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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES
EXCHANGE ACT OF 1934)
Windsor Park Properties 6,
A California Limited Partnership
(Name of Issuer)
N'Tandem Trust
Chateau Communities, Inc.
Windsor Park Properties 6,
A California Limited Partnership
(Name of Person(s) Filing Statement)
Units of Limited Partnership Interest
(Title of Class of Securities)
N/A
(CUSIP Number of Class of Securities)
Steven G. Waite
The Windsor Corporation
6160 South Syracuse Way
Greenwood Village, Colorado 80111
303-741-3707
(Name, Address and Telephone number of persons authorized to receive
notices and communications on behalf of person(s) filing statement)
With copies to:
Jay L. Bernstein, Esq.
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166-0153
(212) 878-8000
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This Statement is filed in connection with (check the appropriate
box):
a. [X] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(C) under
the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act
of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box "a." above are preliminary copies: [X]
Calculation of Filing Fee
- -------------------------------------------------------------------------------
Transaction Valuation Amount of Filing Fee
- -------------------------------------------------------------------------------
$ $
- -------------------------------------------------------------------------------
Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by
[X] registration statement number, or the form or schedule and the
date of its filing.
Amount previously paid: $3,087.62 Filing party: Windsor Park Properties
6, A California Limited
Partnership
Form or registration no.: Schedule 14A Date Filed: November 19, 1999
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This Transaction Statement on Schedule 13E-3 relates to the proposed sale
of the assets of Windsor Park Properties 6, A California Limited Partnership
(the "Partnership"), pursuant to a plan of liquidation (the "Plan of
Liquidation") adopted by the general partners of the Partnership (the "General
Partners").
Pursuant to the Plan of Liquidation, the Partnership will sell its one
wholly-owned property and its partial ownership interests in five other
properties (together, the "Properties") to N'Tandem Trust, an unincorporated
California business trust ("N'Tandem"), whose advisory company, The Windsor
Corporation, is also the managing general partner of the Partnership (the
"Managing General Partner"). Chateau Communities, Inc., which owns the
Managing General Partner, also holds 9.8% of the capital stock of N'Tandem.
In accordance with the Agreement of Limited Partnership of the Partnership
(the "Partnership Agreement"), the General Partners are seeking the consent of
the holders (the "Limited Partners") of units of limited partnership interest
(the "Units") in the Partnership to the sale of assets (the "Sales") and the
Plan of Liquidation.
The Cross Reference Sheet below is furnished pursuant to General
Instruction F to Schedule 13E-3 and shows the location of the information
required to be included in response to the items of this Schedule 13E-3 in the
Consent Solicitation Statement (the "Consent Solicitation Statement") included
in the Partnership's Schedule 14A filed on November 19, 1999, by the Partnership
with the Securities and Exchange Commission (the "Commission") pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The information in the Consent Solicitation Statement is
incorporated into this Schedule 13E-3 by reference. The Consent Solicitation
Statement is incorporated by reference as Exhibit (d) to this Schedule 13E-3.
Capitalized terms not defined herein have the meanings ascribed to them in the
Consent Solicitation Statement.
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CROSS REFERENCE SHEET
Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
Item 1. Issuer and Class of Security
Subject to the Transaction
(a) Cover Page. SUMMARY - Purpose of the
Consent Solicitation; Proposals 1 and
2.
(b) SUMMARY - Purpose of the Consent
Solicitation; Proposals 1 and 2.
CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Record Date;
Required Vote.
(c) SUMMARY - No Established Trading
Market For Units.
(d) SUMMARY - Historical Distributions.
(e) Not applicable.
(f) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Background of the
Proposed Transactions.
Item 2. Identity and Background
(a) - (d) MATERIAL RISK FACTORS AND OTHER
CONSIDERATIONS - Conflicts of
Interest. DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Information Concerning
N'Tandem and Chateau. APPENDIX B -
Information Concerning Officers and
Directors of the Managing General
Partner, N'Tandem and Chateau.
(e) Not applicable.
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Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
(f) Not applicable.
(g) APPENDIX B - Information Concerning
Officers and Directors of the
Managing General Partner, N'Tandem
and Chateau.
Item 3. Past Contacts, Transactions or
Negotiations
(a)(1) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Background of the
Proposed Transactions.
(2)
DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Background of the
Proposed Transactions, and- The
Purchase and Sale Agreement.
(b) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Background of the
Proposed Transactions, and- The
Purchase and Sale Agreement.
Item 4. Terms of the Transaction
(a) DESCRIPTION OF THE PROPOSED
TRANSACTIONS.
(b) Not applicable.
Item 5. Plans or Proposal of the Issuer
or Affiliate
(a) - (g) DESCRIPTION OF THE PROPOSED
TRANSACTIONS.
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Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
Item 6. Source and Amounts of Funds
or Other Consideration
(a) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -The Purchase and Sale
Agreement.
(b) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -The Purchase and Sale
Agreement, -Solicitation Expenses,
and - Estimate of Liquidating
Distributions Payable to Limited
Partners. CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS -
Solicitation of Consents.
(c) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -The Purchase and Sale
Agreement - Purchase Prices.
(d) Not applicable.
Item 7. Purposes, Alternatives, Reasons
and Effects
(a) - (c) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Purpose of the Consent
Solicitation; Proposals 1 and 2,
and - Background of the Proposed
Transactions. SPECIAL
FACTORS - Fairness of the Proposed
Transactions; Recommendation of the
Proposed General Partners,
- Alternatives Considered, and
- N'Tandem and Chateau's Belief as to
the Fairness of the Proposed
Transactions; N'Tandem's and
Chateau's Reasons for Engaging in the
Proposed Transactions.
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Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
(d) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Purpose of the Consent
Solicitation; Proposals 1 and 2,
- The Purchase and Sale Agreement,
- Estimate of Liquidating
Distributions Payable to Limited
Partners, and -Ownership of
Properties by N'Tandem Following
Sales. SPECIAL FACTORS -Fairness of
the Proposed Transactions;
Recommendation of the General
Partners. FEDERAL INCOME TAX
CONSIDERATIONS.
Item 8. Fairness of the Transaction
(a) - (b) DESCRIPTION OF THE PROPOSED
TRANSACTIONS -Background of the
Proposed Transactions. SPECIAL
FACTORS - Fairness of the Proposed
Transactions; Recommendation of the
General Partners, and - N'Tandem's
and Chateau's Belief as to the
Fairness of the Proposed
Transactions; N'Tandem's and
Chateau's Reasons for Engaging in the
Proposed Transactions.
(c) CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Record Date;
Required Vote.
(d) SPECIAL FACTORS - Fairness of the
Proposed Transactions; Recommendation
of the General Partners, and
- Fairness Opinion. MATERIAL RISK
FACTORS AND OTHER CONSIDERATIONS - No
Appointment of Independent
Representative.
(e) Not applicable.
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Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
(f) SPECIAL FACTORS - Fairness of the
Proposed Transactions; Recommendation
of the General Partners.
