. This rate is similar to the state and exceeds the nation.
METROPOLITAN RETAIL SUPPLY ANALYSIS
The Washington D.C. MSA retail market contains more than 106k million square
feet of shopping center space according to National Research Bureau. As shown in
Table IV.l6, there are 23 square feet of total shopping center space per capita
in the MSA compared with 29 square feet per capita for Northern Virginia. Of the
MSA's total space, approximately 48% is located in community and neighborhood
shopping centers. Specifically, the Northern Virginia area (King George,
Fairfax, Lotidoun, Clarke, Warren, Fauquier, Culpeper, Prince William,
Arlington, Stafford and Spotsylvania counties) contains approximately 28.6
million square feet of community and neighborhood shopping center space. or
approximately 16 square feet of community and neighborhood space per capita
compared to 12 square feet per capita for the MSA and 18 squire feet per capita
for the designated Trade Area. As of fourth quarter 1998, approximately seven
projects, or 910,500 square feet of retail space, had commenced development in
the Northern Virginia area, according to FW Dodge. Additionally, more than 2.6
million square feet were in various stages of planning in the Northern Virginia
area, according to FW Dodge. The seven projects in the start phase include:
Borders Books & Kohls in Manassas, Virginia Gateway Shopping Center in
Gainesville, Kohis in Leesburg, JC Penney in Sterling, Dulles Center Sears in
Ashburn, Landsdowne Retail Center in Fort Belvoir and Wal-Mart in Warrenton.
30
<PAGE> 37
<TABLE>
<CAPTION>
---------------------------------------- ------------------- ------------------ ------------------- ------------------
TABLE IV.16
RETAIL SQUARE FEET PER CAPITA
TOTAL TOTAL COMMUNITY COMMUNITY &
TOTAL SHOPPING CENTER & NEIGHBORHOOD TOTAL SQUARE NEIGHBORHOOD
POPULATION SQUARE FEET SQUARE FEET FEET/CAPITA SQUARE FEET/CAPITA
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C> <C>
MSA 4,634,958 106,616,651 56,016,371 23 12
NORTHERN VIRGINIA 1,804,346 52,019,531 28,689,162 29 16
TRADE AREA 250,364 NA 4,393,782 NA 18
</TABLE>
Source: Claritas, National Research Bureau, PricewaterhouseCoopers LLP
COMPETING PROPERTY ANALYSIS
Throughout the Subject's trade area (described below in the Subject Retail Trade
Area Analysis), there are 32 shopping centers that have the potential to compete
with the proposed retail within Southbndge (20 community centers and 12
neighborhood centers). Of these centers, 12 community centers and six
neighborhood centers are located within five miles of Southbridge and most
likely will compete directly to the proposed retail uses to be developed in the
community. These 18 centers are outlined in Table IV. 17 below; a corresponding
location map is provided on the facing page.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
TABLE IV.17
COMPETING CENTERS
ANCHORS
GLA W/ANCHORS/ ------------------------ESTIMATED YEAR # OF
MALL/LOCATION GLA W/O ANCHORS ANCHOR GLA OCCUPANCY OPEN TYPE TENANTS OWNER
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. The Center at 130,000 N/A N/A N/A 1993 Community 61 N/A
Great Oaks N/A
Smoke Town & Davis
Ford Rd.
Prince William, VA
2. Center Plaza 106,000 Giant Food 39,000 90.0% 1978 Community 28 Irene V. Hylton
Dale Blvd. & 66,800 Pic `N Pay 4,000 Marital Trust
Minnieville Rd. Shoes (V Share 2)
Woodbridge, VA
3. Dumfries Plaza 110,000 McGregor's N/A N/A 1958 Community 25 J. Ferlazzo
271 Fraley Blvd. N/A Food Store
Prince William, VA
4. Featherstone 187,977 Food Lion 35,000 N/A 1970 Community 24 Douglas
Square N/A KilRoys 6,000 Development Corp.
14527-14643 Jefferson NationsBank 5,000
Davis Hwy.
Woodbridge, VA
5. The Glen 156,000 Safeway 54,731 99.0% 1993 community 13 Saul Centers, Inc.
Davis Ford Rd. & Old N/A
Bridge
Woodbridge, VA
6. Glendale Plaza 105,200 Pitkin Home 18,250 92.0% 1974 Community 25 Irene V. Hylton
Dale Blvd & 51,538 Center Marital Trust
Minnieville Rd. (V Share 2)
Woodbridge, VA
7. Jefferson Plaza 130,371 Frank's N/A N/A 1962 Community 13 N/A
Mount Pleasant & Jeff Hardware N/A
Davis Hwy. Sea Galley
Prince William, VA Restaurant
8. Market at Opitz 150,000 Safeway 53,990 79.0% 1990 Community 17 The Peterson
Crossing 69,000 WaWaFood Market N/A Companies
Rte. 1 & Opitz Blvd.
Woodbridge, VA
9. Potomac Festival 251,959 Babies 'R Us N/A N/A N/A Community 17 KLNB, Inc.
14233 Potomac Mills Rd. CompUSA N/A
Woodbridge, VA
10.Prince William 233,144 Babies 'R Us N/A N/A 1986 Community 35 The Carey Winston
Square 71,000 CompUSA N/A Company
Smoketown Rd. & Gideon Dr.
Woodbridge, VA
11.Shops at the 170,000 Drug Emporium N/A N/A 1992 Community N/A Smithy Braedon
Glen Safeway N/A ONCOR
Old Bridge & Davis International
Ford Rds.
Manassas, VA
12.Smoketown Plaza 210,000 CVS 12,000 N/A 1987 Community 26 Kensington
Davis Ford & 50,000 Frank's 37,000 Associates
Minnieville Rds. Nursery & N/A Limited
Woodbridge, VA Crafts 50,000 Partnership
Glory Days 9,000
Grill
Hub Furniture
Piece Goods
Fabrics
13.Ashdale Plaza 89,918 Dolalr General 7,500 91.0% 1998 Neighborhood 16 LAMAR, Inc.
2906 Dale Blvd. Fitness 24,500
Dale City, VA Equation
14.Forestdale Plaza 95,000 CVS 30,324 100.0% 1973 Neighborhood 20 Irene V. Hylton
Dale Blvd. & 40,676 Marital Trust
Minnieville Rd. (V Share 2)
Woodbridge, VA
15.Lynwood Plaza 60,000 N/A N/A 67.0% 1970 Neighborhood 12 N/A
14431-7 Jefferson
Davis Hwy.
Woodbridge, VA
16.Potomac Plaza 85,400 Market Street 11,000 91.0% N/A Neighborhood 21 First Washington
13624-13678 Jeff Davis 74,400 Buffet Realty Trust
Hwy.
Woodbridge, VA
17.Prince William 54,583 N/A N/A 70.0% 1967 Neighborhood 14 Washington Real
Plaza Estate Investment
14482 Jefferson Davis Trust
Highway
Woodbridge, VA
18.Triangle Plaza 85,181 Bonus Food Plus 21,304 98.0% 1972 NeighborhoodN/A Curtis Property
Rte. 1 & Graham Park Dollar General 8,160 Management Corp.
Rd.
Dumfries, VA
</TABLE>
SUBJECT RETAIL TRADE AREA ANALYSIS
A trade area is a geographic description of where the significant patronage for
support of a shopping center occurs. The boundaries of a trade area are
determined by analyzing the nature of the shopping center, location of competing
facilities, accessibility, physical barriers, and limitations of driving time
and distance.
DRIVING TIME
Community and neighborhood shopping centers are not as dependent upon automobile
travel as larger Regional centers. Community and neighborhood centers typically
generate 75% to 90% of sales activity from within a five-minute driving radius.
In addition, the frequency of trips within five minutes of a center is such that
a proportionately higher volume of sales is obtained from this area as opposed
to the outer driving radius,
PHYSICAL AND/OR SOCIAL BARRIERS
In addition to travel time and accessibility, physical and social barriers are
major considerations in delineating the trade area of a community retail center.
Examples of physical barriers include rivers without bridges, natural landforms
such as mountains and lakes, and man-made obstacles such as freeways with
limited crossing points. Social barriers consist of areas that a potential
customer may be reluctant to pass through, such as industrial areas, high-crime
neighborhoods or traffic-congested intersections.
The primary barriers impacting the Subject's trade area include Occoquan River
to the north, the Potomac River to the east, and Stafford County line to the
south.
Shopping center trade areas are typically broken down into a primary trade area
and a secondary trade area, which provides the remainder of sales activity.
Based on the foregoing analysis, it is concluded that Subject's primary trade
area is bounded by the above mentioned primary barriers,
RETAIL TRADE AREA DEMAND ANALYSIS
Demand for retail space in the trade area is dependent upon population,
household and income growth potential. Population in the primary trade area grew
31
<PAGE> 38
at an annual compounded rate of 2.8% from 1990 to 1998, compared to 2.3% for
Prince William County over the same period. Population growth in the primary
trade area is expected to remain positive, outpacing growth for the County
through 2003.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
TABLE IV.18
TRADE AREA DEMOGRAPHICS
POPULATION
COMPOUND ANNUAL GROWTH RATE
-------------------------------------
GEOGRAPHIC AREA 1980 1990 1998 2003 80-90 90-98 98-03
----------------------------- ------------ ------------ ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
TRADE AREA 132,389 201,155 250,364 277,624 4.3% 2.8% 2.1%
PRINCE WILLIAM COUNTY 144,646 215,686 257,813 281,050 4.1% 2.3% 1.7%
HOUSING UNITS
COMPOUND ANNUAL GROWTH RATE
-------------------------------------
GEOGRAPHIC AREA 1980 1990 1998 2003 80-90 90-98 98-03
----------------------------- ------------ ------------ ----------- ------------ ------------ ------------ -----------
TRADE AREA 41,560 67,628 86,745 97,577 5.0% 3.2% 2.4%
PRINCE WILLIAM COUNTY 46,473 74,759 92,220 102,091 4.9% 2.7% 2.1%
AVERAGE HOUSEHOLD INCOME
COMPOUND ANNUAL GROWTH RATE
-------------------------------------
GEOGRAPHIC AREA 1980 1990 1998 2003 80-90 90-98 98-03
----------------------------- ------------ ------------ ----------- ------------ ------------ ------------ -----------
TRADE AREA $26,462 $52,297 $63,944 $70,980 7.0% 2.5% 2.1%
PRINCE WILLIAM COUNTY $26,013 $51,570 $63,975 $71,609 71% 2.7% 2.3%
</TABLE>
Source: Claritas, PricewaterhouseCoopers LLP
In response to population growth, housing units increased at a compound annual
rate of 3.2% from 1990 to 1998, compared with 2.7% for Prince William County.
Average household income in the trade area experienced comparable growth to that
of Prince William County from 1990 to 1998. Average household incomes are
expected to grow at an annual compound rate of 2.1% for the primary trade area
versus 2.3% for the County.
As shown in the fo1lowing maps, the Subject is located in a section of the trade
area that has among the lowest levels of population density. In addition, the
number of housing units surrounding the subject is relatively low, compared to
the County and MSA. According to the 1998 Average Household Income Map, the
subject is located among households with average annual incomes ranging between
$30,000 and (pound)100,000. Household income growth is expected to be high,
averaging 5.5% average annual growth through 2003.
TRADE AREA CAPTURE RATE ANALYSIS
In the Metropolitan Retail Demand Analysis, we mentioned that demand for retail
space is, in part, a function of retail sales growth. A trade area capture rate
analysis determines what percent of the MSA's total retail sales is generated by
the trade area, and can be used as a proxy to determine demand for retail space.
In theory, the more retail sales, the more retail space needed. As mentioned
before, the total retail sales for the Washington DC MSA was approximately $43.2
million in 1998. In 1998. the trade area captured 5% of the MSA's total retail
sales (Table IV.l9). The trade area's capture rate is expected to increase to 6%
of the MSA's total retail sales by 2003, indicating an increase in demand for
retail space in the trade area.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
TABLE IV.19
TRADE AREA CAPTURE RATE
1998 2003
COMPOUND ANNUAL
GROWTH IN
TOTAL RETAIL TOTAL RETAIL PERCENT OF MSA TOTAL RETAIL
SALES TOTAL RETAIL SALES TOTAL RETAIL SALES
AREA ($MIL.) SALES ($MIL.) SALES (1998-2003)
-------------------------- ----------------- ------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
MSA $43,189 100% $45,773 100% 1.17%
NORTHERN VIRGINIA $16,813 39% $18,493 40% 1.92%
TRADE AREA $2,333 5% $2,631 6% 2.44%
</TABLE>
Source: Claritas, Woods & Poole Economics, PricewaterhouseCoopers LLP
RETAIL MARKET ANALYSIS CONCLUSION
The overall Washington D.C. MSA as well as Prince William County, are
experiencing strong demographic growth. The Subject is situated in a location
that is expected to experience positive growth in terms of population, housing
units and average household income relative to the County and MSA. This bodes
well for the retail market, as reflected in the forecasted capture rate increase
through 2003.
METROPOLITAN WAREHOUSE/FLEX MARKET ANALYSLS
As pan of the planned unit development of Southbridge, 1,695,600 square feet is
planned to be built with warehouse/flex space. Of this total, 81,600 square feet
is projected to be self-storage space. Tue following market overview outlines
supply and demand generators for warehouse/flex space in the Washington D.C. MSA
and the 1-95 Corridor Warehouse/Flex submarket, in which the Subject is located.
METROPOLITAN WAREHOUSE/FLEX DEMAND ANALYSIS
Demand for warehouse space is generated primarily by manufacturing and wholesale
trade employment and measured in terms of occupied square feet per employee.
Estimates for the Washington D.C. MSA indicate positive demand through 2003, as
positive employment growth in manufacturing and wholesale trade sectors
continues.
32
<PAGE> 39
<TABLE>
<CAPTION>
============================================================================= ================== ==================
MANUFACTURING AND DISTRIBUTION EMPLOYMENT AND SPACE UTILIZATION
WASHINGTON DC MSA
MFG./WHLS. OCCUPIED SF
OCCUPIED TRD. PER MFG./WHLS. ESTIMATED
DISTRIBUTION SF EMPLOYMENT DISTRIBUTION TRD. ABSORPTION
YEAR (000S) GROWTH STOCK GROWTH EMPLOYMENT (000S)
---- ------ ----------- ------------ ---------- ------
<S> <C> <C> <C> <C> <C>
1991 75,506 -5.78% 0.00% 401 2,189
1992 75,195 -1.84% 0.47% 407 183
1993 72,898 1.75% 0.26% 387 -1,574
1994 74,614 0.52% 0.08% 394 1,298
1995 75,163 1.17% 0.51% 393 83
1996 73,817 2.73% 0.33% 375 -1,190
1997 74,342 0.60% 0.26% 376 1,436
1998 75,493 1.57% 0.98% 376 3,666
1999 75,826 0.63$ 0.47% 375 333
2000 76,789 1.54% 0.59% 374 963
2001 77,905 2.00% 0.70% 372 1,116
2002 78,755 1.09% 0.70% 372 850
2003 79359 1.04% 0.69% 371 604
</TABLE>
Source: CB Richard Ellis/Torto Wheaton Research, PricewaterhouseCoopers LLP
Historically, Washington D.C. warehouse space utilization indicated a range from
375 to 407 square feet per manufacturing and wholesale trade employee. This
figure is used as an index for analysis purposes and is not based on actual
build-out specifications. Increased technology has generally led to a reduction
m the time product is spent in the facility. For this analysis, usage of 375
square feet per employee has been estimated beginning in 1999 and declining to
371 square feet by 2003.
METROPOLITAN WAREHOUSE/FLEX ABSORPTION ANALYSIS
Absorption has averaged 761,000 square feet per year from 1991 to 1998 and is
expected to remain positive through 2003, averaging 773,000 square feet per
year. Manufacturing and distribution sectors will lead absorption as these two
industries continue to grow.
WAREHOUSE SUPPLY AND ABSORPTION TRENDS
WASHINGTON DC MSA
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Supply 82,430 82,814 83,027 83,090 83,515 83,788 84,003 84,833 85,223 85,723 86,323 86,923 87,523
Completions 741 384 213 63 425 273 215 821 400 500 600 600 600
Absorption 2,189 183 -1,574 1,298 83 -1,190 1,436 3,666 333 963 1,116 850 604.1
</TABLE>
Source: CB Richard Ellis/Torto Wheaton Research, PricewaterhouseCoopers LLP
METROPOLITAN WAREHOUSE/FLEX SUPPLY ANALYSIS
The Washington D.C. MSA warehouse market contains more than 84 million square
feet of warehouse and flex space. The supply of space has steadily increased
since 1991. averaging 392,000 square feet of new completions per year. New
additions to supply are estimated to average 540,000 square feet per year
through 2003.
According to F.W. Dodge REAPS report. starts in the MSA are expected to moderate
from the strong 1997 levels and average 1.5 million square feet per year between
1999 and 2003. This is a direct result of Prince George's County, the largest
warehouse submarket, limiting development, ultimately forcing new construction
into Loudon and Prince William counties. Most of the projects in the early
phases of review are build-to-suit with a number of self-storage facilities;
however, speculative development is prevalent in Loudon County specifically, in
the Dulles International Airport submarket.
METROPOLITAN WAREHOUSE/FLEX VACANCY ANALYSIS
Declining employment growth in the manufacturing and wholesale trade sectors in
1991 and 1992 resulted in negative absorption of warehouse and flex space in
1993. Vacancy rates peaked in 1993 at 12.2% and ranged between 10.0% and 11.5%
between 1993 and 1998. Vacancy rates are estimated to decline further through
2003. as demand outpaces new construction.
The favorable economic climate has allowed the warehouse market to tighten over
the past year as vacancies declined 1.4 percentage points to 10.7%. Absorption
of warehouse and flex space is benefiting from the large number of high-tech
firms in the area who have significant amounts of storage requirements. The
Route 28 corridor has become an attractive area for developers with a low single
digit vacancy rate and convenient access to Dulles International Airport.
<TABLE>
<CAPTION>
======================================================================================================================
WAREHOUSE VACANCY AND RENTAL RATE TRENDS
WASHINGTON DC MSA
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vacancy 8.4% 9.2% 12.2% 10.2% 10.0% 11.9% 11.5% 11.0% 11.0% 10.4% 9.8% 9.4% 9.3%
Rental Rate $6.07 $5.80 $5.32 $5.21 $5.54 $4.80 $5.33 $5.53 $5.72 $5.92 $6.13 $6.35 $6.57
</TABLE>
Source: CB Richard Ellis/Torto Wheaton Research, PricewaterhouseCoopers LLP
33
<PAGE> 40
METROPOLITAN WAREHOUSE RENTAL RATE ANALYSIS
Due to increases in the overall vacancy rate, rental rates dropped in 1996
before increasing 11.5% in 1997 By 1998. rental rates increased to 1995 levels
as vacancy decreased for three consecutive years.
Rental rates are expected to outpace inflationary levels due to low vacancy
through 2003. The forecasted average net rent for 2003 is $6.57 per square foot.
METROPOLITAN WAREHOUSE MARKET CYCLE CONCLUSION
Real estate markets go through cycles due to the lag relationship of demand and
supply for physical space The Washington D.C. MSA warehouse market has just
recently entered the expansion phase of the market cycle, characterized by
declining vacancy and new construction. The warehouse market is expected to
remain in the expansion phase of the real estate cycle through 2003, as demand
continues to outpace new construction.
[GRAPH]
1-95 CORRIDOR WAREHOUSE/FLEX ANALYSIS
1-95 CORRIDOR WAREHOUSE/FLEX DEMAND ANALYSIS
As in the metro market, demand for warehouse space in the 1-95 Corridor
submarket. in which the Subject is located, is driven by manufacturing and
distribution employment. Future demand for warehouse space is a function of
growth in these industries as well as the relative performance of other
warehouse submarkets in the metro area.
1-95 CORRIDOR WAREHOUSE/FLEX SUPPLY ANALYSIS
The 1-95 Corridor is the second largest warehouse/flex submarket in the
Washington D.C. MSA, with more than 20.1 million square feet of warehouse space.
There been no significant additions to supply since 63,000 square feet entered
the submarket in 1994. In order to keep pace with anticipated demand for space,
additions to supply are anticipated at an average rate of 112,000 square feet
per year through 2003.
<TABLE>
<CAPTION>
======================================================================================================================
SUPPLY TRENDS
I-95 CORRIDOR
SUBMARKET
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Submarket Supply 20,066 20,066 20,066 20,128 20,128 20,128 20,128 20,128 20,208 20,288 20,388 20,538 20,688
Completions 85 0 0 63 0 0 0 0 80 80 100 150 150
</TABLE>
Source: CB Richard Ellis/Torto Wheaton Research, PricewaterhouseCoopers LLP
1-95 CORRIDOR WAREHOUSE FAIR SHARE/ABSORPTION ANALYSIS
A penetration rate analysis indicates whether a submarket is achieving its fair
share of absorption relative to the other submarkets in the metropolitan area.
The penetration rate is the ratio of the actual market share over the fair
market share. A penetration rate of 1.0 or greater indicates a submarket is
achieving its fair share of absorption. The actual market share is the ratio of
occupied inventory in the submarket over occupied inventory in the metropolitan
market. The fair market share is the ratio of total supply in the submarket over
the total supply in the metropolitan market.
<TABLE>
<CAPTION>
======================================================================================================================
FAIR SHARE ANALYSIS
I-95 CORRIDOR SUBMARKET
FAIR MARKET ACTUAL MARKET SUBMARKET VACANCY
YEAR SHARE SHARE ABSORPTION PENETRATION RATE
--------------------- ------------------ ------------------- ------------------ ------------------- ==================
<S> <C> <C> <C> <C> <C>
1991 24.3% 24.5% 348 1.01 7.9%
1992 24.2% 24.2% -110 1.00 9.3%
1993 24.2% 23.7% -810 0.98 13.8%
1994 24.2% 23.7% 326 0.98 12.0%
1995 24.1% 23.4% -149 0.97 12.6%
1996 24.0% 23.7 -77 0.99 13.1%
1997 24.0% 23.0% 829 0.96 10.5%
1998 23.7% 23.0% 372 0.97 10.3%
1999 23.7% 23.0% 86 0.97 10.2%
2000 23.7% 23.0% 221 0.97 9.5%
2001 23.6% 23.0% 257 0.97 8.7%
2002 23.6% 23.0% 196 0.97 8.4%
2003 23.6% 23.0% 139 0.97 8.4%
===================== ================== =================== ================== =================== ==================
</TABLE>
34
<PAGE> 41
Comparing the fair market share and actual market share of warehouse space for
the 1-95 Corridor submarket reveals a penetration rate of 0.97 in 1998.
Therefore, this submarket is capturing just below its fair share of absorption.
Going forward, absorption for the submarket is estimated based on actual market
share of occupied space. These estimates indicate a penetration rate of 0.97
through 2003.
1-95 CORRIDOR WAREHOUSE VACANCY ANALYSIS
The vacancy rate for the 1-95 Corridor submarket peaked at 13.8% in 1993, higher
than the overall metropolitan warehouse market (12.2%). The vacancy rate has
since declined, falling to 10.3% in 19Q8. Demand will outpace new construction
resulting in declining vacancy rates through 2003.
<TABLE>
<CAPTION>
======================================================================================================================
VACANCY AND RENTAL RATE TRENDS
I-95 CORRIDOR SUBMARKET
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vacancy Rate 7.9% 9.3% 13.8% 12.0% 12.6% 13.1% 10.5% 10.3% 10.2% 9.5% 8.7% 8.4% 8.4%
Completions $6.33 $6.08 $5.73 $5.83 $5.08 $5.54 NA NA NA NA NA NA NA
</TABLE>
Source: CB Richard Ellis/Torto Wheaton Research, PricewaterhouseCoopers LLP
WAREHOUSE MARKET ANALYSIS CONCLUSION
The Washington D.C. MSA warehouse market is enjoying recent declines in vacancy
rates and moderate new construction typified by the expansion phase. An
anticipated reduction in vacancy rates as demand outpaces new supply is expected
which will keep the metro warehouse market in the expansion phase through 2003.
The 1-95 submarket has a history of trending with its metro market. Thus, the
1-95 Corridor is expected to continue experiencing declining vacancy rates and
enter the expansion phase of the real estate cycle as 2000 approaches.
METROPOLITAN OFFICE MARKET ANALYSIS
Southridge is projected to be developed with 1,287,000 square feet of office
space. The Subject is located in the Springfield office submarket of the Outer
Northern Virginia office market. The Outer Northern Virginia office market is
dominated by the larger Washing I).C. MSA. Within this analysis, we have focused
on office supply and demand generators for the Washington D.C. MSA with a
following analysis on the Springfield office submarket.
DEMAND ANALYSIS
Demand for office space is generated by office employment and measured in terms
of occupied square feet per employee. Office employment for the Washington D.C.
MSA was strong in 1996, 1997 and 1998,, resulting in the absorption of almost
three million square feet of office space in 1996, more than three million
square feet in 1997 and over six million square feet in 1998. Estimates for
Washington D.C. indicate continuing growth in office employment, resulting in
positive net absorption through 2003 (Table IV.2 1).
<TABLE>
<CAPTION>
======================================================================================================================
TABLE IV.21
OFFICE EMPLOYMENT AND SPACE UTILIZATION
WASHINGTON DC MSA
OFFICE OCCUPIED SF
OCCUPIED OFFICE EMPLOYMENT STOCK PER OFFICE ESTIMATED
YEAR OFFICE SF GROWTH GROWTH EMPLOYMENT ABSORPTION
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C> <C>
1988 151,597,112 5.5% 7.6% 287 12,601,801
1989 160,748,460 3.7% 7.3% 294 9,116,058
1990 165,875,083 1.6% 6.7% 298 6,951,115
1991 173,699,562 -2.6% 2.6% 321 7,478,518
1992 179,166,665 2.6% 1.4% 323 5,078,511
1993 185,184,834 2.9% 0.7% 324 5,014,932
1994 188,015,780 3.2% 0.1% 319 2,489,978
1995 191,246,057 2.8% 0.7% 316 2,403,963
1996 194,392,057 3.0% 0.2% 312 2,994,707
1997 197,101,238 5.4% 0.3% 300 3,2206,180
1998 204,275,040 3.9% 1.8% 299 6,811,093
1999 208,881,400 2.3% 2.3% 299 4,606,360
2000 213,040,200 2.3% 2.3% 298 4,158,800
2001 217,441,600 2.8% 3.5% 296 4,401,400
2002 219,496,400 2.3% 4.3% 292 2,054,800
2003 223,039,000 2.3% 4.1% 290 3,542,600
</TABLE>
Source: CB Richard Ellis/Torto Wheaton Research, PricewaterhouseCoopers LLP
Historical Washington D.C. office space utilization indicated a range from 287
to 324 square feet per office employee, fluctuating with office employment
growth and the real estate market cycle. This figure is used as an index for
analysis purposes and is not based on actual build-out specifications. For this
analysis, office usage of 299 square feet per employee has been estimated
beginning in 1999 and declining to 290 square feet by the year 2003.
35
<PAGE> 42
ABSORPTION ANALYSIS
Net absorption of office space in the MSA has historically fluctuated with
office employment growth and has averaged over 5.8 million square feet annually
from 1988 to 1998. Net absorption is expected to remain positive, averaging
approximately 3.7 million square feet per year from 1999 to 2003.
SUPPLY ANALYSIS
The Washington D.C. MSA office market contains more than 215,9 million square
feet of office space, 54% of which is Class A space. Throughout the 1980s, large
amounts of new office space entered tile Washington D.C. office market averaging
11 million square feet of new office space per year. Additions to supply
outpaced demand during this time frame resulting in an oversupplied market.
Since this boom of activity, additions to the office market have declined,
averaging 3.1 million square feet per year between 1990 to 1998. The moderate
level of new construction has allowed demand for office space to catch up with
supply. In fact, there are currently both build-to-suit and speculative office
buildings planned and under construction throughout the MSA.
[GRAPH]
VACANCY ANALYSIS
Vacancy rates for office space in the MSA peaked at 17.1% in 1990 as supply
outpaced demand. Since 1989, vacancy rates have steadily declined, reaching 5.4%
in 1998. Vacancy, is expected to remain relatively low, averaging 8.1% from 1999
to 2003.
[GRAPH]
RENTAL RATE ANALYSIS
As of year-end 1998, the average gross asking rental rate was $25.89 per square
foot (up from $24.33 in 1997 and S22.52 in 1996). 1998 year-end Class A space
averaged a gross asking rent of $27.43 per square foot while Class B&C space
averaged a gross asking rent of $20.47 per square foot. From 1999 to 2003. rents
are estimated to increase, as office employment growth continues increasing the
demand for office space.
MARKET CYCLE CONCLUSION
Real estate markets go through cycles due to the lag relationship of demand and
supply for physical space. The Washington D.C. office market is currently at the
peak of the expansion phase. Increasing demand, decreasing vacancy and additions
to supply characterize the expansion phase. Continuing positive demand is
expected to keep the office market in the expansion phase of the real estate
cycle into the next millennium: however, large continuous additions to supply
may cause the Washington D.C. office market to enter the contraction phase.
[MAP]
36
<PAGE> 43
SUBMARKET ANALYSIS
The subject site is located in the Outer Northern Virginia office market. Due to
the lack of relevant data and information in Prince William County, we have
placed our emphasis on the Springfield submarket data.
DEMAND ANALYSIS
The subject is located in the Outer Northern Virginia office market of the
Washington D.C. MSA. As in the metro market, demand for office space in the
submarket is driven by office employment. The types of office tenants include
high-tech information services, finance, telecommunications, insurance and real
estate as well as services industries. As of year-end 1998 statistics, three
major tenants have moved into Prince William County. Two of the tenants, General
Dynamics and Hoppman Corporation moved from Fairfax County, while American Type
Culture Collection moved from Rockville County. We are not aware of any major
tenants leaving Prince William County over the past three years.
Future demand for office space is a function of growth in these industry sectors
as well as the relative performance of other office submarkets in the metro
Washington D.C. area. As the following chart illustrates, annual net absorption
in Springfield has increased over the past three years.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
TABLE IV.23
ANNUAL NET ABSORPTION
OUTER NORTHERN VIRGINIA: 1995-1998
SUBMARKET 1995 1996 1997 1998
----------------------------- --------------------- ---------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Tysons Corner 726,000 1,228,600 290,200 229,600
Merrifield (167,000) 130,600 166,800 61,400
Fairfax Center 416,000 654,200 198,400 134,600
Reston 335,200 391,000 259,400 418,900
Herndon 179,000 148,300 237,100 340,700
Dulles/Route 28 261,000 201,800 543,800 591,800
SPRINGFIELD 204,000 37,400 41,900 82,600
----------------------------- --------------------- ---------------------- --------------------- ---------------------
TOTAL 1,954,200 2,791,900 1,737,600 1,859,600
============================= ===================== ====================== ===================== =====================
</TABLE>
SUPPLY ANALYSIS
The Outer Northern Virginia office market contains 70.6 million square feet,
representing 25% of the total office space in the metropolitan area. Most of the
new office supply entered the market during 1998. with more expected in 1999 and
2000. Estimates for 1999 and 2000 indicate approximately 38% of' the new product
is leased, while 78% of the new product built in 1998 is leased.