Item 9. Reports, Opinions, Appraisals
and Certain Negotiations
(a) - (c) SPECIAL FACTORS - Fairness Opinion, -
and Appraisals.
Item 10. Interest in Securities of the
Issuer
(a) CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Record Date;
Required Vote.
(b) Not applicable.
Item 11. Contracts, Arrangements or Not applicable.
Understandings with Respect
to the Issuer's Securities
Item 12. Present Intention and
Recommendation of Certain
Persons with Regard to the
Transaction
(a) CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Record Date;
Required Vote.
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Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
(b) SPECIAL FACTORS - Fairness of the
Proposed Transactions; Recommendation
of the General Partners.
Item 13. Other Provisions of the
Transaction
(a) CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - No Appraisal
or Dissenters' Rights.
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information
(a) FINANCIAL STATEMENTS. SUMMARY
- Historical Distributions.
SUMMARY HISTORICAL FINANCIAL DATA.
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.
(b) Not applicable.
Item 15. Persons and Assets Employed,
Retained or Utilized
(a) CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Solicitation
of Consents.
(b) CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Solicitation
of Consents.
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Location in Consent Solicitation
Item in Schedule 13E-3 Statement by Caption
- ---------------------- --------------------------------
Item 16. Additional Information SUMMARY. SUMMARY HISTORICAL FINANCIAL
DATA. MATERIAL RISK FACTORS AND OTHER
CONSIDERATIONS. DESCRIPTION OF THE
PROPOSED TRANSACTIONS. SPECIAL
FACTORS. SUMMARY OF SELECTED TERMS OF
THE PARTNERSHIP AGREEMENT. THE
PARTNERSHIP'S PROPERTIES. FEDERAL
INCOME TAX CONSIDERATIONS. CONSENT
PROCEDURES; TRANSACTIONS AUTHORIZED
BY CONSENTS. FINANCIAL STATEMENTS.
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) The name of the issuer of the class of equity securities which is the
subject of the Rule 13e-3 transaction is Windsor Park Properties 6, A California
Limited Partnership, and the address of its principal executive offices is 6160
South Syracuse Way, Greenwood Village, Colorado 80111. The information set forth
in the Consent Solicitation Statement on the cover page and under the caption
"SUMMARY - Purpose of the Consent Solicitation; Proposals 1 and 2" is
incorporated herein by reference.
(b) The class of security which is the subject of the Rule 13e-3 transaction is
units of limited partner interest of the Partnership. The information set forth
under the caption "CONSENT PROCEDURES; TRANSACTIONS AUTHORIZED BY CONSENTS -
Record Date; Required Vote" in the Consent Solicitation Statement is
incorporated herein by reference.
(c) The information set forth under the caption "SUMMARY - No Established
Trading Market For Units" in the Consent Solicitation Statement is incorporated
herein by reference.
(d) The information set forth under the caption "SUMMARY - Historical
Distributions" in the Consent Solicitation Statement is incorporated herein by
reference.
(e) Not applicable.
(f) The information set forth in the Consent Solicitation Statement under the
caption "DESCRIPTION OF THE PROPOSED TRANSACTIONS - Background of the Proposed
Transactions" is incorporated herein by reference.
Item 2. Identity and Background.
This Schedule 13E-3 is being filed jointly by N'Tandem Trust, an unincorporated
California business trust, which is an affiliate of the Partnership, Chateau
Communities, Inc., a Maryland corporation, an entity that controls N'Tandem and
the Managing General Partner of Partnership, and Windsor Park Properties 6, A
California Limited Partnership (the issuer of the class of equity securities
which is the subject of the Rule 13e-3 transaction). The information set forth
under the captions "DESCRIPTION
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OF THE PROPOSED TRANSACTIONS - Information Concerning N'Tandem and Chateau" and
"MATERIAL RISK FACTORS AND OTHER CONSIDERATIONS - Conflicts of Interest," in the
Consent Solicitation Statement is incorporated herein by reference.
(a)-(d) Information required by this item relating to directors and executive
officers of N'Tandem, Chateau, and The Windsor Corporation is set forth in
APPENDIX B to the Consent Solicitation Statement, which is incorporated herein
by reference.
(e) To the knowledge of N'Tandem, Chateau and the General Partners of the
Partnership, none of the persons with respect to whom information is provided in
response to this Item 2 was, during the last five years, convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
(f) To the knowledge of N'Tandem, Chateau and the General Partners of the
Partnership, none of the persons with respect to whom information is provided in
response to this Item 2 was, during the last five years, a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining further violations of, or prohibiting activities, subject to,
federal or state securities laws or finding any violation of such laws.
(g) Information required by this item relating to directors and executive
officers of N'Tandem, Chateau and The Windsor Corporation is set forth in
APPENDIX B to the Consent Solicitation Statement, which is incorporated herein
by reference.
Item 3. Past Contacts, Transactions or Negotiations.
(a) (1) The information set forth under the caption "DESCRIPTION OF THE
PROPOSED TRANSACTIONS - Background of the Proposed Transactions" in the
Consent Solicitation Statement is incorporated herein by reference.
(2) The information set forth under the caption "DESCRIPTION OF THE
PROPOSED TRANSACTIONS - Background of the Proposed Transactions" and "-
The Purchase and Sale Agreement" in the Consent Solicitation Statement
is incorporated herein by reference.
(b) The information set forth under the caption "DESCRIPTION OF THE PROPOSED
TRANSACTIONS - Background of the Proposed Transactions" and "- The Purchase
and Sale Agreement" in the Consent Solicitation Statement is incorporated
herein by reference.
Item 4. Terms of the Transaction.
(a) The information set forth under the caption "DESCRIPTION OF THE PROPOSED
TRANSACTIONS" in the Consent Solicitation Statement is incorporated herein by
reference.
(b) Not applicable.
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a)-(g) The Rule 13e-3 transaction provides for the sale of all of the
Partnership's assets, a dissolution and winding up of the Partnership, and a
termination of registration of the Units under the Exchange Act. The
information set forth under the caption "DESCRIPTION OF THE PROPOSED
TRANSACTIONS" in the Consent Solicitation Statement is incorporated herein by
reference.
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Item 6. Source and Amounts of Funds or Other Consideration.
(a) The information set forth under the caption "DESCRIPTION OF THE PROPOSED
TRANSACTIONS - The Purchase and Sale Agreement - Purchase Prices" in the
Consent Solicitation Statement is incorporated herein by reference.
(b) The information set forth in the Consent Solicitation Statement under the
captions "DESCRIPTION OF THE PROPOSED TRANSACTIONS - The Purchase and Sale
Agreement," "- Solicitation Expenses" and "- Estimate of Liquidating
Distributions Payable to Limited Partners" and "CONSENT PROCEDURES; TRANSACTIONS
AUTHORIZED BY CONSENTS - Solicitation of Consents" relating to the expenses
estimated to be incurred in the transactions, is incorporated herein by
reference.
(c) The information contained in the last paragraph under the caption
"DESCRIPTION OF THE PROPOSED TRANSACTIONS - The Purchase and Sale Agreement
- - Purchase Prices" in the Consent Solicitation Statement is incorporated herein
by reference.