VACANCY ANALYSIS
The most recent substantial decline in Springfield's vacancy rate was between
1996 and 1997 when a 470 basis point decline was experienced. The year-end 1998
vacancy rate for the Outer Virginia office submarket is 5.3%. At 9.1%, the
Springfield submarket vacancy rate is considerably higher than the average rate
for the entire market: however, it is at a four year low. In addition, the total
vacancy rate for the Outer Northern Virginia submarkets increased from 1997 to
1998 by almost 1%, while the Springfield vacancy rate remained flat.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
TABLE IV.24
YEAR-END 1998 VACANCY RATES
OUTER NORTHERN VA. SUBMARKETS
OFFICE SPACE
SUBMARKET INVENTORY AVAILABLE YEAR-END 1995 YEAR-END 1996 YEAR-END 1997 YEAR-END 1998
------------------------ -------------- --------------- --------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Tysons 211,774 674,145 9.2% 4.8% 3.8% 3.2%
Merrifield 63,538 341,336 10.6% 8.1% 5.6% 5.4%
Fairfax Center 104,553 355,480 12.1% 7.0% 3.1% 3.4%
Reston 118,976 635,392 8.7% 5.8% 4.1% 5.3%
Herndon 51,043 469,596 10.4% 7.1% 4.7% 9.2%
Dulles 118,079 921,016 14.7% 10.5% 5.6% 7.8%
Springfield 37,761 344,740 16.8% 13.9% 9.2% 9.1%
------------------------ -------------- --------------- --------------- --------------- -------------- ---------------
TOTAL 70,572,350 3,741,705 10.7% 6.8% 4.4% 5.3%
======================== ============== =============== =============== =============== ============== ===============
</TABLE>
RENT ANALYSIS
As of year-end 1998. the average gross asking rental rate in the Outer Northern
Virginia submarket was $22.37 per square foot (up from $21.99 per square foot in
1997). 1998 year-end Class A space in the submarket averaged a gross asking rent
of $27.50 per square foot while Class B&C space averaged a gross asking rent of
$21.5 I per square foot.
37
<PAGE> 44
MARKET ANALYSIS CONCLUSION
The Washington D.C. MSA office market is enjoying declining vacancy rates and
speculative building typified by the expansion phase. The metro area is expected
to experience continued reductions in vacancy rates and increases in market
rents. The Outer Northern Virginia submarket is experiencing robust demand for
high-technology and telecommunications firms as well as steady demand from
professional services firms. Overall, there is continued tenant movement to the
west of downtown Washington D.C. Vacancy rates are expected to stay low as the
area benefits from positive overall office employment growth and limited new
additions to supply.
[GRAPH]
SENIOR HOUSING INDUSTRY OVERVIEW
INTRODUCTION
Southbridge is planned to comprise 316 senior housing units. To this end, we
have provided an industry overview highlighting the demographic trends that
drive development of senior housing. This will be followed by a brief summary of
the types of senior housing, and finally a discussion of the emerging trends in
the industry.
DEMOGRAPHICS
The demographic profile of America is changing. The size and growth rate of the
65+ segment of the population is impacting many aspects of our society and
economy. According to the U.S. Census Bureau's "Sixty-Jive Plus in the United
States" publication, the elderly population will more than double to over 80
million by 2050 from the 1990 Census estimate of 31 million. Currently,
approximately one in eight Americans are over the age of 65, and by 2030, (he
elderly population will account for one in five.
Over the past few years much has been written about how the aging of the baby
boomers has influenced the economy. It is important to realize, however, that
the oldest baby boomers have just recently turned fifty and have not yet entered
the senior housing market to date. In fact, the 65+ population is currently
growing at the slowest rate since 1910. When the baby boomers do retire,
however, the nation will see an unparalleled increase in demand for senior
housing.
The composition of the elderly population is also changing. The "oldest old"
classified as 85+ is the fastest growing segment within the elderly population.
In 1994, the 85+ segment of the population totaled 3.0 million, which equates to
about 1% of the general population. With the arrival of the baby boomers in
2050, this segment will balloon to 19 million. This will account for 24% of the
elderly (65+) and 5% of all Americans. This segment will require the most
assistance with everyday activities. Approximately 50% of people over the age of
85 need assistance with everyday activities, while only 9% of the people aged 65
to 69 require daily assistance.
The rapid growth in the percentage of the population that is elderly is
occurring nationwide, not just in the traditional retirement destinations such
as California, Arizona and Florida. In 1990, nine states had elderly populations
in excess of one million; those states include California, Florida, New York,
Pennsylvania, Texas, Illinois, Ohio. Michigan, and New Jersey. In 1990. Virginia
had 664,000 residents over the age of 65. By 2010, this figure is expected to
increase 48.2% to 985,000 while the 85+/- segment of Virginia's population is
expected to increase by 134.0%. The national growth rates for this time period
38
<PAGE> 45
are 26% for the 65+ population and 98.5% for the 85+ population. As indicated,
the growth of the senior market in the state of Virginia is projected to exceed
national averages. This is due in part to the state's relatively small senior
population.
In terms of geographic distribution, in 1990, almost 74% of the elderly live
within metropolitan areas. It is also important to note that most seniors do not
move when they retire. In fact, in 1993 only 3% of seniors who moved, moved far
enough to change their county of residence. Seniors want to remain near their
friends, family and doctors.
FACILITY TYPES
The senior housing industry has developed as companies attempt to address the
needs and desires of this segment of the population. Facilities compete both in
terms of lifestyle amenities provided as well as the level of medical services
available on site. Products within the senior housing industry are generally
defined by level of lifestyle support services provided and their position on
the continuum of care provided. The following descriptions of senior housing
product types, as outlined in the publication "SENIORS HOUSING: AN EMERGING
INSTITUTIONAL INVESTMENT INDUSTRY" by Prudential Investments, address six
classifications of product.
[GRAPH]
o Active-ties fall at the low end of the service spectrum. This type of
seniors housing is typically in the form of either attached or detached
homes. The communities are age restricted, and typically offer a number of
amenities that would appeal to any active individual.
o Senior Apartments are very similar to the active-adult communities in
their low level of service and high level of physical amenities that
appeal to seniors. Senior apartments, as the name suggests, tend to be
larger multi-unit facilities with a rental payment structure. In addition
to age restrictions, many properties have income restrictions. Taken
together the active-adult communities and senior apartments are often
called Independent Living Facilities.
o Congregate Care Facilities appeal to seniors who are less active and who
have begun to view household upkeep as a burden. This form of housing is
very similar to seniors apartments, but congregate care facilities
typically offer several forms of congregate services, including meals,
housekeeping, and transportation.
o Assisted Living Facilities are the next step in the continuum of care.
These facilities typically offer personalized support services to seniors
who need assistance in daily activities, but are not at the state where a
nursing home is required. These units and common areas are designed to
accommodate a higher level of support needs.
o Skilled Nursing Facilities, commonly known as nursing homes, provide the
highest level of care of all seniors housing alternatives. They are also
the most expensive, and the most regulated, usually requiring state
licensing. These facilities have evolved over time to the point where,
today, many are equipped to handle seniors with intensive medical care
needs, and are equipped close to hospital standards.
39
<PAGE> 46
o Continuing Care Retirement Communities (CCRC) typically combine the
services provided by the Congregate Care and Skilled Nursing facilities.
They are designed to provide residents with the opportunity to continue to
reside at the facility as they age from relative health through increasing
frailty.
Senior housing is often viewed as an operating business (similar to hotels)
rather than real estate. This is especially true for product types which move
further along the continuum of care from Independent Living Facilities to
Skilled Nursing Facilities and CCRCs.
RECENT AND EMERGING TRENDS
The senior housing industry continues to be dominated by small operators.
However, over the last few years. substantial consolidation has occurred as
larger public companies and Real Estate Investment Trusts (REITs) have entered
into the industry. Due to the high service component, the large hotel operators
such as Hyatt and Host Marriott have been aggressively expanding their presence
in the industry. Senior housing also has a number of non-profit and religious
based organizations. Within the CCRC segment, non-profits comprise a substantial
percentage of the operations. According to the "1997 State of Senior Housing"
publication by Coopers & Lybrand and the American Senior Housing Association,
non-profits comprise approximately 20% of all senior housing and 40% of all
CCRCs. One reason for the large representation of non-profit CCRCs is that they
have no tax implications in regard to the entrance fees often charged.
The American Senior Housing Association has compiled a list of the top
twenty-five owners and managers of senior housing each year since 1994. Over the
years there have been significant changes in the make-up of the large players in
the industry. The percentage of non-profit owners on the ASHA top 25 list has
declined from 32% in 1994 to 12% in 1998. The 1998 survey shows rapid growth in
publicly traded companies, which now comprise 60% of the list. Colson & Colson,
Holiday Retirement Corp. remain is the largest owner and manager of senior
housing by a large degree. The company controls 23,706 units while the number
two operator, Prometheus Senior Quarters, has only 3 (26 Units The top 25 owners
controlled 269"o more units in 1998 than in 1997 and 106% more than in 1994 (the
first year of the list). The rapid growth of the top twenty-five owners and the
rise of REITs and publicly traded corporations show how the industry is evolving
to a more institutional investment industry.
As consolidation occurs and operators gain historical track records, the
industry will emerge as an institutional investment opportunity. Already several
CMBS lenders are currently gearing up to underwrite loans for senior housing.
The growth of REITs and public operating companies participating in the industry
will allow for public and private equity investment into the industry. Since
1994, sixteen IPOs of senior housing companies have occurred. The gross capital
size of the investment-quality senior housing market, as estimated by the
NIC/Price Waterhouse Study, is expected to grow from $86 billion in 1996 to $490
billion in 2030.
DEMAND ANALYSIS
Demand for senior housing facilities such as that proposed at the Subject is
established not only by sufficient numbers of elderly in the primary service
area, but also by a sufficient number who can afford the various levels of care
and services provided. Based upon the assumption that the units to be developed
at the Subject will be of a luxury nature offering modem amenities and services,
it is likely that the potential residents would need a minimum annual income of
$25,000. This would allow the residents to pay a minimum fee of $1,771 per month
or 85% of household income for housing and board. The high rent to annual income
40
<PAGE> 47
ratio considers that most resident meals as well as personal services are
included in the monthly fee. We have assumed that endowment fees will not be
required for the Subject Property, hence home ownership is not a necessary
screening criteria to estimate demand for at the Subject.
We have defined the target population to be the 75+ age segment within Prince
William County, Virginia. The following summary of the population
characteristics within the county is taken from the "SENIOR LIFE REPORT'
provided by Claritas, Inc. A copy of which is included in the addenda.
PRINCE WILLIAM COUNTY, VA
<TABLE>
<CAPTION>
ANNUAL
1998 EST. 2003 PROJ. % CHANGE
--------- ---------- --------
<S> <C> <C> <C>
Total Population 257,813 281,050 1.7%
75+ Population 3,718 5,350 7.6%
% of Total Population 1.4% 1.9% n/m.
75+ Median HH Income $26,716 $27,871 0.9%
75+ Qualified 865 1,275 8.1%
Households
</TABLE>
<TABLE>
<CAPTION>
HOUSEHOLDS > $25,000 INCOME
HOUSEHOLDS 1998 EST. 2003 PROJ.
---------- --------- ----------
<S> <C> <C>
65-69 5,092 3,834
70-74 3,248 2,345
75-79 1,874 1,222
80-84 1,036 514
85+ 808 267
</TABLE>
As indicated, the general population is expected to increase over the next five
year period at an annual compound rate of 1 .7%, while the number of persons in
the 75+ category within the primary trade area is forecast to expand at an
annual rate of 7.6%. This, in conjunction with modest increases in the median
income level of the 75+ population within the county, results in an 8.1% annual
increase in the number of qualified households during the next five years. Based
on the primary service market, the size of the income qualified 75+ market in
1998 of 865 is projected to increase to 1,275 persons.
MARKET SATURATION
Market saturation analysis is a method of estimating the relative demand! supply
equilibrium within the primary service market. The analysis involves four steps:
1. MEASURING THE SIZE OF THE SUBJECT'S PRIMARY TARGET MARKET.
2. DETERMINING THE MAXIMUM DEMAND WITHIN THE PRIMARY TARGET AREA; AND
ADDITIONAL DEMAND FROM OUTSIDE THE TRADE AREA.
3. IDENTIFY THE TOTAL NUMBER OF COMPETITIVE UNITS.
4. CALCULATING THE EXCESS/SHORTAGE OF UNITS.
41
<PAGE> 48
Rather than identify a target market for the Subject, we have prepared a macro
analysis of the entire Prince William County senior housing market. As stated
earlier, the market is defined as 75+ population within Prince William County
with a minimum annual income requirement of $25,000.
The industry standard saturation level of 15% of total market area population is
typical for a general senior housing living facility. The Subject's favorable
location within an area with high population growth projections in the 75+ age
category might promote an increase of this level, however for purposes of this
analysis, a 15% saturation level will be used. This level is assumed to indicate
an adequate market demand for absorption of the market area's senior housing
units; significantly under 15% would indicate an insufficient supply. A level
above 15% generally indicates an overbuilt status.
The third step involves a determination of the total number of competitive
units. Two sources have been used to identify the total supply of senior housing
facilities. The first is a residential development plan pertaining to the
subject prepared by Rosenstein Baker Associates, dated June 1998, which
identified 13 facilities containing 3,967 units . The second is a list of senior
housing facilities published in the Prince William News Letter, dated November
1997, which identifies 17 facilities containing 3.971 units ranging from
independent living to skilled nursing facilities. The unit counts cited include
2,217 units recently rezoned for senior housing, the largest of which, includes
1,950 proposed units. We have excluded the proposed units from our projected
supply, as it is uncertain as to when and if they will be developed. The
calculation of the overall demand analysis for the Subject follows.
SENIOR HOUSING DEMAND
PRINCE WILLIAM
1998 EST. 2003 EST.
--------- ---------
Primary Service Area 257,813 281,050
Population 12,058 17,579
Population 3,718 5,350
75+ Pop. as a % of Total Pop. 1.4% 1.9%
75_ w/ Annual Income of _______ 865 1,275
Maximum Supportable 15.0% 15.0%
Maximum Demand Units within Primary 130 191
Plus 10% from Outside Primary 13 19
Total 143 210
Less Existing and Planned (1,754) 1,754
Shortage (Excess) of _______ (1,600) (1,655)
===================================== ====================== =================
CONCLUSION
As presented above, the demand analysis indicates that the defined market area
is currently over supplied. The unit supply is dominated by independent living
facilities; we have assumed that these communities could draw from a younger
demographic profile, arid have expanded our demand analysis to include the 65+
income qualified population. Market penetration of the of the income qualified
65+ population of 42% would be required to support the existing unit supply. The
supply of senior housing in Prince William County has grown over the past two
years. Heritage Hunt, a proposed 1,950 unit program in Gainesville exemplifies
the amount of new construction. According to Rosenstein Baker, independent
living concepts account for 73% of new senior housing programs.
Considering the preceding analysis, as well as potential additions to the supply
of senior housing units, it is our opinion that the Prince William County senior
housing market is currently over supplied. Therefore, the proposed senior
housing sector of Southbridge should not be introduced, at this time, but remain
on hold until demand reaches an equilibrium point with supply. Within the build
out of the community, we project that the senior housing component will be sold
to a third party operator/developer as a bulk sale in 2008.
V. HIGHEST AND BEST USE
According to the Third Edition of The Dictionary of Real Estate Appraisal.
published by the Appraisal Institute, highest and best use is defined as: "the
reasonable probable and legal use of vacant land or an improved property, which
is physically possible, appropriately supported, financially feasible, and that
results in the highest value. The four criteria the highest and best use must
meet are legal permissibility, physical possibility, financial feasibility, and
maximum profitability."
42
<PAGE> 49
The competitive forces in a market provide the foundation on which highest and
best use, and ultimately market value, are formulated. Following the above, it
can be safely assumed that no informed or well advised owner would be warranted
in selling for a price lower than that available for the best use. Once land is
improved with a substantial structure, the result becomes an integrated unit.
When a parcel of land is improved, the integrated unit (land and improvements)
is normally continued in the use for which it was originally designed as long as
the land and improvements combined have a higher market value than the land
alone, as if vacant and available for a better use.
HIGHEST AND BEST USE AS IF VACANT
In accordance with the definition of highest and best use, it is appropriate to
analyze the site as if vacant, as it relates to legality of use, physical
possibilities, and financial feasibility.
LEGALITY OF USE
The Subject site is governed by the Prince William County Land Use Ordinance and
is presently approved for a mixed-use community. Of the total site, 955 acres
are zoned R20, 1060 are zoned Planned Mixed Residential (PMR), 473 are zoned
Planned Mixed Use (PMD) and 196 are Planned Business District (PBD). Uses
permitted include retail, residential, multifamily, industrial and office.
Accordingly, Southbridge has been designed in conformance with the regulations
outlined in the Cherry Hill Comprehensive Sector Plan of the Prince William
County Comprehensive Plan. The proposed master plan for a mixed-use development
which includes a golf course with single and multi-family residential uses,
retail, industrial and office are legally permissible. A list of permitted uses
is located in the addenda.
PHYSICAL POSSIBILITY
We have considered available information on the physical characteristics of the
site including its shape, size, topography, soil and overall utility.
The Subject site comprises approximately 2,685-acres. Environmental Assessments
supplied by Legend Development does not state any adverse conditions that impact
the potential development of the site. Topography of the site is characterized
as rolling to sharp terrain rising from the Potomac River to the east and
Powell's Creek to the north. Nonetheless, the Subject's planned community has
been designed to benefit from the rolling topography and viewsheds of the
Potomac River and Powell's Creek. Overall, our inspection revealed that no
physical factors place significant constraints on the development of the site,
consequently, the Subject is suitable for a mixed-use development.
FINANCIALLY FEASIBLE
The determination of financial feasibility is dependent primarily on estimates
of anticipated potential income from each possible use of the Subject site.
Given the legally and physically possible uses permitted on the site single
family, agricultural or recreational, institutional, service oriented commercial
and industrial offer several financially feasible uses to examine. Development
of any proposal would be feasible if gross sale proceeds were sufficient to meet
development costs and provide a reasonable profit threshold required from such a
development.
From an ownership perspective, turning the site over for use as a park or
agricultural purposes, while legally and physically possible, is financially
infeasible. Donations of the site, which may provide tax benefits, would likely
be infeasible as any tax relief would not be sufficient to cover purchase money,
legal fees associated with the planning process, and holding costs to-date.
43
<PAGE> 50
A single family subdivision is considered a possible use. Single family
residential developments in this area have been well received. As exhibited in
the Residential housing Market Analysis, permit activity has increased and the
on-going subdivisions are seeing good absorption figures. Demand generators for
this product type are likely to remain strong in the foreseeable future.
Therefore, single family detached dwellings are a possible use for the site.
Townhouse product which recently has shown limited activity in the area should
be considered as a secondary use. As sale prices increase for a single family
detached product, townhouse ownership is considered to become an acceptable
alternative. Additionally, given the limited supply and good absorption,
townhomes should comprise a substantial amount of the residential units.
Other uses to be considered are senior housing, garden apartments and
condominium units. As stated in the Senior Housing Overview, Prince William
County is over supplied. Typical senior housing in the county consists of single
family dwellings providing some form of assisted care. As stated, Senior
1-lousing to he built on the site should be considered at a later time as demand
balances with supply. In addition, at the time when Senior Housing is feasible
is should only be considered on a tertiary level and comprise a minimal
percentage of the overall number of housing units.
For the commercial sector, industrial, retail and office uses should be
considered. Given the ample highway frontage and driving time to major
employment centers, the site is conducive for commercial development. The
proximity to the residential housing suggests that office space should attract
tenants servicing the neighborhood. Other commercial uses include industrial and
flex space, although a capture rate of below 1.0 is seen in the 1-95 Corridor,
industrial and flex space should attract defense contractors, local machine
shops, and warehousing companies.
Retail use is planned to comprise approximately 32% of the total commercial
component at Southbridge. There appears to be adequate demand for retail in the
area. In addition, the amount of households to he developed in the community
will increase demand for retail. The proposed Town Center ~vi1l he a focal point
of the community and increase the marketability and attraction of the project.
The Town Center is anticipated to add to the self-sufficient aspect of the
community.
The proposed community includes an 18-hole golf course. According to Prince
William County there are 11 golf courses within the County and seven are in the
planning and/or construction phase. Of the existing 11 courses, six are public,
three are private and two are semi-public. Four existing clubs are within five
miles of the Subject. Given this limited supply and the growth of the area, a
public golfcourse should be considered as a recreational amenity and compliment
to residential uses.
No one of the aforementioned uses are dominant enough to develop the entire
2,685-acre site with a single product type. Therefore, as proposed for the site,
a mixed-use concept integrating the uses into one community is considered to be
financially feasible. Such a product mix should compliment the terrain and
vistas of the site which would allow for premiums to be attached to those
dwelling units benefiting from a view of the Potomac River or orientation along
the golf course.
HIGHEST AND BEST USE AS IF IMPROVED
Since the vast majority of the Subject's site is presently vacant and
unimproved, the question of the site's highest and best use as if improved is
moot.
44
<PAGE> 51
HIGHEST AND BEST USE CONCLUSION
We have considered the Subject as described in this report and have studied its
ability to perform in the market. To this end, we have studied supply and demand
characteristics of the defined marketing area and have analyzed expected
productivity of the property as proposed. Based on our analysis, the highest and
best use of the subject site is for development of a mixed-use community -
VI. SALES COMPARISON APPROACH
The Sales Comparison Approach, is a valuation technique that encompasses the
comparison of similar properties with the subject. Inherent in the relationship
of the sales comparison approach to market value are the principles of
substitution, supply and demand, balance, and externalities. Substitution
implies that a purchaser would not pay more for a property than the cost of
acquiring a property with similar utility. Supply and demand, as well as the
number of buyers and sellers in a market, help determine the price level of
properties. These factors can be shifted due to numerous economic, demographic,
and legislative reasons, causing price levels to also change. There is a
tendency for the market to move to equilibrium, bringing price levels in line
with supply and demand. Balance refers to the relationship between land and
improvements and/or property and its environment. Imbalances such as excess site
capacity or atypical construction characteristics may result in price
differentials for particular properties. Externalities refer to factors that
affect properties, outside of the site and improvements. These factors include
neighborhood/trade area support, development, economic characteristics,
amenities, access, convenience, municipal demands, and other factors that are
primarily related to location.
According to the Third Edition of The Dictionary of Real Estate Appraisal,
published by the Appraisal Institute, the sales comparison approach involves:
a set of procedures in which a value indication is derived &v comparing
the property being appraised to similar properties that have been sold
recently, applying appropriate units of comparison, and making
adjustments to the sale prices of the comparable based on elements of
comparison.
By analyzing sales which qualify as arm's-length transactions between willing,
knowledgeable buyers and sellers, we can usually identify market value and price
trends. Comparability in physical, locational, and economic characteristics is
an important criterion when comparing the sales to the subject. The basic steps
involved in the application of this approach arc as follows:
45
<PAGE> 52
1. RESEARCHING RECENT RELEVANT PROPERTY SALES AND CURRENT OFFERINGS
THROUGHOUT THE COMPETITIVE AREA;
2. SELECTING AND ANALYZING THOSE PROPERTIES CONSIDERED MOST SIMILAR TO THE
SUBJECT, GIVING CONSIDERATION TO THE TIME OF SALE, ANY CHANGE IN ECONOMIC
CONDITIONS WHICH MAY HAVE OCCURRED SINCE THE DATE OF SALE, AND OTHER
PHYSICAL, FUNCTIONAL, OR LOCATIONAL FACTORS;
3. ANALYZING THE SALES PRICE FOR COMMON UNITS OF COMPARISON, SUCH AS PRICE
PER SQUARE FOOT OF BUILDING AREA, EFFECTIVE GROSS INCOME MULTIPLIER, GROSS
INCOME MULTIPLIER, OVERALL RATE, AND YIELD RATES;
4. MAKING APPROPRIATE ADJUSTMENTS BETWEEN THE COMPARABLE PROPERTIES AND THE
PROPERTY APPRAISED. THIS INCLUDES THE IDENTIFICATION OF SALES WITH
FAVORABLE FINANCING AND CALCULATING THE CASH EQUIVALENT PRICE, IF
APPLICABLE; AND
5. INTERPRETING THE ADJUSTED SALES DATA AND DRAWING A LOGICAL VALUE
CONCLUSION.
Because no two properties are truly identical, it is frequently not possible to
find truly comparable sales. Even those sales judged roughly comparable
ordinarily require substantial adjustment in order to derive an indication of
value for a property. The difficulty of finding comparable sales is directly
related to the uniqueness of the property under appraisal.
In the case of land, however, other possible elements require consideration
including access to the property, governmental restrictions such as conservation
or preservations easements, water and riparian rights, on-site environmental
conditions, and off-site improvements required prior to development.
UNIT OF COMPARISON
To properly analyze the comparable sales in relation to the Subject, a relevant
unit of comparison must be selected. Based on discussion with local market
participants, most land parcels are typically priced on a price per acre basis.
Retail and office land investors/developers also look to price projected per
FAR, which recognizes the degree of functional utility (allowable density) among
sites with differing zoning classifications permitting a comparison on a common
unit basis. However, given the status of the subject. this comparison cannot be
adequately performed.
COMPARABLE PROPERTIES
Since the Subject is zoned for a mixed-use development to include single family
dwellings, townhomes, an 18-hole golf course and clubhouse and various other
amenities, we have searched the Washington DC. metropolitan area for large bulk
acreage sales and have analyzed each as it relates to the Subject site.
LAND VALUATION
We have uncovered seven large planned unit developments located within the
Washington D.C. metropolitan area. These transactions occurred between March
1997 and March 1999 and includes one under contract. The sales range in size
from 342 to 2,225 acres and in price from $12,809 to $22,206 per acre, As
expected with large planned development sites, zoning classifications, density
and use vary widely. The table on the facing page outlines each sale while
details are located in the addenda.
46
<PAGE> 53
Due to the differences in zoning, (both classifications and amounts, as well as
potential changes in zoning), adjustments to the sales are highly subjective and
difficult to ascertain without more accurate detailed information which is
proprietary in nature and often unavailable. We have not attempted to make
individual adjustments to the sales and have included them for informational
purposes only. A discussion on the individual sales' locational and physical
characteristics as they relate to the Subject follows.
As stated above, sale price per acre is a relevant unit price indicator for
planned unit developments. The sale price per acre is derived through the
division of the sale price by the total acreage in the development. Price per
acre can be expressed either in terms of a gross area or net area, which takes
into account wetlands, environmental considerations or any other non-usable
acreage.
Often, price per acre of net land area is considered a more reliable value
indicator because of the impact that the nonusable acreage has on the density of
the site. The reliability of the data, however, limits the usage of net acreage.
However, all development tracts will involve some portion of non-usable area for
open space requirements, setbacks, infrastructure, and the like. Considering
this, the sales have been analyzed on a gross acreage basis.
As the list of sales displays, the sale comparables reflect sizes between 342
and 2,225 acres. All of the sales are to be developed with a mixed-use community
and five of the sales include the development of a golf course. Sale Four sold
to the State of Maryland and was purchased for environmental preserve; however,
the sale price was based on the current approvals for a mixed-use community.
Although motivation was a factor in this sale, it is considered a good indicator
of value for the Subject site.
Sale Two was purchased by Toll Brothers in March 1999 is considered to be
slightly superior in location within Loudon County. The 2,021 acre projects does
have i similar density as the Subject but does not include amenities such as a
golf course. The price per acre of $22,226 is based on discussions with Toll
Brothers and is an approximate. The higher price and superior location does not
lend itself for support of the Subject's market value.
Sales Five and Six, although smaller than the Subject, are located in similar
areas and appear to have similar densities. Sale Six includes an age restricted
area and golf course. Sales Five and Six transacted for S 15,620 and $12,994 per
acre, respectively. Based on the above analysis, we estimate that the value for
the Subject property lies between Sale Four and Five with additional support
from Sale Six.
Further support for the unit values indicated and for the investment returns
forecasted in the Income Approach is provided by 24 master-planned community
land sales that have occurred nationally. The sales are included in the Addenda.
The sales range in size from 60.4 to 9,300 acres and have an indicated price
range from $7,371 per acre to $135,220 per acre, averaging $44,222. Equity
internal rates of return range from 15.0% to 20.5 percent.
[CHART]
Given the limited number of truly comparable planned unit development sales, a
reliable value indication can not be ascertained. We have correlated the sales
price per acre with the number of acres in a linear regression analysis. The
indicted price per acre for the Subject equates to $14,100. Limited reliability
is based on the regression analysis, as the R-squared factor is less than .30.
Nonetheless, the indicated value supports the value concluded by the Income
Approach.
47
<PAGE> 54
Difficulties in the use of the Sales Comparison approach in the valuation of the
subject are significant. Specific adjustments have not been made to the
individual sales for time, location, and other property characteristics due to
the difficulty in quantifying such adjustments without more detailed lease,
income and expense information. Consequently, it is concluded that the sales
comparison approach, by itself, produces a value estimate which cannot be
adequately substantiated.
VII. INTRODUCTION
In order to estimate the market value of the Subject, we have relied on the
subdivision development method which incorporates discounting projected cash
flow at a market derived rate. Therefore, our attention focuses on an estimate
of excess income over expenses from development operations. The method guided by
current investor requirements and decisions criteria, must accurately simulate
investment activity in the current market in this case, represents the most
reasonable, supportable and accurate approach for the estimation of the Subject
market value.
RESIDENTIAL DEVELOPMENT
RESIDENTIAL LOTS PRICES
There are several types of finished residential building lots that are sold and
proposed to be sold at Southbridge. The product breakdown is showed in the
following table.
----------------------------------------------- ----------------------------
SINGLE FAMILY DETACHED TOWNHOUSE
----------------------------------------------- ----------------------------
o Estate Lots -- 30,000 square feet o Weak Link
o Country Lots -- 7,300 to 15,000 square feet o Executive Townhomes
o Village Lots -- 6,000 to 7,500 square feet o 18-Foot Townhomes
o Cottage Lots -- 5,000 square feet
----------------------------------------------- ----------------------------
Residential lots vary in value depending on size and location. The following
section looks at each of the major product types, concluding with an estimated
retail market value of a typical finished lot sold to a builder. To this end,
comparable lot sales data is abstracted below. Finally, we reviewed the
scheduled lot prices recommended by Rosenstein Baker Associates for each phase
of development within the project. We conclude with an estimate of value
representing the weighted average of the standard and premium lots within the
subdivision.
SINGLE FAMILY DETACHED LOTS
There are 3,373 single family detached lots projected to be developed in
Southbridge. The single family detached home product can be divided into four
different types of lots: Cottage, Village, Country, and Estate. Further, there
will be 911 total Cottage lots, 877 Village lots, 1,416 Country lots, and 169
Estate lots. The Cottage lots are an estimated 5,000 square foot lot area that
brings the detached home to its lowest price point in what is considered to be a
wide and shallow lot configuration. The Village lot is the next level, It
averages in size from 6,000 to 7,500 square feet. The finished product is a home
that is slightly below the $200,000 price point. The Cottage lots are larger and
average between 7,300 to 15,000 square feet. This would. allow the builders to
have more opportunity to create a higher priced and larger sized product. And
finally, the Estate lots are 30,000 square feet. This creates a true high-end
section with a potential to create a gated environment within the proposed golf
course area. Since these lots are considered to be at the high-end of the
market, these types of lots will account for the smallest single family
component.