(d) Not applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a)-(c) The information set forth under the captions "DESCRIPTION OF THE
PROPOSED TRANSACTIONS - Purpose of the Consent Solicitation; Proposals 1 and 2,"
"- Background of the Proposed Transactions," "SPECIAL FACTORS - Fairness of the
Proposed Transactions; Recommendation of the General Partners," "-Alternatives
Considered" and "- N'Tandem's and Chateau's Belief as to the Fairness of the
Proposed Transactions; N'Tandem's and Chateau's Reasons for Engaging in the
Proposed Transactions" in the Consent Solicitation Statement is incorporated
herein by reference.
(d) The information set forth under the captions "DESCRIPTION OF THE PROPOSED
TRANSACTIONS," "- Purpose of the Consent Solicitation; Proposals 1 and 2,"
"- Estimate of Liquidating Distributions Payable to Limited Partners,"
"- Ownership of Properties By N'Tandem Following Sales" and "SPECIAL FACTORS
- - Fairness of the Proposed Transactions; Recommendation of the General Partners"
in the Consent Solicitation Statement is incorporated herein by reference. The
information contained under the caption "FEDERAL INCOME TAX CONSIDERATIONS" in
the Consent Solicitation Statement is incorporated herein by reference.
Item 8. Fairness of the Transaction.
(a)-(b) N'Tandem, Chateau and the General Partners of the Partnership
reasonably believe that the transaction is fair to the unaffiliated Limited
Partners. The information set forth under the captions "DESCRIPTION OF THE
PROPOSED TRANSACTIONS - Background of the Proposed Transactions," "SPECIAL
FACTORS - Fairness of the Proposed Transactions; Recommendation of the General
Partners" and "- N'Tandem's and Chateau's Belief as to the Fairness of the
Proposed Transactions; N'Tandem's and Chateau's Reasons for Engaging in the
Proposed Transactions," in the Consent Solicitation Statement is incorporated
herein by reference.
(c) The information contained under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - Record Date; Required Vote" in the Consent
Solicitation Statement is incorporated herein by reference.
(d) The information set forth in the Consent Solicitation Statement under the
captions "SPECIAL FACTORS - Fairness of the Proposed Transactions;
Recommendation of the General Partners," "- Fairness Opinion" and "MATERIAL RISK
FACTORS AND OTHER CONSIDERATIONS - No Appointment of Independent Representative"
is incorporated by reference.
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(e) The proposed transactions were approved by both of the General Partners of
the Partnership. As a limited partnership, the Partnership does not have
directors. All of the directors of the Managing General Partner were appointed
by Chateau. All of the directors of the Managing General Partner approved the
proposed transactions.
(f) The information contained under the caption "SPECIAL FACTORS - Fairness of
the Proposed Transactions; Recommendation of the General Partners" in the
Consent Solicitation Statement is incorporated herein by reference.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a)-(c) The information contained under the captions "SPECIAL FACTORS - Fairness
Opinion," and "- Appraisals" in the Consent Solicitation Statement is
incorporated herein by reference.
Item 10. Interest in Securities of the Issuer.
(a) The information contained under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - Record Date; Required Vote" in the Consent
Solicitation Statement is incorporated herein by reference.
(b) Not applicable.
Item 11. Contracts, Arrangements or Understandings with
Respect to the Issuer's Securities.
Not applicable.
Item 12. Present Intention and Recommendation of Certain
Persons with Regard to the Transaction.
(a) The information contained under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - Record Date; Required Vote" in the Consent
Solicitation Statement is incorporated herein by reference.
(b) The information set forth under the caption "SPECIAL FACTORS - Fairness of
the Proposed Transactions; Recommendation of the General Partners" in the
Consent Solicitation Statement is incorporated herein by reference. No other
person has made a recommendation required to be described herein.
Item 13. Other Provisions of the Transaction.
(a) The information set forth under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - No Appraisal or Dissenters' Rights" in
the Consent Solicitation Statement is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information.
(a) The information set forth under the captions "FINANCIAL STATEMENTS,"
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "SUMMARY - Historical
Distributions" and "SUMMARY HISTORICAL FINANCIAL DATA" in the Consent
Solicitation Statement is incorporated herein by reference.
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(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) The information set forth under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - Solicitation of Consents" in the Consent
Solicitation Statement is incorporated herein by reference.
(b) The information set forth under the caption "CONSENT PROCEDURES;
TRANSACTIONS AUTHORIZED BY CONSENTS - Solicitation of Consents" in the Consent
Solicitation Statement is incorporated herein by reference.
Item 16. Additional Information.
The information set forth in the Consent Solicitation Statement under each of
the following headings is incorporated herein by reference: "SUMMARY,"
"SUMMARY HISTORICAL FINANCIAL DATA," "MATERIAL RISK FACTORS AND OTHER
CONSIDERATIONS," "DESCRIPTION OF THE PROPOSED TRANSACTIONS," "SPECIAL
FACTORS," "SUMMARY OF SELECTED TERMS OF THE PARTNERSHIP AGREEMENT," "THE
PARTNERSHIP'S PROPERTIES," "FEDERAL INCOME TAX CONSIDERATIONS," "CONSENT
PROCEDURES; TRANSACTIONS AUTHORIZED BY CONSENTS," "FINANCIAL STATEMENTS," and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Item 17. Materials to be Filed as Exhibits.
(a) Form of Promissory Note of N'Tandem in favor of Chateau.
(b)(1) Appraisals of Whitcomb Real Estate, Inc.
(A) Town & Country Estates
(B) Chisholm Creek
(C) Carefree Village
(D) Rancho Margate
(E) Winter Haven
(F) Garden Walk
(b)(2) Fairness Opinion of Legg Mason Wood Walker, Incorporated.
(d) Preliminary Consent Solicitation Statement and related proxy
materials.*
4 Agreement of Limited Partnership of the Partnership.
23.1 Consent of Whitcomb Real Estate, Inc.
23.2 Consent of Legg Mason Wood Walker, Incorporated.
23.3 Consent of PricewaterhouseCoopers LLP**
_____________________
* Incorporated by reference to the Consent Solicitation Statement, including
the Appendices thereto, and related proxy materials included in the
Partnership's Schedule 14A filed with the Commission on November 19, 1999.
** To be filed by amendment
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Signature
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
WINDSOR PARK PROPERTIES 6,
A California Limited Partnership
By: The Windsor Corporation,
general partner
By /s/ Steve Waite
--------------------------
Name: Steve Waite
Title: President
Date: November 19, 1999
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Signature
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
N'TANDEM TRUST
By: /s/ Gary P. McDaniel
---------------------
Name: Gary P. McDaniel
Title: Trustee
Date: November 19, 1999
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Signature
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
CHATEAU COMMUNITIES, INC.
By:/s/ Gary P. McDaniel
------------------------------
Name: Gary P. McDaniel
Title: Chief Executive Officer
Date: November 19, 1999
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(a) Form of Promissory Note of N'Tandem in favor of Chateau.