LOT SALES AGREEMENTS
Lot purchase agreements by currently active builders at Southbridge provide
strong support for the estimate of value of single-family lots. Each are
explained in the following charts.
48
<PAGE> 55
------------------------------ ---------------------------------------------
1. BUILDER WASHINGTON HOMES
------------------------------ ---------------------------------------------
Location Phase I Sections 5, 7, & 20
Lot type Village & Country
Price Village--$44,000; Country--$53,000
Number of Lots Village--39 lots; Country--55 lots
Closing Pace Per Quarter 5 per qtr per section
Escalation 5%/yr commencing 1 yr. After 2nd closing
------------------------------ ---------------------------------------------
------------------------------ ---------------------------------------------
2. BUILDER PIGHINI-RICHARDS
------------------------------ ---------------------------------------------
Location Phase I Sections 20 & Swans Creek
Lot type Country & Estate
Price Country--$50,000; Estate--$64,000
Number of Lots Country--42 lots; Estate--26 lots
Closing Pace Per Quarter 5 per qtr per Country; n/a for Estate
Escalation $3,000 per lot
------------------------------ ---------------------------------------------
------------------------------- ----------------------------------------------
3. BUILDER MILLER & SMITH
------------------------------- ----------------------------------------------
Location Phase I Sections 3 & 4
Lot type Cottage
Price Cottage -- $24,000 & $25,900
Number of Lots Cottage -- 148
Closing Pace Per Quarter 9 per qtr per section 3
7 per qtr per section 4
Escalation 4%/yr commencing 6 mos. after initial closing
------------------------------- ----------------------------------------------
------------------------------- ----------------------------------------------
4. BUILDER RICHMOND AMERICAN
------------------------------- ----------------------------------------------
Location Phase I Sections 20, 21 & Swans Creek
Lot type Country & Estate
Price Country--$53,000; Estate--$65,000
Number of Lots Country--70 lots; Estate--26 lots
Closing Pace Per Quarter 5 per qtr per sections 20 & 21
3 per qtr per Swans Creek
Escalation 5%/yr commencing 1 yr. after 2nd closing
------------------------------- ----------------------------------------------
------------------------------- ----------------------------------------------
5. BUILDER POTOMAC HERITAGE
------------------------------- ----------------------------------------------
Location Phase I Sections 20
Lot type Country
Price Country -- $53,000
Number of Lots Country -- 10 lots
Closing Pace Per Quarter 10 per qtr per section
------------------------------- ----------------------------------------------
LOT SALE COMPARABLES: SINGLE FAMILY DETACHED
Recent lot sales provide the strongest support of market value for the Subject's
lots. However, additional market support is provided by the comparable sales
profiled in this section. Sale One is Ashland, a 500-acre community located off
of Route 234 in the Mid-County corridor. Ashland is selling .30-acre lots in its
newest section of home sites selling at approximately $55,000. Comstock,
Washington Homes, and NYR Homes are on a take down of 11,000 to 12,000 square
foot lots, which are similar to the Country lot products at Southbridge. The
builders are selling the finished product for a median home price of $247,000,
resulting in the $55,000 lot price equating to a 22% cost-to-price ratio.
------------------------------------- ----------------------------------
COMMUNITY ASHLAND
------------------------------------- ----------------------------------
Average Lot Prices $55,000
Range of Lot Size 11,000 -- 12,000 Square Feet
1998 Absorption*
Per Year 124 lots
Per Month 10.33 lots/month
1997 Absorption*
Per Year 57 lots
Per Month 4.75 lots/month
------------------------------------- ----------------------------------
*INCLUDES BOTH THE SINGLE FAMILY AND TOWNHOME PRODUCTS
Sale Two is Dawson Landing situated off of Route One, approximately three miles
north of Southbridge. NVR Homes and Ryan Homes are selling single-family
detached homes on .50 to .60 acre lots. This subdivision is on the Potomac River
similar to the Subject. Builders are purchasing 22,000 to 26.000 square foot
lots for $59,000 and selling the finished product for an average of $250.000. A
sale price of $59,000 per lot equates to a 24% cost-to-price ratio. This value
supports both the high-end Estate lot and the smaller Country lot at
Southbridge.
------------------------------------- ----------------------------------
COMMUNITY DAWSON LANDING
------------------------------------- ----------------------------------
Average Lot Prices $59,000
Range of Lot Size 21,780 -- 26,136 Square Feet
1998 Absorption*
Per Year 34 lots
Per Month 2.84 lots/month
1997 Absorption*
Per Year 16 lots
Per Month 1.33 lots/month
------------------------------------- ----------------------------------
*INCLUDES BOTH THE SINGLE FAMILY AND TOWNHOME PRODUCTS
Sale Three is SOUTHTAKE @ MONTCLAIR, which is located approximately three miles
west of the Subject on Route 234. The builders in this subdivision are
purchasing quarter-acre lots from $44,000 to $54,000, depending on the location
relative to the lake. The median price for a home is estimated at $198,000,
reflecting a $44,000 lot price and a 22% cost-to-price ratio. This product is
most comparable with the Village lots being built by Washington Homes at the
Subject.
------------------------------------- ----------------------------------
COMMUNITY SOUTHLAKE @ MONTCLAIR
------------------------------------- ----------------------------------
Average Lot Prices $44,000 to %54,000
Range of Lot Size 10,500 Square Feet
1998 Absorption*
Per Year 34 lots
Per Month 2.83 lots/month
1997 Absorption*
Per Year 24 lots
Per Month 2.00 lots/month
------------------------------------- ----------------------------------
*INCLUDES BOTH THE SINGLE FAMILY AND TOWNHOME PRODUCTS
MARKET VALUE CONCLUSION: SINGLE FAMILY DETACHED LOTS
The strongest support for market value is the lot purchase contracts to date at
Southbridge. As adjusted for differences in location, market conditions, and
site characteristics, sales comparables from the various Eastern Prince William
County projects provide benchmarks for an estimate of market value for the
Subject's lots.
Rosenstein's business plan places premiums on lots located in the project within
the golf course community and for those located on or having view of the water.
Recommended premiums are estimated and concurred at 10% above the existing
pricing. Therefore, the estimated market values of the finished lots sold to the
builders, before premiums, are the following:
49
<PAGE> 56
---------------------------- -------------------------
DESCRIPTION PRICE
---------------------------- -------------------------
Estate $68,000
Country $53,000
Village $44,000
Cottage $35,000
---------------------------- -------------------------
Because it is uncertain, at this time, which type of house will be built on each
section of the planned development, we have based the lot price for a single
family house on a weighted average of the total build out of Phase I, to date.
To reiterate, Phase I sold or is under construction with a total of 1,319 single
family detached units of which 26.5% are Cottage, 26.0% are Village, 42.5% are
Country and 5.1% are Estate homes. Correlating the Phase I build out with the
estimated market value of the lots, we have concluded a value of $46,550 per
single family lot, before a premium is added.
------------------------------------------------------------------------------
SINGLE FAMILY DETACHED
LOT PRICING ANALYSIS
BUILD-OUT: 4/1/99 ESTIMATED
---------------------------------- ESTIMATED
TYPE AMOUNT % OF AMOUNT VALUE
------------------------- ---------------- ----------------- -----------------
Cottage 349 26.5% $35,000
Village 343 26.0% $44,000
Country 560 42.5% $53,000
Estate 67 5.1% $68,000
Total/Weighted Avg. 1,319 $46,550
------------------------- ---------------- ----------------- -----------------
In addition to the aforementioned pricing analysis of the single family lot
sales, we have utilized a cost-to-price ratio, which takes account for the
finished product sale and the cost of the land. The comparables listed above
reflecting a cost-to-price ratio of 22% within Ashland and Southlake @ Montclair
and 24% at Dawson Landing. The recommended Rosenstein pricing for the finished
product in Southbridge is listed in the table below. Correlating the recommended
average selling price with a 23% cost-to-price ratio indicates a weighted
average selling price of $43,298. Since this value is within 10% of the
indicated value via the sales, we have utilized the weighted average of $46,550
with support from the indicated value based on the cost-to-price method.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
SINGLE FAMILY DETACHED
COST-TO-PRICE RATIO ANALYSIS
AVERAGE COST-TO-PRICE LOT AVERAGE
TYPE SELLING PRICE RATIO PRICE WEIGHT SELLING PRICE
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Cottage $160,000 23.0% $36,800 26.5% $ 9,752
Village $185,000 23.0% $42,550 26.0% $11,063
Country $200,000 23.0% $46,000 42.5% $19,550
Estate $250,000 23.0% $57,500 5.1% $ 2,933
------------------- ------------------
Total/Weighted Average 100% $43,298
---------------------------------------- ------------------- ------------------ ------------------- ------------------
</TABLE>
TOWNHOUSE LOTS
There are 972 townhouse and/or single-family attached lots scheduled to be built
within the Southbridge mixed-use community. In Phase One of the project, 503
townhouse lots have sold and closed. Of the 503 units, 160 were the standard
18-foot wide, while the remaining 343 lots were the Executive townhome product.
Of the remaining 972 townhome lots, there are three type of products being
marketed These include the 18-foot standard size lot, the Executive townhome
lots located in the Town Center. and the weak-link lots. The weak-link product
is a relatively new product, which is attached either via garage, recreation
room, or fence. The weak-link lots give the appearance of a single-family
detached home even though it is subtly connected. Currently, no townhomes are
planned until the Town Center phase of the project begins.
CURRENT LOT SALES AGREEMENTS
At this time, there are no current lot sale agreements with a builder to develop
the townhome product. The primary reason for this is the low land values for
townhome lots being realized in the current market. Therefore., the current
building contracts are for single-family detached product line only.
TOWNHOUSE LOT SALES COMPARABLES
Although the Subject has no immediate plans to sell lots for the townhome
product, the Prince William County area has experienced sales activity. Sale
Four, Ashland, offers a location on Route 234, approximately four to six miles
from the Subject. NVR Homes has been buying the lots for $28,800 to $36,000
ranging in size from 1,870 square feet to 2,790 square feet. The indicated
prices are similar with Rosenstein's conclusion for the Executive townhomes as
well as the weak-link product, both of which are similar in size to this
competitor.
50
<PAGE> 57
Sale Five, SOUTHLAKES @ MONTCLAIR. The Piccard Development Group purchased 23
lots at $26,500 per lot for townhouse development These lots are large, 2,700
square feet, and they will be developed with a high-end unit. Again, the
location of this development and size of the final product, allows this
development to be comparable to the Executive Townhome product proposed for the
Subject community.
Sale Six, is located west of the Subject in subdivision called Wexford. Fourteen
lots of approximately 1,900 square feet in size were purchased by Equity Homes
for $15,000 each. The final product's median sales price is $132,000 per
townhome. This subdivision is considered inferior to the Subject due to
locational attributes; however these lots directly compare to the standard
18-foot wide townhomes being planned in the Subject.
TOWNHOUSE LOT MARKET VALUE CONCLUSION
In conclusion, based on our analysis of the market data we concur with
Rosenstein's price recommendations for pricing the standard 18-foot wide at
$22,000 per lot, the executive townhome at $35,000 per lot, and the weak-link
product at $37,500. Additional support comes from the several builders within
the Prince William County area who are purchasing lots at prices ranging from a
low of $15,000 to a high of $36,000 for superior locations. Since the weak-link
lot is a fairly new product in the Northern Virginia market, it should command a
higher sales price due to its larger size and appearance as a single family
detached. Therefore the weak-link lots will receive the high-end range of the
market. The following are the market values for the three different types of
single-family attached product proposed to be built within Southbridge.
------------------------------------ ----------------------------------------
DESCRIPTION PRICE
------------------------------------ ----------------------------------------
Weak-Link $37,500
Executive Townhome $35,000
18-Foot Wide $22,000
------------------------------------ ----------------------------------------
LOCATION PRICE PREMIUM
Within Southbridge, 21% of the single family detached lots and 14% of the
townhome lots are assigned premiums due to their location within either the golf
course community, the locations near the water, or the location in the Town
Center. In our research, we found that residential lots which have the preceding
attributes in other comparable mixed-use communities generally command a 10%
premium over the typical selling prices. This is passed directly to the builder
who then attaches a premium to the finished product. In our pro forma, the
weighted average in each section reflects the quality and value of each lot
type.
PROJECTED LOT PRICING INCREASES
The future pricing of lots at the Subject and in Prince William County in
general depends on several factors. They include the rate of inflation, interest
rates, availability of new land and housing, employment growth, and household
income growth. During the first half of the decade, inflation was held below
4(degree)/s while mortgage interest rates have fallen. The assumption used for
our cash flow analysis is that over the next twenty years, both inflation and
real mortgage interest rates are going to rise in accordance to historical
trends. According to Rosenstein's residential plan, housing demand is
anticipated to be stronger in the future than in the past. The current pipeline
of new developments in Prince William County should be enough to equal demand
and allow prices to remain relatively flat.
Currently, the weighted average lot prices are influenced by market conditions
as of the April 1, 1999 effective appraisal date. Residential market conditions
on average are expected to grow throughout the 20-year cash flow projection with
51
<PAGE> 58
the pace of inflation. We have estimated that inflation will continue to
increase, therefore the residential lot values are forecasted to increase by
3.5% per annum.
RESIDENTIAL LOT ABSORPTION
PROJECTION
Our absorption projection is based on information garnered from the Rosenstein
Baker Associates Southbridge Residential Development Plan dated June 1998 arid
Meyers Group Real Estate Information Housing reports for 1997 and 1998. The
Meyers Group study includes year-to-date and overall absorption rates for all
subdivisions within Prince William County as well as each County within the
Washington D.C. metropolitan area. This data was presented in our MARKET
OVERVIEW ANALYSIS section.
Absorption for a large-scale project can be tracked at two levels. They are
either by the short-term builder or the long-term project wide absorption. There
is excellent statistical data that supports the average monthly sales pace that
builders in the market have achieved in comparable projects throughout Prince
William County.
Support for our projected lot absorption is based on the pace of sales to the
builders and to a lesser extent the sale of the finished product to the home
buyer. The following product analysis summarizes the data presented in our
MARKET OVERVIEW ANALYSIS.
SINGLE FAMILY DETACHED
A survey was conducted by Rosenstein Baker Associates of 53 competing
single-family new home projects in the market area. The survey indicates a range
of absorption of less than one sale per month in slow moving projects to a high
of 6.89 per month at Madison Farm in the Lake Ridge corridor. Aggregate average
builder sales pace is 2.1 per month among all 53 projects. Our analysis suggests
that each builder within Southbridge could expect an average pace of 1.6 units
per builder per month. Further, we have concluded, based on projects within
Prince William County and other metropolitan large master planned community
projects, Southbridge can feasibly sustain five and six builders simultaneously.
There are nine builders active in Ashburn Farms, a 1,274-acre master planned
community located in Loudoun County; and seven builders in Ashburn Village, a
1,580-acre mixed use planned community also located in Loudoun County.
Currently, five builders are working within Phase One of the Subject.
SINGLE FAMILY ATTACHED
Rosenstein's townhouse absorption survey includes 21 projects within Eastern
Prince William County. The 1997 monthly sales pace among the 21 projects
averaged 1.8 units out of the 640 units sold in 1997. In 1995 and 1996, sales
were 427 and 499 lots with an average of 1.4 and 1.5 units per month,
respectively. The overall sales pace ranged from 0.2 units for Comstock within
Ashland to 4.8 units per month by P.C. Homes in The Glen. The overall pace since
1995 for eastern Prince William County averaged 1.77 units per month.
Rosenstein projects up to two townhouse pods under development with two to three
builders per pod and absorption of two to three units per builder. A maximum
absorption of 4.25 townhouse units per month community wide, or 51 annually. Our
survey of above average performing projects throughout the market area suggests
that an absorption pace of two to three units per month per builder is
achievable for a townhouse product in Southbridge.
52
<PAGE> 59
PLANNED UNIT DEVELOPMENT ABSORPTION STATISTICS
At the micro-market level, Southbridge absorption is a composite of the five
builders that will be individually selling product in several sections
simultaneously. However, an overview of total project absorption is a way to
support the most optimistic forecast of the total project performance.
The following table is an overview of the long-term pace of absorption at six
large mixed planned communities in the Baltimore-Washington metropolitan area.
<TABLE>
<CAPTION>
----------------------- ---------------- ------------------- ------------------ ------------------- ------------------
TOTAL AVG. ANNUAL AVG.
NAME BUILD ABSORPTION ANNUAL
OF YEAR OUT UNITS BUILT (DURATION OF ABSORPTION
DEVELOPMENT OPENED EXPECTED TO DATE PROJECT) (PAST 5 YRS)
----------------------- ---------------- ------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Ashburn Farm 1988 3,767 3,320 332.0 261
Ashburn Village 1987 5,056 3,000 272.7 287
St. Charles* 1966 14,060 13,556 423.6 157
Piney Orchard 1989 4,200 1,700 188.8 142
Russett 1991 1,547 1,200 171.4 218
Kentlands 1990 1,740 1,000 125.0 148
</TABLE>
*DATA ONLY REFLECTS THE EXISTING TWO VILLAGES
ASHBURN FARM
Ashhurn Farm, a master planned community, is built on 1,274 acres in eastern
Loudoun County, that opened in 1988. The 3,767 planned households calls for
l,729 single family homes, 1,416 townhomes, 460 condominiums, and 162
apartments. As of March 29, 1999, 88.1% or 3,320 units have been sold and 3,167
have been occupied. An annual absorption rate of 322.0 units has been realized
thus far. Single-family homes sales price range from the low $200,000s to the
mid $260.000s, townhomes range from the mid $l40,000s to the $170,000s, and the
condominiums range from the SI 13,000 to the $l30,000s. Recreational amenities
include three pools, 12 tennis courts, eight multi-purpose courts, three Loudoun
County little league fields, two soccer fields, one softball field, one sand
volleyball pit, 13 tot lots, three ponds, one regulation size baseball diamond,
one Loudoun County in-line skating deck, miles of bike/exercise trails, and
Trailside Park. Community conveniences in-place include an elementary school,
two day care centers, two churches, and one pre-school. A children's center,
county library, and a high school are scheduled to open in 1999 and 2000. Retail
and professional services in place are the Ashburn Farm Town Center, which
includes an Exxon Tiger Mart, McDonald's, and First Virginia Bank. Ashburn Farm
Village Center includes an Exxon Tiger Mart, grocery store, video store,
Goodyear Tire and Auto store, hair design shop, Pizza Hut, karate school, and
nails and hair cutter, realtor, a bank, a Chinese restaurant, an ice cream shop,
a dental practice, and parcel plus. Future development includes a 104,500 retail
center, a 30,000 square foot retail center, and a 75,000 square foot
professional office space.
ASHBURN VILLAGE
Ashhurn Village is a 1,580-acre development in Loudoun County, Virginia, which
opened in 1987. A total of 5,056 residential units, approximately 2.5 million
square feet of commercial and office space, 200,000 square feet of retail space,
and a 32,130 square foot sports pavilion. The residential break down is as
follows: 1,486 single-family; 2,502 townhomes; and 1,068 condominiums and
apartments. An annual absorption rate of 272.7 units has been realized thus far.
Single-family homes sales price range from the mid $230,000s to the $360,000s,
townhomes range from the mid $l20,000s to the $2lO,000s. the condominiums range
from the $90,000 to the mid $140,000s, and apartments rent for a range of $845
to $1,245 per month. Recreational amenities include four pools, 2 clubhouses, 13
tennis courts, 10 multi-purpose courts, 5 ball fields, 6 soccer fields, 7 tot
lots, 6 lakes, 10 miles of biking and jogging trails. 2 elementary schools, 1
middle school, 3 day care centers, and 2 proposed churches. Commercial and
retail centers include a medical center, a bank, a grocery and drug store, and
the sports pavilion.
ST. CHARLES
Located in north central Charles County, St. Charles is a planned community
consisting of 15 neighborhoods, three business parks, a regional shopping mall,
and a series of parks. Residential uses within St. Charles include several
neighborhoods developed throughout both Srnallwood and Westlake Village that
53
<PAGE> 60
consist of single family, townhouse, and ~par1:ments. These units are generally
priced between $90,000 and $200,000 and range in age from 25 years to new
construction. An estimated 35.500 people reside in St. Charles and upon
completion of the community, the expected total population will be approximately
85,000. Over the past five years, St. Charles has experienced an annual
absorption rate of 157 housing units per year. Plans for continued residential
growth include the development of Fairway, the first planned for construction,
Wooded Glen, and Piney Reach, which are all located south of Smallwood Village.
PINEY ORCHARD
Piney Orchard is located in Northwestern Anne Arundel County and is one of the
largest planned communities in Maryland. With its central location, between
Odenton and Crofton, it is within 20 miles of Annapolis Baltimore, Columbia, and
Washington D. C. The community includes a business park, village center, indoor
pool and nature trails. Piney Orchard first opened ten years ago and has sold
almost one-third of its planned units. In the last five years, Peney Orchard
single family home sales averaged a pace of 40 units per year, while townhouse
sales have averaged a pace of 102 units per year. Condominiums generally are
offered by the builders beginning in the low $80,000's, townhouses from the
$130,000's, and single family units are reported to be between $160,000 and
$200,000.
RUSSETT
Russett is a 613-acre community located within northwestern Anne Arundel County
at the interchange of Route 198 and Interstate-295, ten miles outside the
capital beltway. The community opened in mid 1991. As of today, there has been a
strong market acceptance, which is attributed to its accessibility from the
Washington metropolitan area. In its first three and one half years, Russet's
units sold at a pace of 290 units per year selling 66% of its total Phase One
product. The pace has slowed recently, but demand remains strong. The first
phase of its product consists of 238 family residences, 730 townhouses, 264
condominium units and 315 multi-family rental units. Prices begin at $95,000 for
a garden condominium and move upwards of $250,000 to $300,000 for a single
family detached unit.
KENTLANDS
Kentlands is a unique planned community in the city of Gaithersburg located in
Montgomery County. This self-contained community recaptures the town square
spirit of a 19th century small town. The development plan proposes 1,500
single-family homes and 240 garden apartments. According to the visitor center,
since this community's opening in 1990, the project has sold approximately 1,000
units. Single family houses range from $275,000 to $500,000, townhomes range
from $215,000 to $256,000, and condominiums are price at $127,000. A 335,000
square foot community shopping center opened in early 1994. Absorption in this
community was brisk with 80% of the project leased and sold within a year after
opening. It is currently experiencing high demand as vacancy levels remain low.
CONCLUSION
Average annual absorption figures tend to be higher in larger projects. The
larger St. Charles PUD has experienced 424 units annually over the past 33
years. The Russett and Kentlands projects are both smaller than Southbridge, and
both were able to obtain absorption levels of 171 and 125 units per year,
respectively. The slightly smaller Piney Orchard achieved absorption level of an
estimated 189 units per year. Ashburn Farm and Ashburn Village experience
absorption level of 332 and 272 units per year since they both opened
54
<PAGE> 61
respectively. Both are regarded as having a superior location within a strong
Northern Virginia market. Nonetheless, similar absorption results are expected
at Southbridge.
During the early years of the remaining phases, sales can be expected to be slow
with increases during the project's peak and gradually tapering off. The
Subject's proposed absorption will trend the comparable projects, as the early
years of the development will start at a slower sales pace. As the project gains
awareness and recognition, sale paces tends to increase. Moreover, driving the
residential absorption will be the amenities planned including the golf course
and Town Center feature. Further supported by the proposed rail terminal, which
will provide direct access into Washington D.C. Thus, during the peak
development years between 325 and 640 units will be sold to builders. Overall
absorption will average 225 units per year over the 20-year sellout period. This
equates to 18 units per month and 56 per quarter. To reiterate, this correlates
with absorption currently experienced in Ashburn Farm and Ashburn Village, two
direct competitors to the Subject.
COMMERCIAL
INTRODUCTION
The following tables summarize the most recent comparable commercial land sales
in the subject's area. To properly analyze the comparable sales in relation to
the subject on a consistent basis, a relevant unit of comparison must be
selected. Based on discussion with local market participants and our findings,
most land parcels are typically priced on a price per acre basis. Retail and
office land investors/developers also look to price projected FAR, which
recognizes the degree of functional utility (allowable density) among sites with
deferring zoning classifications permitting a comparison on a common unit basis.
We have utilized the price per FAR within the following analysis.
============================================================================
COMMERCIAL USES
============================================================================
PROPOSED USE SQUARE FEET %
------------------------------ ------------------ --------------------------
Office 687,000 16.07%
Office/Town Center 600,000 14.03%
Retail 414,430 9.69%
Retail/Office 721,280 16.87%
Retail/Town Center 225,000 5.26%
Self Storage 81,600 1.91%
Flex Industrial 1,614,000 36.16%
------------------------------ ------------------ --------------------------
TOTAL 4,343,310 100.00%
============================== ================== ==========================
Commercial uses proposed within Southbridge include retail pad sites, office
complexes, mixed commercial/residential buildings and light industrial/warehouse
facilities. In the following section, we have estimated the land value for each
use based on comparable properties. The following analysis is a discussion of
each. Because of a lack of information in the Subject's immediate area, we have
expanded our search to include the entire Washington D.C. metropolitan area.
RETAIL
LOT PRICES
We have identified nine sales that sold for retail development in the Subject's
market area; each are summarized below. The comparable sales range from $2.65 to
$15.43 per square foot and transacted between January 1998 and January 1999. The
sales range in size from 0.99 acres to 28.37 acres.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
OUTER NORTHERN VIRGINIA RETAIL LAND SALES
DATE OF SIZE BUILDABLE SALE PRICE
NO. SALE LOCATION (ACRES) AREA (SF) TOTAL PER ACRE PER SF PER FAR
-------- --------- ---------------------- ----------- ----------- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Jan-98 Glen Burnie, MD 2.03 -- $900,000 $443,350 $10.18 --
Saint Mary's County
2. Jan-98 Columbia 1.358 3,500 $675,000 $497,054 $11.41 $192.86
Howard County
3. Jan-98 Dulles, VA 16.07 -- $10,800,000 $672,060 $15.43
Loudoun
4. Jan-98 Dulles, VA 7.35 -- $3,610,000 $491,156 $11.29
Loudoun
5. Mar-98 Woodbridge, VA 0.9993 2,880 $519,192 $522,852 $12.00 $180.22
Prince William County
6. Apr-98 Dulles, VA 28.37 500,000 $3,280,000 $115,615 $2.65 $6.56
Loudoun
7. Jun-98 Woodridge, VA 1.35 -- $800,000 $592,593 $13.60 --
Prince William County
8. Jul-98 Woodbridge, VA 1.649 -- $1,000,000 $606,244 $13.92 --
Prince William County
9. Jan-99 Woodbridge, VA 1.272 -- $515,000 $404,842 $9.29 --
Prince William County
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
No one land sale is considered to be truly comparable to the subject. In
addition the sales listed in the above table, we have considered the sale of
3.81 acres of land located directly across from the Subject site. This sale
transacted in October 1997 for $413,385 per acre or $9.49 per square foot of
land. The site is currently being improved with a retail neighborhood center
anchored by Food Lion.
55
<PAGE> 62
We have not made specific adjustments to individual sales for time and property
characteristics due to the difficulty in making appropriate adjustments, but we
have, however, considered the individual sales and their relation to the
proposed development. The value estimate concluded for the Subject retail sites
falls towards the lower end of the range. Therefore, we have utilized a price of
$7.50 per square foot or $326,700 per acre of land area. Based on an FAR of .30,
a value of $25.00 per square foot of building area for the retail land component
of Southbridge is concluded.
OFFICE
LOT PRICES
Fourteen office land sales situated with the Washington D.C. metropolitan area
have been identified and summarized below. Comparable sales range in size from
1.3 to 23.3 acres and in sale price from $2.65 to $15.43 per square foot of
land. Based on the approved building size and the sales prices, the per
allowable square foot selling price has a range of $7.92 to $40.24.
[MAP]
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
OUTER NORTHERN VIRGINIA OFFICE LAND SALES
--------------------------------------------------------------------------------------------------------------------------------
SALE PRICE
DATE OF SIZE BUILDABLE
NO. SALE LOCATION (ACRES) AREA (SF) TOTAL PER ACRE PER SF PER FAR
--- ---- -------- ------- --------- ----- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Aug-97 Columbia, MD 9.446 110,528 $2,241,500 $237,296 $5.45 $20.28
Howard County
2 Sep-97 Clarkesville, MD 1.79 26,000 $600,000 $335,196 $7.70 $23.08
Howard County
3 Sep-97 Halethorpe, MD 4.314 30,000 $624,950 $144,866 $3.33 $20.83
Baltimore County
4 Sep-97 Rockville, MD 1.353 8,200 $330,000 $243,902 $5.60 $40.24
Montgomery County
5 Oct-97 Gaithersburg, MD 2.69 50,000 $400,000 $148,699 $3.41 $8.00
Montgomery County
6 Nov-97 Sterling, VA 9.7 40,000 $1,416,000 $145,979 $3.35 $35.40
Loudoun County
7 Jan-98 Dulles, VA 16.07 -- $10,800,000 $672,060 $15.43
Loudoun County
8 Jan-98 Greenbelt, MD 5.0 106,000 $840,000 $168,000 $3.86 $7.92
Prince George's
County
9 Jan-98 Annapolis, MD 7.94 200,000 $3,500,000 $440,806 $10.12 $17.50
Anne Arundel County
10 Jan-98 Dulles, VA 7.35 -- $3,610,000 $491,156 $11.29
Loudoun County
11 Apr-98 Dulles, VA 28.37 500,000 $3,280,000 $115,615 $2.65 $6.56
Loudoun County
12 Apr-98 Falls Church, VA 6.555 185,000 $3,082,100 $470,191 $10.79 $16.66
Fairfax County
</TABLE>
Because office land is typically sold on a price per buildable square foot
basis, we have estimated a value based on the per FAR for the office space
proposed in Southbridge. We have placed little emphasis on the sales in
Rockville, Dulles, and Falls Church because all three of these markets are
densely built and have a higher demand for office space than the Subject's area
due to their proximity to Washington D.C. The remaining sales range in price
from $7.92 per buildable square foot in Greenbelt to $35.40 per buildable square
foot in Sterling. Based on the comparable sales and conversations with brokers
familiar with commercial land in the Subject's area, a value estimated close to
the middle of the range is concluded for the proposed office development at
Southbridge. Therefore, we conclude a value of $15.00 per square foot of
building area. Based on a FAR of .25, a value estimate $4.50 per square foot or
$196,000 per acre of land area is achievable.