(b)(1) Appraisals of Whitcomb Real Estate, Inc.
(A) Town & Country Estates
(B) Chisholm Creek
(C) Carefree Village
(D) Rancho Margate
(E) Winter Haven
(F) Garden Walk
(b)(2) Fairness Opinion of Legg Mason Wood Walker, Incorporated.
(d) Preliminary Consent Solicitation Statement and related
proxy materials.*
4 Agreement of Limited Partnership of the Partnership.
23.1 Consent of Whitcomb Real Estate, Inc.
23.2 Consent of Legg Mason Wood Walker, Incorporated.
23.3 Consent of PricewaterhouseCoopers LLP**
_____________________
* Incorporated by reference to the Consent Solicitation Statement, including
the Appendices thereto and related proxy materials, included in the
Partnership's Schedule 14A filed with the Commission on November 19, 1999.
** To be filed by amendment.
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EXHIBIT 99.(a)
FORM OF UNSECURED PROMISSORY NOTE
$ _____________ ________, ____
FOR VALUE RECEIVED N'Tandem Trust, an unincorporated California
business trust having an address at 6160 South Syracuse Way, Greenwood Village,
Colorado 80111 (hereinafter referred to as "Maker"), promises to pay to the
order of Chateau Communities, Inc., a Maryland corporation having an address at
6160 South Syracuse Way, Greenwood Village, Colorado 80111 (hereinafter referred
to as "Payee"), at such address or at such place as the holder hereof may from
time to time designate in writing, the principal sum of $____________ or so much
as thereof as may be advanced and outstanding with interest on the principal
balance from the date of each advance in lawful money of the United States of
America, with interest thereon to be computed from the date of this Note at the
Applicable Interest Rate (hereinafter defined), and to be paid as follows:
ARTICLE 1: PAYMENT TERMS
Accrued interest shall be due and payable on the 31st day of ________,
_____ and on the same day of each succeeding month, and the balance of said
principal sum and all accrued, unpaid interest thereon shall be due and payable
on the 31st day of _________, _____ (the "Maturity Date"). Interest on the
principal sum of this Note shall be calculated on the basis of a three hundred
sixty (360) day year composed of twelve (12) months of thirty (30) days each
except that interest due and payable for a period less than a full month shall
be calculated by multiplying the actual number of days elapsed in such period by
a daily rate based on said 360 day year.
The term "Applicable Interest Rate" as used in this Note shall mean
one percent (1%) per annum over such base rate of interest ("Base Rate") as may
be adopted by Bank One, N.A. from time to time as its base or prime commercial
lending rate. Regardless of the term that may be used from time to time to
describe the Base Rate (such as "prime rate"), Base Rate does not necessarily
mean the lowest interest rate charged by Bank One, N.A. to other borrowers. The
Applicable Interest Rate shall be adjusted on the first day of each calendar
quarter during the term of this Note, with the adjusted rate being based upon
the Base Rate prevailing on the date of such adjustment.
ARTICLE 2: DEFAULT AND ACCELERATION
The whole of the principal sum of this Note, together with all
interest accrued and unpaid thereon and all other sums due under this Note (all
such sums hereinafter collectively referred to as the "Debt") shall without
notice become immediately due and payable at the option of Payee (i) if any
payment required in this Note is not paid within ten (10) days of the date when
due or (ii) if the entire Debt is not paid on the Maturity Date ((i) or (ii)
hereinafter referred to as an "Event of Default"). In the event that it should
become necessary to employ counsel to collect the Debt, Maker also agrees to pay
attorney's fees for the services of such counsel whether or not suit be brought.
ARTICLE 3: DEFAULT INTEREST
Maker does hereby agree that upon the occurrence of an Event of
Default, Payee shall be entitled to receive, and Maker shall pay interest on,
the entire unpaid principal sum at
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the rate of the lesser of (i) five percent (5%) above the Applicable Interest
Rate or (ii) the maximum rate of interest which Maker may by law pay (the
"Default Rate"). The Default Rate shall be computed from the occurrence of the
Event of Default until such Event of Default is cured or the date upon which the
Debt is paid in full, as the case may be. This charge shall be added to the
Debt. This clause, however, shall not be construed as an agreement or privilege
to extend the date of the payment of the Debt, nor as a waiver of any other
right or remedy accruing to Payee by reason of the occurrence of any Event of
Default.
ARTICLE 4: PREPAYMENT
The principal balance of this Note may be prepaid in whole or in part
at anytime.
ARTICLE 5: SAVINGS CLAUSE
This Note is subject to the express condition that at no time shall
Maker be obligated or required to pay interest on the Debt or any portion
thereof at a rate which could subject Payee to either civil or criminal
liability as a result of being in excess of the maximum interest rate which
Maker is permitted by applicable law to contract or agree to pay. If by the
terms of this Note, Maker is at any time required or obligated to pay interest
on the Debt or any portion thereof at a rate in excess of such maximum rate, the
rate of interest under this Note shall be deemed to be immediately reduced to
such maximum rate and the interest payable shall be computed at such maximum
rate and all prior interest payments in excess of the maximum rate shall be
deemed to have been payments in reduction of principal and not on account of the
interest due hereunder.
ARTICLE 6: LATE CHARGE
If any sum payable under this Note is not paid within ten (10) days of
the date on which it is due, Maker shall pay to Payee an amount equal to the
lesser of five percent (5%) of such unpaid sum or the maximum amount permitted
by applicable law to defray the expenses incurred by Payee in handling and
processing such delinquent payment; provided, however, no such late charge will
be charged or collected if the amount of such late charge when added to all
interest constructed for, charged or received by Payee hereunder would exceed
the maximum amount of interest allowed by applicable law. This clause, however,
shall not be construed as an agreement or privilege to extend the date of the
payment of the Debt, nor as a waiver of any other right or remedy accruing to
Payee by reason of the occurrence of any Event of Default.
ARTICLE 7: NO ORAL CHANGE
This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Maker or Payee, but only by an agreement in writing signed by the party against
whom enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought.
<PAGE>
ARTICLE 8: JOINT AND SEVERAL LIABILITY
If Maker consists of more than one person or party, the obligations
and liabilities of each such person or party shall be joint and several.
ARTICLE 9: WAIVERS
Maker and all others who may become liable for the payment of all or
any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest and notice of protest and non-payment. No
extension of time for payment of this Note or any installment hereof, and no
alteration, amendment or waiver of any provision of this Note made by agreement
between Payee and any other person or party shall release, modify, amend, waive,
extend, change, discharge, terminate or affect the liability of Maker, and any
other who may become liable for the payment of all or any part of the Debt.
ARTICLE 10: AUTHORITY
Maker (and the undersigned representative of Maker, if any) represents
that Maker has full power, authority and legal right to execute, deliver and
perform its obligations pursuant to this Note and that this Note constitutes a
valid and binding obligation of Maker.