INDUSTRIAL FLEX
LOT PRICES
The following table summarizes ten comparable industrial/flex land sales in the
Subject's area. The comparable sales range in size from 1 acre to 22 acres and
in price from $0.61 to $5.00 per square foot of land.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
OUTER NORTHERN VIRGINIA INDUSTRIAL LAND SALES
--------------------------------------------------------------------------------------------------------------------------------
SALE PRICE
DATE OF SIZE BUILDABLE
NO. SALE LOCATION (ACRES) AREA (SF) TOTAL PER ACRE PER SF PER FAR
--- ---- -------- ------- --------- ----- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Apr-97 Manassas, VA 22.23 $588,888 $26,450 $0.61 --
Prince William County
2 May-97 Waldorf, MD 1.0 10,000 $160,000 $160,000 $3.67 $16.00
Charles County
3 Jun-97 Clinton, MD 1,829 -- $398,415 $217,832 $5.00 --
Prince George's County
4 Aug-97 Brandywine, MD 24.7 400,000 $2,161,250 $87,500 $2.01 $5.40
Prince George's County
5 Sep-97 Manassas, VA 12.073 -- $368,156 $30,494 $0.70 --
Prince William County
6 Dec-97 Woodbridge, VA 22.405 -- $765,000 $34,144 $0.78 --
Prince William County
7 Jan-98 Manassas, VA 3.004 35,000 $250,000 $83,222 $1.91 $7.14
Prince William County
8 Aug-98 Manassas, VA 13.0 -- $566,280 $43,560 $1.00 --
Prince William County
9 Aug-98 Manassas, VA 3.0 -- $328,722 $109,574 $2.52 --
Prince William County
10 Nov-98 Manassas, VA 9.29 -- $303,575 $32,678 $0.75 --
Prince William County
</TABLE>
The above listed transactions sold for industrial flex use and are located
throughout the Washington D.C. metropolitan area. Of the listed sales, we have
focused on the most recent transactions situated in Prince William County in
close proximity to the subject. These sales have an indicated price range from
$0.61 per square foot to $2.52 per square foot of land area. We concluded with a
value close to the middle of the range at $1.00 per square foot of land area.
Therefore, based on a FAR of .20, a price per buildable area of $5.00 is
concluded.
56
<PAGE> 63
GOLF COURSE SITES
LOT PRICES
The following table illustrates five comparable golf course sites sold within
the Washington D. C. metropolitan area. We have placed the most emphasis on
location and size in comparison to the subject.
57
<PAGE> 64
[MAP]
58
<PAGE> 65
[CHART]
59
<PAGE> 66
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
LAND SALES
GOLF COURSE SITES
SOUTHBRIDGE
SALE TOTAL SALE PRICE/
NUMBER LOCATION DATE PRICE ACRES OFFSITES ACRE
-------------- ------------------------------- ----------- ----------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 Golf Academy Drive Jul-97 $655,205 98.14 All to Site $6,676
Woodbridge, VA 22191-193
Prince William County
2 Muirfield Drive Dec-96 $1,050,000 176.95 All to Site $5,934
Haymarket, Virginia 20169
Prince William County
3 Route 144 Jun-96 $400,000 136.7 Needed $2,926
West Friendship, MD 21794
Howard County
4 Darnestown Road May-96 $1,700,000 283.83 All to Site $5,990
Beallsville, MD 20839
Montgomery County
5 West of W. Willard Road Feb-96 $330,000 127.02 Needed $2,598
Poolesville, MD 20837
Montgomery County
TOTALS/AVERAGE SALE PRICE 822.64 $4,825
WEIGHTED AVERAGE SALE PRICE $5,027
</TABLE>
The most emphasis for value of the golf course land at Southbridge has been
placed on Sales One, Two, and Four due to location and comparability. Sale One
is located in Prince William County just north of the Subject along the Occoquan
River. Since this parcel's intended use is for a nine-hole golf course, a
downward adjustment is warranted for the smaller size in comparison to the
Subject. Sale Two is located in the northwestern portion of Prince William
County within Haymarket. The intended use is for an 18-hole regulation golf
course with surrounding uses to either include single-family, multi-family, or
commercial. This sale is considered to be slightly superior due to its
locational attributes; therefore, a downward adjustment is warranted. Sale Four
is located in Montgomery County, Maryland. The superior location in comparison
to the Subject warranted a downward adjustment. Based on the land sites that are
most comparable to the Subject, we have utilized a price of $5,000 per acre of
land for the golf course component of Southbridge.
DEVELOPMENT TIMELINE/ABSORPTION
According to the Southbridge Business Plan, supplied by Legend Development
Company, the project is planned to advance both residential and nonresidential
development in as many forms as possible, in a manner which optimizes the use of
infrastructure and capital resources. The project is divided into seven Phases.
The table in the following pages lists the Phase, number of units and/or square
feet for nonresidential parcels, the prices of the lots (1999 dollars) and
absorption. Following is a detail of the development of each phase.
60
<PAGE> 67
The fo1lowing schedule is based on the information supplied by Legend
Development Company and the absorption analysis herein. The schedule allows for
development of the infrastructure in each respective phase which allows phases
to run concurrent. The timeline on the facing page shows the projected
commencement and sellout of each phase.
Phase II is projected to commence in 2003 with the development of 506 single
family detached dwellings. In general this area is located north of existing Old
Cherry Hill. Road, and east of the River Oaks Development. The 13 land bays of
Phase II include singe family detached, single family attached, office, retail
and land for public use. The public use includes an elementary school site
containing 20-acres and a public safety site. During this phase we project the
golf course will sell to a third party operator. In addition, the senior housing
section of 316 units will be sold as part of a bulk sale. Infrastructure needed
to create this level of development requires installation of road extensions,
sanitary sewer and water and further improvements of Route One. Phase II is
projected to have a sell-out date of 2009.
Phase III is a key phase as it begins the entry into the Town Center along with
the Potomac River viewsheds and the VRE Rail Station. The phase will commence in
2006. The phase contains three land bays included the Town Center bay which will
be developed with 1.4 million square feet of retail and office use. Within the
housing component, planning will focus in urban townhouses, semi-attached units,
condominiums and apartments (freestanding and mixed use buildings). It should be
noted that land bay SN-i is planned for retail and office use; however, as
development progresses, this site may be reallocated into a hotel site, office
complex or urban style housing. We have priced this bay as retail and office
use. Infrastructure needed for this phase include the Potomac Parkway and the
sanitary sewer extension into the Town Center. Total sellout of this phase is
projected to be 2010.
During the build out of Phase III, Phase IV will have commenced in 2008 with
sellout anticipated to be concurrent with Phase III in 2010. Phase IV allows the
site to develop an employment node servicing the area. The land dedicated to
this includes industrial warehouse and flex space. Uses with retail allowed as
ancillary within the same building. These bays lend themselves to an office
campus of variable size. Infrastructure need for this phase is primarily the
sewer and water extensions. Land bays within this phase are located in a new
drainage shed and require considerable extensions.
Phase V comprises seven land bays projected to be sold between 2008 and 2010.
Five of the land bays are residential, two are nonresidential. The mix of
residential includes single family both attached and detached and multifamily.
All are planned as primary housing units. The 253 multifamily housing units are
projects to be sold as part of a bulk sale in 2009. As the infrastructure
progresses through the various phases the traffic capacity on Cherry Hill will
have reached maximum capacity. Development at this phase will require
installation of a new road connection, Potomac Parkway from its terminus
constructed by the State of Virginia out to the intersection with Cherry Hill
Road constructed as part of Phase II.
Phase VI is anticipated to commence in 2009 at the eastern boundary of Wayside
Village (Phase I) and is developed eastward towards the Potomac. Five land bays,
four of which are residential and one is commercial. The retail will be a
center, either community are power with a grocery and big box tenant. The
residential component is mostly single family detached given its location.
Moreover, because of location, the single family detached in this section is
projected to be sold with a premium. During this phase, the third access point
into the community will be developed, Congressional Way. This connection carries
a substantial investment of infrastructure.
61
<PAGE> 68
Phase VII, the last phase of the community, contains seven land bays, two are
residential, four are commercial and one is public use. The residential bays
contain both attached and detached product, providing an opportunity for a bulk
sale. The employment uses provide similar opportunities for bulk sales, pad
sales or a build-to-suit.
The public use is an elementary school or park.
The development scenario that governs our estimate of value assumes that the
Site is purchased in its existing condition as raw land, with a development
master plan approved. The development program includes construction of
infrastructure as designed in the concept plan: grading, roads, utilities up to
the finished residential lots and bulk sale of the commercial parcels, community
water, and engineering. Sale lots and parcels are assumed to be purchased
finished and permit ready with all utilities and infrastructure to the lot line,
graded and balanced. The assumptions is that the developer is selling finished
lots to developers or home builders, who will then in turn construct houses and
commercial buildings for sale or lease to end-users.
Legend Development Company has provided development costs estimates for the
entire project in its business plan. Where possible these expenses have been
corroborated by local builders in the subject's vicinity and/or by national cost
manuals such as Marshall and Swift Valuation Service.
LOT FINISHING COSTS
UNIT CONSTRUCTION COSTS
Lot finishing costs include all of the hard and soft Construction costs
associated to complete a finished lot that can be marketed to the builder or
developer. Included is the cost of grading, street improvements, curbs, gutters
and sewer costs brought from the street to each lot. A developer's profit is
included in this figure. The cost is based on a supplied budget and corroborated
by interviews with builders in the market. The disbursement of the finishing
coats occurs concurrently with the absorption of each parcel. The cost is
estimated to increase at a rate of 3.5% per annum. The Cost to build each lot is
listed in the table below.
--------------------------------------- -----------------------------------
COMPONENT PRICE PER LOT
--------------------------------------- -----------------------------------
Single Family Detached $23,700
Townhouse $13,500
Multi-Family Not Applicable
Commercial Land $1.00/SF of Land
--------------------------------------- -----------------------------------
We have included remaining development costs for section 4, 7, and 20 of Phase I
at $12,776, $ 10,221, and $2,459 per Unit, respectively. These figures were
supplied by Legend Development Co.
HARD/CONSTRUCTION COSTS
COMMUNITY INFRASTRUCTURE
This cost item includes all hard and direct soft costs to build roads and
utilities. Total escalated projected costs by Legend Development Company is
$47,024,359. This expenditure will be spread over the 20-year development period
and me phased in accordance to the absorption schedule. Treatment of the
expenditure during the development process is based oil a bell curve schedule
that commences and terminates in accordance with the following time frame.
---------------------------------------------------------------------------
PHASED ROADWAY COSTS
PHASE START DATE/END DATE AMOUNT
-------------------- -------------------------------- ---------------------
Phase I Completed Completed
Phase II 2000/2005 $6,860,000
Phase III 2006/2010 $12,000,000
Phase IV 2007/2011 $6,870,000
Phase V 2007/2011 $5,300,000
Phase VI 2009/2012 $9,100,000
Phase VII 2011/2018 $5,900,000
-------------------- -------------------------------- ---------------------
62
<PAGE> 69
AMENITIES
This item includes the cost of building a recreation center, in-ground pool and
tennis courts to be utilized by residents of Southbridge. The timing of the
development will be 2006. Total cost is estimated at $1,750,000 in 2006 dollars.
SOFT/DEVELOPMENT COSTS
PERMITS AND ZONING
This item includes expenditures related to ongoing zoning issues, land planning,
engineer's fees and associated legal fees. According to the business plan.
Legend Development Company budgets $2,650,530 in permit and zoning related
expenses. We have accepted this figure and dispersed it evenly over the
development period.
SALES AND MARKETING
Sales and marketing costs include those expenditures related to the advertising
of the subdivision, marketing and promotional material, brochures and special
advents for promotions. Total budget is forecasted to be $15,124,188 divided
between the marketing of the residential portion of the project at $14,532,406
and the commercial portion of $591,782. The commercial expenditure reflects low
marketing costs because of the bulk nature of the sates which will be marketed
by a third party brokerage company.
ADMINISTRATION/OVERHEAD
General and administrative overhead includes market research, staff salaries,
professional services, office space overhead, public relations. and
miscellaneous administrative items. This item is calculated based on 3.5% of
gross sales. Legend's projects an administration expenditure of $9,478,205 in
1999 dollars to be spread over the entire development period.
REAL ESTATE TAXES
The real estate taxes have been outlined in the Real Estate Tax Analysis section
of this report. To reiterate, the real estate taxes are based on 5 broad brush
method that incorporates the current real estate tax liability and the projected
absorption of the units. This equates to a declining liability over the 20-year
build out.
CLOSING COSTS
Based on an examination of market rates, 2.5% of the gross sale proceeds has
been included for expenses relating to closing costs. The selling cost includes
1.5% for closing costs and 1.0% for sales commissions in accordance with market
parameters. Fees are calculated on a per lot basis in accordance to the
absorption schedule.
63
<PAGE> 70
VALUATION ANALYSIS
YIELD AND PRESENT VALUE RANGE
Selection of an appropriate yield or discount rate is crucial to the valuation
of properties using the development method. The discount rate quantifies both
financial and subjective characteristics in accordance with market perceptions
and the sections of investors in the marketplace. Buyers are often willing to
accept lower yields when the underlying cash flow projection is based on
conservative income assumptions. Likewise, buyers require higher yields when
return is predicated on rapid appreciation. Required yields for speculative land
development are even higher as there is no guaranteed income, and even minor
changes to market conditions can be devastating to the income potential of
undeveloped land.
According to the PricewaterhouseCoopers LLP 1998 Mid-Year National Land
Investment Survey, investors and developers preferred method of measuring
investment performance was the D.C.F analysis. While most respondents rely on
the expected ERR as their primary indication of return for new development
projects, approximately 10% reportedly utilize a static profit margin
calculation, with approximately 66% utilizing both methodologies.
Participants in the survey are generally concerned with pretax yields and
property rates of return when analyzing land investment, with only a few
reporting equity yields (rate on leveraged transactions) as their primary
indicator of return. According to the PricewaterhouseCoopers LLP 1998 Mid-Year
National Land Investment Survey, competition among developers for quality
development sites has decreased the expected rate of returns over the last six
months. In particular, this is seen in the Mid-Atlantic region as their are too
few sites for development and too many builders competing for the sites. The
following has been reported within the 1998 Land Survey.
o The survey finds a wider range in rates than had been noted in previous
surveys. This may indicate that certain investors are more cautious and
prefer a higher return commensurate with the increased risks associated
with Certain property types. The mid-year unleveraged, expected pre-tax
returns (IRRs) generally ranged from 10% to 35%, with a sample median of
17.3% for approved land development projects. The average and median are
lower than the result from the 1997 Year End survey, indicating increased
competition for desirable sites for development. The average overall
median equity discount rate (leveraged, pretax IRR) and the gross profit
margin rate were also lower than in the previous survey.
o The range in the gross profit margins and markup over project costs also
widened. The median gross profit margin remained unchanged from year-end,
while the expected markup over project costs declined. The highest
expected returns continue to be on larger-scale, unapproved/unentitled
developments, where unleveraged expected returns can be as high as 70% or
more. The average and median expected returns on these speculative
developments have dropped since the year-end survey but the range is wider
indicating that certain investors projections are more speculative.
o Land cost as a percentage of total project cost shows an upward trend due
to increased competition for desirable sites. This has generally been true
for all types of developments with the land percentage of total cost
higher in developed locations where development Sites are scarce.
o The South Atlantic region remains the most popular area for new
development among survey respondents. with the Pacific region next
popular. Improved conditions were noted in the Mid-Atlantic. Mountain,
West South Central and East South Central regions.
64
<PAGE> 71
o Single family residential development, suburban office buildings and
warehouse/distribution facilities were most often cited as
recently-developed property types.
o During the past six months, as demand for residential and commercial
properties has increased in many U.S. markets, the demand for all types of
vacant land has increased or at least held Constant. The development
climate is heating up is locations where demand is skyrocketing or where
barriers to entry make it difficult to add new supply.
RANGE MEDIAN
----- ------
DCF ANALYSIS...................
Property Discount Rate (IRR) 10.0% - 35.0% 17.3%
Equity Discount Rate (IRR) 14.0% - 70.0% 25.0%
GROSS PROFIT ANALYSIS..........
Gross Profit Margin 9.0% - 50.0% 20.0%
Markup over Project Costs 8.8% - 50.0% 20.0%
---------------------------
(1) Rate on unleveraged, all-cash transactions.
(2) Rate on leveraged transactions.
(3) As a percentage of total revenue.
The report further states that developer's have found themselves creating
alliances with Wall Street investment firms and REIT's, who have been typically
skeptical on investing in new development. Returns from these alliances, which
in the past have been high, are starting to decline that is a direct result from
intense competition for a limited supply of product. New development allows
REIT's and other investors to sustain their growth and their current returns.
SEGMENT YIELD ANALYSIS
Southbridge is a mixed-use development that will comprise several components
upon completion. In general these components include residential and commercial.
Within these broad segments residential will comprise multi-family, single
family attached and single family detached, and senior housing. Within the
commercial component, Southbridge will comprise office, retail,
entertainment/town center, and industrial/flex space. Developers seek varying
yields depending on the component and the risk/reward relationship associated
with that component. The following table outlines yields by property type as of
Mid-Year 1998.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
YIELD BY PROPERTY TYPE
MID-YEAR 1998
DCF ANALYSIS. . . PROPERTY DISCOUNT RATE (RRR)(1) EQUITY DISCOUNT RATE (RR)(2)
RANGE MEDIUM RANGE MEDIUM
<S> <C> <C> <C> <C>
Apartments 14.00% - 30.00% 20.00% 20.00%-50.00% 25.00%
Hotel 12.00% - 30.00% 20.00% 18.00% - 50.00% 30.00%
Industrial 10.00% - 22.00% 15.00% 14.00% - 25.00% 17.00%
Office 11.00% - 30.00% 16.00% 14.00% - 50.00% 25.00%
Residential 10.00% - 35.00% 20.00% 15.00% -70.00% 12.00%
Retail 10.00% - 25.00% 12.00% 12.00% - 15.00% 12.00%
GROSS PROFIT MARGIN(3) MARKUP OVER PROJECT COSTS
RANGE MEDIUM RANGE MEDIUM
GROSS PROFIT ANALYSIS . . .
Residential 9.00% - 50.00% 20.00% 8.80% - 50.00% 25.00%
</TABLE>
--------------------
(1) Rate on unleveraged, all-cash transactions, approved sites.
(2) Rate on leveraged transactions, approved sites.
(3) As a percentage of total revenue.
RESIDENTIAL
According to the PricewaterhouseCoopers LLP Survey, property discount rates on
unleveraged transactions for residential development ranges from 10.0% to 35%
with a median of 20.0%, excluding multi-family development. The property
discount rate that developers seek for multi-family development ranges from
14.0% to 300% with a median of 20.0 percent.
Demand for finished residential product, including luxury single family detached
dwellings, and condominiums, is generally strong in every market. Builders have
been struggling to keep pace with the demand for new homes created by a strong
economy, low mortgage interest rates, and an increasing stock market. Land
prices are escalating as prices are exhibiting double digit increases in tight
markets. The National Association of Realtors continues to report a favorable
affordability index for housing. Resales have increased with many markets
reporting a low inventory of homes for sale. This permits sellers to sell
quickly and "move-up" to new single family dwellings. The luxury new home market
has benefited from the strong returns on Wall Street.
Apartments, except luxury apartments, appear to be falling out of favor because
of the new construction that has occurred during the last two years. Approved
single family and condominium sites, with a one-two year inventory potential,
are gaining favor as prices on existing homes are rising and the cost of
financing is relatively low. Twenty-four publicly traded companies have been
analyzed and have shown an increase in the average return on equity from 9% in
1995 to 12% in 1997. It is anticipated that the actual returns for 1998 will
increase because the cost of borrowing is lower and sales are stronger in most
markets. This may be more than offset by the higher cost of land.
65
<PAGE> 72
OFFICE
Developers of office buildings and parks expect unleveraged returns from a low
of 11% for build-to-suit situations to more than 30% for speculative
developments with an average expected return of 16%. Expected returns on equity
for leveraged sites range from 14% to more than 50% for speculative
developments. Expected returns for unapproved sites are generally 1000 basis
points higher than for approved sites.
According to the PricewaterhouseCoopers land Survey, suburban office sites are
favored land investments with speculative construction beginning in some markets
that are extremely tight. Many developers have owned their sites for a long time
and have a competitive advantage over newcomers to specific markets. Rents have
not increased sufficiently to justify new construction based on the price that
owners are demanding for their approved sites. New England has shown significant
improvement along with the West Central, South Atlantic and the Pacific Regions.
Most new construction ranges between 100,000 and 150,000 square feet in order to
minimize risk.
INDUSTRIAL/WAREHOUSE/R&D
Typically, developers of industrial/warehouse or hex space expect the lowest
unleveraged returns. However, because industrial has become the most favored
product type for developer's, demand has been increasing resulting in higher
overall yields. Rates of return on unleveraged transactions, as of Mid-Year
1998. for industrial land has a manse from 10.0% to 22.0%, with a median of
15.0%, 100 basis points below office development and 230 basis points below the
median for all property types.
Suburban industrial/warehouse/R&D sites ale the most favored land investment
because they are generally build-to-suit projects. Speculative construction is
occurring in the more desirable markets that are extremely tight. As with office
building land, many developers have owned their sites for a long time and have a
pricing advantage over new investors because existing owners have a lower land
cost basis. Warehouse and distribution development is attracting most investor
activity in this sector. Demand for development continues to be in the Southeast
and Pacific Regions. West South Central has gained favor during the last
quarter.
RETAIL
Retail development continues to be the least desirable investment. Sites
approved for development with power centers may stay vacant for a long time
because of over-building, existing competition and the new threat from online
shopping over the Internet in certain retail sectors. Sites for community
centers are the most desirable retail investment. Entertainment centers
represent an alternative to traditional retail development. Neighborhood
shopping center and community shopping center sites are most favored along with
freestanding build-to-suit retail facilities.
Because of the lack of vacant sites in many developed areas, another retail
trend noted is that of "conversion retail" or "change of use retail." For
example, the REITs that have been purchasing land under car dealerships are
prepared to create retail projects on those sites if and when the economics
justify transition from auto dealership use to an alternative retail
development. Older retail areas, either in center city or suburban location --
like Los Angeles' Fairfax district -- are also the scene of conversion, upgrade,
repositioning or redevelpment projects.
66
<PAGE> 73
Rates of return on unleveraged property for development of retail use ranges
from 10.0% to 25.00% with a median of 12.0%. the lowest of the property types.
The low rates of return being experienced within the retail sector can be
attributable to the short term weakening of demand and a shortage of capital for
development.
DETERMINATION OF YIELD RATE
A review of 24 master-planned community land sales presented in the addenda
indicates a wide range of anticipated yields from 15.4% to 20.0% with a central
tendency towards 18.4%. On closer examination, we have bracketed the sales
located in the eastern U.S. Three sales show an Equity IRR of 17.5% while one
reflects an IRR of 20.0%. All of the sales are to be developed with a mixed-use
development, similar to the subject.
The returns posted by the four sales located in the eastern U.S. are similar to
those posted by the Land Yield Survey. Further, developers in the eastern region
generally seek lower returns due to increasing competition and less buildable
land. This is attributable to declining profit margins accepted by developers'
in the east.
In order to determine a reasonable rate of return for the Subject mixed-use
community, we have considered yields available on alternative investment
vehicles, master-planned community sales, and survey results, as well as the
quality and characteristics of the Subject. To this end, we have established a
benchmark equity yield of 16.0% to 23.0% for Southbridge. Discounting projected
cash flows at the various rates produces the following matrix.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
2,685 ACRES
VALUATION MATRIX
----------------------------- --------------------------------------- ------------------
NET PRESENT VALUE
---------------------------------------
YIELD ACTUAL ROUNDED PRICE/ACRE
----------------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C>
16.00% $46,136,721 $46,100,000 $17,169.46
16.50% 44,637,042 44,600,000 16,610.80
17.00% 43,202,178 43,200,000 16,089.39
17.50% 41,828,773 41,800,000 15,567.97
18.00% 40,513,670 40,500,000 15,083.80
18.50% 39,253,897 39,300,000 14,636.87
----------------------------- ------------------- ------------------- ------------------
19.00% 38,046,655 38,000,000 14,152.70
----------------------------- ------------------- ------------------- ------------------
19.50% 36,889,307 36,900,000 13,743.02
20.00% 35,779,367 35,800,000 13,333.33
20.50% 34,714,493 34,700,000 12,923.65
21.00% 33,692,474 33,700,000 12,551.21
21.50% 32,711,223 32,700,000 12,178.77
22.00% 31,768,772 31,800,000 11,843.58
22.50% 30,863,259 30,900,000 11,508.38
23.00% 29,992,927 30,000,000 11,173.18
----------------------------- ------------------- ------------------- ------------------
</TABLE>
DISCOUNTED CASH FLOW VALUE CONCLUSION
The cash flow projection developed in our analysis represents our best estimate
of future returns to the investor under assumptions based on past trends, and
current and expected future conditions. Our opinion is that a potential buyer
would employ a projection methodology similar to that used herein and that this
potential investor would derive comparable income estimates.
Essentially, the quality of the projected income stream, i.e., the perceived
risk associated with the investment, is a measure of the probability of
attaining the forecast returns. The measure of risk can be derived through
specific consideration of cash flow projection variables including the timing of
estimated periodic returns, assumptions regarding growth rates, operating ratios
and profit margins, as well as further consideration of those factors which aid
in defining the initial range of likely required yield rates. Ultimately, it is
the balancing of the most probable buyer's risk and return requirements and the
buyer's perceptions of the Subject relative to these variables which guides the
selection of the most appropriate yield and present value.
The risk profile of Southbridge is considered to be reasonably balanced given
the amount of growth in the area and the amount of new construction. Historical
trends at the Subject as well as competing subdivisions reflect demand for the
area. Thus, our projection of a 20-year development period appears to be well
supported.
On a project basis, the scope of Southbridge entails various components that
compliment the terrain and Orientation of the site while allowing for open space
to be preserved. The golf course component and the Town Center will allow the
development to be a self sufficient community enhancing the overall
67
<PAGE> 74
marketability. Therefore, based on the quality of the property under
consideration, the extended sell-out time of the development as well as
observations presented throughout this report, we believe a buyer would require
an 19% free and clear yield on our cash flow forecast. Discounting the
forecasted cash flows at 19%, renders a value of $38,000,000.
Therefore, based on the Income Approach to Value (Subdivision Development
Method), we estimate the as is market value of the fee simple interest in
Southbridge on an all cash basis, as of March 31, 1999 was:
[TABLE]
68
<PAGE> 75
APPRAISER QUALIFICATIONS
69
<PAGE> 76
<TABLE>
<CAPTION>
<S> <C>
ROBERT K. RUGGLES, III, CRE, MAI
-------------------------------------------------------------------------------------------
POSITION Principal in charge of Global Valuation! Consulting within
PricewaterhouseCoopers Real Estate Valuation/Advisory Services
EDUCATION Fordham University
MBA Degree
Cited for Distinguished Academic Achievement in Real Estate Finance
The University of Connecticut
B.S. Degree: Majors--Finance, Real Estate and Urban Economic Studies
Graduation with Honors from the University of
Connecticut and Distinction (in Finance) from the
School of Business Administration
PROFESSIONAL COOPERS & LYBRAND, L.L.P. (1996-1997)
HISTORY Principal, National Real Estate Valuation/Advisory Services 1997
Director (following C&L's acquisition of L.W. Ellwood in November 1996)
L.W. ELLWOOD & COMPANY (1973-1996)
Directly responsible - formerly as a senior principal
- for managing all aspects of L.W. Ellwood &
Company's practice.
Elected Principal 1976
Elected Vice President 1975
Elected Secretary and Director 1973
CENTER FOR REAL ESTATE AND URBAN ECONOMIC STUDIES, SCHOOL OF BUSINESS
ADMINISTRATION, UNIVERSITY OF CONNECTICUT (1969-1972) Prior to association
with L.W. Ellwood & Company, employed for three years at the Center for
Real Estate and Urban Economic Studies, School of Business
Administration, University of Connecticut worked closely with the
Director of the Center conducting research assignments on various urban
and real estate related topics which culminated in several articles in
professional journals and texts. Working with executive and educational
development programs primarily through the use of heuristic gaming
devices and simulation models was also a job activity. Finally, practical
application of computer technology was a requirement of the position.
PROFESSIONAL Actively engaged in all phases of real estate analysis for the past
EXPERIENCE twenty-five years, presently as Principal of PricewaterhouseCoopers LLP.
Responsible for the origination and implementation of counseling and
consulting assignments as well as the preparation of narrative type
appraisals for equity purchase, mortgage financing, litigation, and other
purposes, highest and best use, feasibility, and land use studies.
Analyses performed have encompassed projects in all sections of the
continental United States, Caribbean, and Hawaii, ranging from major
institutional portfolios, involving complex multi-use properties, to
single commercial and industrial buildings.
Specialized areas of expertise include property valuations, transaction
and litigation support. A sampling of engagements completed over the last
three years include the following:
o LEND LEASE - Responsible for the audit of internal valuations and
valuation concurrence on certain properties in the Prime Property
Fund an open-end commingled fund. The engagement consists of 100+
properties valued at $2.5 - $3.5 billion.
</TABLE>
70
<PAGE> 77
<TABLE>
<CAPTION>
<S> <C>
ROBERT K. RUGGLES, III, CRE, MAI
-------------------------------------------------------------------------------------------
o BUCKHEAD REIT - Oversight of valuations utilized in formation of
private industrial REIT purchased by a state pension fund.
Properties were located in ten cities in eight states ranging from
Florida to California.
o GSIC PORTFOLIO - Annual valuations prepared for the U.S. real estate
portfolio of the Government of Singapore. Portfolio consists
primarily of major office and industrial properties in seven states.
o PSERS/CONSTELLATION - Oversight of valuations utilized to ascribe
share values to two entities contributing properties to a fund the
intent of which is to spin off public and/or private REIT vehicles.
PUBLISHED "Supply, Demand, and the Nature of Value", THE APPRAISAL JOURNAL, April,
MATERIALS 1983 Member, Appraisal Institute (MAI)
PROFESSIONAL Member, The Counselors of Real Estate (CRE)
AFFILIATIONS State Certified Real Estate Appraiser (32 states)
National Association of Corporate Real Estate Executives
National Association of Realtors
National Council of Real Estate Investment Fiduciaries
Pension Real Estate Association
International Council of Shopping Centers
PROFESSIONAL Numerous committee assignments for both the Appraisal Institute and Real
ACTIVITIES Estate Counselors with primary focus on Admissions, Membership, Ethics
and Counseling, Academic Liaison, and Continuing Education.
</TABLE>
71
<PAGE> 78
FRANK. G. GRECO
------------------------------------------------------------------------------
EXPERIENCE
Professionally engaged in real estate analysis and valuation at
PricewalerhouseCoopers LLP since 1996.
Responsible for appraisals for mortgage financing, equity purchases, feasibility
studies on proposed developments, portfolio review, land use studies and highest
and best analysis. Analyses performed have involved various types of investment
real estate throughout the continental United States, including apartment
complexes, condominium conversions, hotels, industrial/R&D parks, residential
subdivisions, retail centers, office buildings and vacant land.
The Weitzman Group, New York, NY
Assistant Vice President (1996)
Real estate specialists, providing advice and counsel to those engaged in
evaluation, buying, selling, leasing, financing, or developing real estate.
Atterbury & Associates, Inc., Paramus, New Jersey
Vice President (199 1-1996)
Real estate appraisers providing market analyses, investment analyses, and
property valuation services.
EDUCATION
Fairleigh Dickinson University
B.A. Communications
New York University
Diploma in Real Estate Investment Analysis
PROFESSIONAL
AFFILIATION
Appraisal Institute, Candidate for MAI Designation
Bergen County Board of Realtors
PROFESSIONAL
COURSES
Principles of Real Estate Appraising
Basic Valuation Procedures
Basic Income Capitalization
Advanced Income Capitalization
Standards of Professional Practice - Part A
Standards of Professional Practice - Part B
Report Writing and Valuation Analysis
72