ARTICLE 11: NOTICES
All notices or other written communications hereunder shall be deemed
to have been properly given (i) upon delivery, if delivered in person or by
facsimile transmission, (ii) one (1) Business Day (defined below) after having
been deposited for overnight delivery with any reputable overnight courier
service, or (iii) three (3) Business Days after having been deposited in any
post office or mail depository regularly maintained by the U.S. Postal Service
and sent by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Maker: N'Tandem Trust
6160 South Syracuse Way
Greenwood Village, Colorado 80111
Attention: Steven G. Waite
If to Payee: Chateau Communities, Inc.
6160 South Syracuse Way
Greenwood Village, Colorado 80111
Attention: Tamara Fischer
or addressed as such party may from time to time designate by written notice to
the other parties. Either party by notice to the other may designate additional
or different addresses for subsequent notices or communications. "Business Day"
shall mean a day upon which commercial banks are not authorized or required by
law to close in Colorado or New York.
ARTICLE 12: WAIVER OF TRIAL BY JURY
Maker hereby waives, to the fullest extent permitted by law, the right
to trial by jury in any action, proceeding or counterclaim, whether in contract,
tort or otherwise, relating
<PAGE>
directly or indirectly to the loan evidenced by this Note, the application for
the loan evidenced by this Note or any acts or omissions of Payee, its officers,
employees, directors or agents in connection therewith.
ARTICLE 13: GOVERNING LAW
This Note shall be deemed to be a contract entered into pursuant to
the laws of the State of Colorado and shall in all respects be governed,
construed, applied and enforced in accordance with the laws of the State of
Colorado and the applicable laws of the United States of America.
IN WITNESS WHEREOF, Maker has duly executed this Note as of the day
and year first above written.
N'TANDEM TRUST, an unincorporated
California business trust
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT 99(b)(1)
Appraisals of Whitcomb Real Estate, Inc.
<PAGE>
EXHIBIT (b)(1)(A)
SUMMARY
REAL ESTATE APPRAISAL REPORT
320-Space Town & Country Estates
Manufactured Housing Community
4444 East Benson Highway
Tucson, Pima County, Arizona
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6430 South Quebec Street
Englewood, Colorado 80111
AS OF
September 1, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
[LETTERHEAD OF WHITCOMB REAL ESTATE APPEARS HERE]
September 15, 1999
Steve Waite
Windsor Corporation
6430 South Quebec Street
Englewood, Colorado 80111
RE: 320-Space Town & Country Estates
Manufactured Housing Community
4444 East Benson Highway
Tucson, Pima County, Arizona
Dear Mr. Waite:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of September 1, 1999, based on an exposure period of six months, to
be:
- FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS -
($5,400,000)
Our value estimate applies to the land as physically constituted, to the
improvements actually in existence and reflects prevailing trends in the local
real estate market. We have made a careful inspection, study, and analysis of
the property, and have considered all factors which, in our opinion, would tend
to influence the market value of the subject.
Town & Country Estates is a fully developed family manufactured housing
community containing a total of 320 spaces, with a clubhouse, two pools,
Jacuzzi, playground, and four shuffleboard courts. The community has an on-site
well and the Pima County Wastewater District furnishes sewer service.
<PAGE>
Steve Waite
September 15, 1999
Page Two
The rental rate at Town & Country Estates is currently $238.00 and includes
water, sewer and trash. According to the manager, the physical occupancy of the
subject is currently 98.8%. The manager occupies one unit, resulting in an
economic occupancy of 98.4%.
Our conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
We appreciate this opportunity to be of service to you. If you have any
questions, please do not hesitate to contact us.
This is a Summary Appraisal, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of
Professional Appraisal Practice for Summary Appraisal Reports. This report
represents only summary discussions of the data, reasoning, and analyses
employed in the appraisal process toward the development of our opinion of
value. Supporting documentation has been retained in our files.
Very truly yours,
WHITCOMB REAL ESTATE
/s/ L. Drake Moore
L. Drake Moore, MAI
St. Cert. Gen. REA #TP40569
<PAGE>
4
<TABLE>
TABLE OF CONTENTS
- -----------------
<S> <C>
Table Of Contents......................................................... 4
Photographs Of The Subject................................................ 5
Summary Of Facts And Conclusions.......................................... 6
Extent Of Confirming, Collecting And Reporting Data....................... 7
Purpose, Function And Date Of The Appraisal............................... 7
Area/Neighborhood Description............................................. 8
Manufactured Home Community Market Overview............................... 10
Land And Site Improvements................................................ 11
Improvement Description................................................... 12
Ownership And Property History............................................ 12
Occupancy................................................................. 12
Zoning And Other Land Use Controls........................................ 13
Real Estate Assessment And Taxes.......................................... 13
Marketability And Marketing Period........................................ 14
Highest And Best Use...................................................... 15
Valuation Process......................................................... 16
Income Capitalization Approach............................................ 16
Sales Comparison Approach................................................. 24
Final Estimate Of Value................................................... 28
Certification............................................................. 29
Assumptions And Limiting Conditions....................................... 30
</TABLE>
Addenda
Legal Description
Maps
Profile Of Appraiser
<PAGE>
5
PHOTOGRAPHS OF THE SUBJECT (Taken August 27, 1999)
[Picture appears here]
1. Entrance to Subject
[Picture appears hear]
2. Typical Street View
<PAGE>
6
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
Property Appraised: 320-Space Town & Country Estates
-------------------
Manufactured Home Community
4444 East Benson Highway
Tucson, Pima County, Arizona
Property Rights
---------------
Appraised: Fee Simple Interest, subject to tenant leases
----------
Land Area: 48.418 acres, or 2,109,104 square feet (Estimated by
----------
Appraiser)
Improvements: 320-manufactured home spaces, clubhouse with office
-------------
two pools and recreation area.
Owner: Windsor Park Properties 5 and 6
------
Zoning: TH, Trailer Homesite Zone
-------
Highest and Best Use: As Improved -- Current Use
---------------------
Value Indications: Income Approach $5,400,000
------------------
Sales Comparison Approach $5,500,000
Final Estimate of Value: $5,400,000
------------------------
Date of Appraisal: September 1, 1999
------------------
Date of Inspection: August 27, 1999
-------------------
<PAGE>
7
EXTENT OF CONFIRMING, COLLECTING AND REPORTING DATA
- ---------------------------------------------------
This assignment encompasses providing an "as is" market value of the fee
simple title of the property and improvements, as of the specified date. This
investigation included an overview of the area and local manufactured home
market. We have inspected the subject and its environs, collected and analyzed
market data, inspected the comparable and competitive properties, considered and
applied the appropriate valuation methods and reconciled the final value
estimate.
The real estate interest appraised is that of ownership in fee simple
interest, subject to the existing tenant leases. The property is appraised as
if free and clear of mortgages, liens, servitude's and encumbrances, except
those noted in the body of this appraisal.
PURPOSE, FUNCTION AND DATE OF THE APPRAISAL
- -------------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of September 1, 1999. The information, opinions, and
conclusions contained in this report have been prepared as a basis for portfolio
valuation. The subject was physically inspected on August 27, 1999, and the date
of this appraisal is September 1, 1999.
Market Value is defined as: The most probable price which a property should
bring in a competitive and open market under all conditions requisite to a fair
sale, the buyer and seller each acting prudently, knowledgeably and assuming the
price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a specified
date and the passing of title from seller to buyer under conditions whereby:
. Buyer and Seller are typically motivated;
. Both parties are well informed or well advised, and each acting in
what he considers his own best interest;
. A reasonable time is allowed for exposure in the open market;
. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
. The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale./1/
- -------------------
/1/ The Office of the Thrift Supervision, 12 CFR 564.2(f)
<PAGE>
8
AREA/NEIGHBORHOOD DESCRIPTION
- -----------------------------
Location/Access
- ---------------
The subject is located in Tucson, which is located within southeast
Arizona, approximately 110 miles southeast of Phoenix, within the northeastern
portion of Pima County. The city of Tucson serves as the county seat of Pima
County. This area lies in the southern portion of the state and regional
highway access is good with two interstates, I-10 and I-19, which traverse the
county. Tucson is located approximately 409 miles southeast of Las Vegas,
Nevada, 455 miles southwest of Albuquerque, New Mexico and 424 miles east of San
Diego, California. It is the second largest city in the state and encompasses
156.04 square miles while the metropolitan area spreads over 495 miles. The
subject lies approximately 6 miles southeast of the Central Business District of
Tucson. Access to the neighborhood is excellent, offering all amenities,
shopping, schools, churches, medical facilities and entertainment and
recreation. Ingress and egress of the subject is rated adequate.
Development has taken the form of mixed-use residential, commercial and
light industrial type properties located along the major road frontages, typical
of rural areas. Land use in the immediate vicinity of the subject is
characteristic of the entire neighborhood. Existing uses along East Benson
Highway are typical of older, industrial and retail strip types of development.
The neighborhood is estimated to be 50% developed. There remain large
contiguous tracts of land available for in-fill development.
Population
- ----------
As of 1998, Pima County contained a total population of 790,755, and
represents a 18.20 percent increase from 1990. The city of Tucson is the second
largest city within the state with an estimated 1998 population of 458,675. This
represents a 13.14 percent increase in total population since 1990. The
surrounding area has exhibited a significant amount of population growth during
the past two decades. This growth is attributed to job growth and attractive
cost of living for the surrounding area. Population trends for the area are
outlined on the following page.
<PAGE>
9
Area/Neighborhood Analysis
==========================================================================
REGIONAL POPULATION TRENDS
1980 to 1990
Compound Annual
1980 1990 1998 Growth Rate
- --------------------------------------------------------------------------
Tucson 330,537 405,390 458,675 2.29%
Pima County 531,896 668,750 790,755 2.58%
State of Arizona 2,718,215 3,763,350 4,668,631 3.68%
==========================================================================
It is estimated that the population levels of Pima County and other
locations in the surrounding area will continue to increase in coming years. As
of 1998, the per capita personal income for Pima County stood at $21,065 and
represents a 29.2% increase from 1993.
Economic Base and Employment
- ----------------------------
Pima County has a relatively diversified economic base and primary
employment sectors include services (31.1%), government (23.1%), wholesale and
retail trade (21.7%) and manufacturing (9.0%). Manufacturing employment within
the Tucson area has more than doubled during the past 10 years and is attributed
to the increase of high technology manufacturers which include AlliedSignal, 3M,
Raytheon Missile Systems and Burr-Brown. Tourism also serves as an important
source of income with over $2.8 billion in revenues during 1998. Mining also
plays as an important role in the local economy. Employment growth trends for
the surrounding area reflect the recession of the early 1990's and a full
recovery. The unemployment rate has continued to decline as the total labor
force has increased. This factor indicates job growth has outpaced the growth
in the labor force. From 1994 to 1998, the total labor force within the MSA
increased by 3.5 percent. Much of this growth has been in the service,
manufacturing and government sectors. Major employers include University of
Arizona (10,100 employed), Davis-Monthan Air Force Base (8,340), Hughes Missile
Systems Co. (7,100), HealthPartners of South Arizona (4,300) and BHP Copper Co.
(3,340).
The labor force for the MSA numbered approximately 356,400 in April 1999
and represents a 3.2 percent increase from April 1998. As of April 1999, the
estimated unemployment rate stood at 2.6%, and represents a decrease from April
1998. In addition, these figures are below both state and national unemployment
levels.
<PAGE>
10
Area/Neighborhood Analysis
Transportation
- --------------
Pima County has an abundant transportation network that allows convenient
access to surrounding cities. Two interstate highways converge on the city and
provide primary access to the surrounding areas. Interstate 10 extends
northwest to Phoenix and southeast to El Paso, Texas. Interstate 19 extends
south from Tucson to Nogales. Other primary routes include State Routes 86, 77
and 83. Commercial air service is available from the Tucson International
Airport. Over 39+ trucking companies with several maintaining terminals within
the surrounding area provide common carrier freight service. Southern Pacific
and Amtrak provide railroad service, which serve the area. Overall,
transportation facilities within the Pima County area are sufficient to serve
the needs of both businesses and residents.
Summary
- -------
In summary, the Tucson and Pima County area looks favorable with most
economic sectors experiencing strong growth from both relocations and
expansions. With a diversified economy, a large measure of stability is ensured
relative to many other areas. Although future rates of growth are not likely to
match those of the early and mid 1990's, the overall prognosis of factors
pertinent to the long-term real estate investment decision appears positive.
MANUFACTURED HOME COMMUNITY MARKET OVERVIEW
- -------------------------------------------
According to the 1998 U.S. Housing Market Map, Arizona ranked 13/th/ among
states in the number of homes shipped in 1998. As shown on the following table,
manufactured home shipments in Arizona have varied annually since 1996.
Manufactured
Home Shipments
===============================================
Year Shipments
-----------------------------------------------
1996 8,095
-----------------------------------------------
1997 9,315
-----------------------------------------------
1998 8,611
===============================================
Source: Arizona Manufactured Housing Association
New communities are not being developed in the urban areas due to
restrictive zoning ordinances. There is a wide range of rental rates in the
marketplace. Generally speaking, lot rent ranges between $159.00 per month to
$260.00 per month. Rates varied within some of the communities as lots on a
corner, lots for multi-section homes and larger lots leased for higher than
standard amounts. Typically, services included in the rental rate vary.
<PAGE>
11
LAND AND SITE IMPROVEMENTS
- --------------------------
The subject site is irregularly shaped and contains approximately 48.418
+/- acres, or approximately 2,109,104 square feet of gross area. A survey was
not available; therefore, the size of the subject site is an estimate. The
subject tract is generally level and at grade with East Benson Highway.
Drainage of the tract appears adequate and no adverse soil or subsoil conditions
were observed during the physical inspection of the site. Utility services
connected and in service on the date of valuation include sanitary and storm
sewer, electricity and telephone. An on-site well provides water to the
community.
Roadways arranged to maximize the use of the land access the individual
lots in the community. Roadway improvements include:
Street-bed: East Benson Highway is an asphalt paved, two-lane
----------
roadway. The subject streets are asphalt paved 25-foot
wide roadways.
Sidewalks/Curb: There are no sidewalks or curbs along the public
--------------
streets or in the subject.
Street Lights: East Benson Highway does not have streetlights. The
-------------
subject park has pole mounted overhead streetlights
along the right of way.
Landscaping: Sodded and planted areas extend along the entire
-----------
perimeter and throughout the site.
Encumbrances: None Noted
-------------
Easements: Standard utility easements are assumed to exist.
----------
Encroachments: None Noted
--------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded, or otherwise known
liens, defects in title or adverse easements. There are no rent controls in
effect in Pima County.
Functional Utility
- ------------------
The sites, which are irregular in shape and contains approximately 48.418
+/- acres, which is large enough to accommodate building improvements and
roadways as well recreational amenities and green areas. The sites are
considered functional for various residential development scenarios. The
current development equates to an overall density of approximately 6.61 units
per acre, which is above current development standards that tend toward larger
lot sizes, wider streets and more green areas.
<PAGE>
12
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 320 manufactured housing community pads,
arranged along streets configured to maximize the available lot spaces. All of
the lots vary slightly in size and the density of the park is equal to 6.61
spaces per acre.
The common area amenities include the clubhouse, two pools, and children's
playground area. We have not estimated a separate value for these amenities, or
equipment, as they are standard items found at most manufactured home
communities. These amenities are typical, adequate and functional in use.
The community and site improvements were built in 1971. The common areas,
streets, amenities and individual mobile homes were observed to be in excellent
overall condition, having been originally constructed of quality materials and
having been maintained over the years. No significant item of deferred
maintenance was noted and the current maintenance level is rated good.
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject property is in the name of Windsor Park
Properties 5 and 6. The Windsor Corporation purchased the subject property in
November 1989. There have been no other sales or other transfers of the
property of which the appraisers are aware. The subject is currently not listed
for sale nor is there pending offers or current contracts for the sale of the
property.
OCCUPANCY
- ---------
Two fully developed manufactured home communities with 320 total spaces
occupy the property. According to the manager, there are currently 4 vacant lots
and the physical occupancy is 98.8%. In addition, the manager occupies one lot.
The August 1/st/ rent roll indicated there were 6 vacancies.
<PAGE>
13
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The property is zoned MH, Manufactured Housing/Mobile Home. It is our
opinion that the subject property is in conformance with the zoning code.
Flood Hazard
- ------------
According to Flood Map Community Number 04019C2245K, dated February 8,
1999, the subject is located in Zone "X", which indicates areas of minimal
flooding.
Environmental
- -------------
We observed no obvious areas of contamination on or about the site. We
noted that there is an on-site waster water treatment plant and we have
previously mentioned the spaces that have individual septic systems. We have no
qualifications in environmental hazards and recommend an environmental audit be
performed.
REAL ESTATE ASSESSMENT AND TAXES
- --------------------------------
The subject property is identified in the Pima County records under tax
parcel number ###-##-####. The Full Cash Value (FCV) of the subject totals
$2,195,391 and the Limited Primary Value (LPV) is $2,165,831. It is our opinion
that the subject is under assessed. This not uncommon for manufactured housing
communities since large parts of the value can be attributed to the
entrepreneurial skill in acquiring the land and filling the community.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Arizona, manufactured housing
communities are assessed at 10% of the Full Cash Value and Limited Primary
Value. Properties are reassessed annually and equitability of assessments is
not a basis for assessment in the state of Arizona. The 1999 current taxes total
$39,841.22 and should be approximately the same in 2000.
In the State of Arizona, property taxes are paid in arrears. Taxes are due
and payable on or before December 31/st/.
<PAGE>
14
MARKETABILITY AND MARKETING PERIOD
- ----------------------------------
The subject is competitive with other properties in the marketplace and is
marketable, although not considered a candidate for a resident purchase.
Discussions with large institutional manufactured home community investor
representatives and local area realtors, indicated that "properly priced",
stable, well kept manufactured home communities should "be under contract"
within a six month period in today's market.
Our discussions also indicated overall capitalization rates were higher for
all-age communities and dependent upon occupancy and condition. Pricing is
established by processing gross income, reduced by a vacancy and credit loss
factor, operating expenses and an additional capital charge based on overall
condition, is deducted to arrive at a net operating income (NOI). Those surveyed
indicated that at properties not operating at stabilized occupancy, they were
unwilling to compensate a seller for any of the upside to be gained in filling
the property.
In early October 1998, commercial mortgage backed securities (CMBS) lenders
restructured their pricing for long term fixed rate loans. These loans had
historically been priced based on an interest rate spread above Treasury
Securities. The secondary market for these loans became illiquid and lenders
were unable to sell the loans profitably. Consequently, although interest rates
on Treasuries have fallen, the interest rates on securitized loans have
increased. Based upon a recent survey by John B. Levy & Company of selected CMBS
spreads and whole loans a spread between 195 and 200 basis points over 10-year
U.S. Treasuries is available for an A rated security. BBB rated CMBS
securities may have a spread ranging from 240 to 250 basis points over the 10-
year treasury. A prime mortgage rate ranging from 8.02 to 8.12 is available for
a loan with a ten-year term.
Interest rates are low and financial institutions are again willing to lend
money for real estate projects with good occupancies. There has also been
significant institutional investor interest in manufactured home community
investments. In our opinion, the marketing period for the property would be
within the range indicated by the industry participants or six months.
<PAGE>
15
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as: The reasonably probable and legal
use of vacant land or an improved property, which is physically possible,
appropriately supported, financially feasible and which results in the highest
value."/2/
We have considered all of the potential uses to which the subject is
legally and physically adaptable. It is our opinion that the current use of the
subject, as a 320-space, manufactured home community, represents the highest and
best use of the subject.
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a fully occupied manufactured home community, investors
are primarily concerned with cash flow to service any debt and the equity
position. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of mobile homes by
offering low space rental rates, an investor would not be willing to compensate
a seller for any more than the income to be received. The subject is fully
developed with no expansion possibilities, therefore a potential investor would
be primarily interested in the cash flow and equity return and we have excluded
the Cost Approach.
- -----------------
/2/ The Appraisal Institute, The Appraisal of Real Estate, 10th Ed. Chicago: The
----------------------------
Appraisal Institute, 1992, page 275.
<PAGE>
16
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is, of course, an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms, and within the goal of price minimization seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
facility, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property in the market.
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the subject property. The
estimate of net operating income is derived through the process of estimating
the total potential gross income (PGI from rentals and other sources, less any
vacancy and credit loss producing an effective gross income (EGI) estimate. All
expenses associated with the operation of the property are then deducted to
yield a stabilized net operating income (NOI) estimate.
A survey of the competitive properties is presented in summary form on the
following page.
<PAGE>
RENT COMPARABLE SUMMARY
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
No. Name Total Monthly Rental Services Amenities
Address Spaces/ Rate Included In Rent
% Occ. Concession
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Country Club Estates MHP 256/ $235.00 to None. Pool and playground.
5600 South Country Club Road 100% $250.00
Tucson, Arizona
- ------------------------------------------------------------------------------------------------------------------------------------
2 Desert Classic Mobile Home 273/ $220.00 to None Clubhouse, pool and
5250 South Campbell 100% $230.00 playground.
Tucson, Arizona
- ------------------------------------------------------------------------------------------------------------------------------------
3 Mountain Vista Mobile Home Park 459/ $220.00 to None Clubhouse and two pools.
4545 South Mission Road 93.5% $230.00
Tucson, Arizona
- ------------------------------------------------------------------------------------------------------------------------------------
4 Park Lane Mobile Home Park 136/ $250.00 to None Clubhouse, pool and
5255 South Park Street 100% $260.00 billiard room.
Tucson, Arizona
- ------------------------------------------------------------------------------------------------------------------------------------
5 Mobile Aire Mobile Home Park 80/ $159.00 None Pool.
6065 South Country Club Road 100%
Tucson, Arizona
- ------------------------------------------------------------------------------------------------------------------------------------
Subj. Town & Country Estates MHP 320/ $238.00 Water, sewer and Clubhouse, 2 pools with
4444 E. Benson Highway 98.8% trash pick-up. spa, billiards and
Tucson, Arizona shuffleboard.
===================================================================================================================================
</TABLE>
<PAGE>
18
Income Capitalization Approach
Income Analysis
- ---------------
The general market practice is on a base lot rent charged on a monthly
basis. The base lot rent in our survey ranged from $159.00 to $260.00 per
month, as indicated by the rent comparables recited in this report. As shown by
our survey, the subject's lot rents are within the market range.
Potential Gross Income
- ----------------------
In our forecast of total rental income, we have projected 12 months at the
current rent levels. Based on the current rent roll, the total monthly rent
amounts to $76,160 and the average monthly rental rate for the 320 units is
equivalent to $238.00. The potential gross income from rentals is $913,920 per
year.
Vacancy and Credit Loss
- -----------------------
The subject is an all-age community currently 98.8% physically occupied with
4 of the 320 sites vacant. The market currently ranges from 93.5% to 100%. We
have estimated vacancy at 5.0% of total potential gross income, or $45,696.
Other Income
- ------------
Additional income is typically derived from sources such as storage fees,
labor charges to the tenants, commissions on sales and rentals of the units.
Historically, the subject has generated from $23.50 per space in 1998 to $32.06
per space in annualized 1999, in other income. We have based our estimate of
other income on the historical levels, estimating this income at $30.00 per
space, or $9,600 annually.
Effective Gross Income (EGI)
- ----------------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated losses due to tenant changes, plus any additional income. Thus
potential gross rental income of $913,920 less a vacancy and credit loss
allowance in the amount of $45,696 or 5.0% produces an effective gross income
from rentals estimate of $868,224. To this we add income derived from other
sources, which totals $9,600, arriving at an effective gross income estimate of
$877,824.
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
Town & Country Manufactured Housing Summary of Historical Operations
Pct. of $ Per Pct. of $ Per Pct. of $ Per
1996 Income Space 1997 Income Space 1998 Income Space
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $ 663,011 98.74% $ 2,071.91 $ 732,672 98.91% $2,289.60 $ 785,827 99.05% $2,455.71
RV Rent 252 0.04% 0.79 - 0.00% - - 0.00% -
Utility Income 152 1.89% 0.48 - 0.00% - - 0.00% -
Miscellaneous/Other 8,034 1.20% 25.11 8,097 1.09% 25.30 7,520 0.95% 23.50
--------------------------------------------------------------------------------------------------------
Total Income $ 671,449 101.87% 2,098.28 $ 740,769 100.00% 2,314.90 $ 793,347 100.00% $2,479.21
Expenses:
Insurance 13,092 1.95% 40.91 15,927 2.15% 49.77 4,402 0.55% 13.76
Office 41,605 6.20% 130.02 46,060 6.22% 143.94 41,159 5.19% 128.62
Maintenance & Supplies 22,284 3.32% 69.64 34,520 4.66% 107.88 30,209 3.81% 94.40
Management Expense 33,580 5.00% 104.94 36,983 4.99% 115.57 39,496 4.98% 123.43
Wages & Benefits 65,936 9.82% 206.05 87,087 11.76% 272.15 94,567 11.92% 295.52
Property Taxes 31,501 4.69% 98.44 31,681 4.28% 99.00 34,282 4.32% 107.13
Utilities 89,969 13.40% 281.15 98,742 13.33% 308.57 96,080 12.11% 300.25
---------------------------------------------------------------------------------------------------------
Total Expenses $ 297,967 44.38% $ 931.15 $ 351,000 47.38% $1,096.88 $ 340,195 42.88% $1,063.11
Net Operating Income $ 373,482 55.62% $ 1,167.13 $ 389,769 52.62% $1,218.03 $ 453,152 57.12% $1,416.10
=================================================================================================================================
<CAPTION>
6 Months
Annualized Pct. of $ Per
1999 Income Space
=============================================================
<S> <C> <C> <C>
Income:
Rents $ 868,540 98.83% $2,714.19
RV Rent - 0.00% -
Utility Income - 0.00% -
Miscellaneous/Other 10,258 1.17% 32.06
------------------------------------
Total Income $ 878,798 100.00% $2,746.24
Expenses:
Insurance 5,920 0.67% 18.50
Office 44,422 5.05% 138.82
Maintenance & Supplies 33,924 3.86% 106.01
Management Expense 43,280 4.92% 135.25
Wages & Benefits 87,018 9.90% 271.93
Property Taxes 37,976 4.32% 118.68
Utilities 95,430 10.86% 298.22
------------------------------------
Total Expenses $ 347,970 39.60% $1,087.41
Net Operating Income $ 530,828 60.40% $1,658.84
=============================================================
</TABLE>
<PAGE>
20
Income Capitalization Approach
Operating Expense Analysis
- --------------------------
Insurance: Historically, this expense has exhibited a decreasing trend. Our
- ----------
estimate of this expense has been stabilized based on the historical amounts, or
$20.00 per space per year. This is equal to $6,400 annually or approximately
0.73% of the effective gross income.
Administrative/Office: Historically, this expense has varied since 1997. In the
- ----------------------
financial statements, this expense does include some corporate expense items,
which we have not considered. We have stabilized our estimate of this expense at
$133.00 per space per year, which is equal to $42,560 or approximately 4.85% of
the estimated effective gross income.
Maintenance and Repair: Historically, this expense has varied. We have based
- -----------------------
our estimate on the indicated historical trend at $100.00 per space per year or
$32,000 annually, believed adequate to properly maintain the community. This
amount is equal to approximately 3.65% of the estimated effective gross income.
Management Fees: This expense typically includes off-site management, the
- ---------------
oversight of the on-site manager and monthly bookkeeping functions. We used a
rate of 5% of the effective gross income estimate, typical in the market place,
equal to $43,891 or $137.16 per space per year.
Wages and Benefits: Historically, this expense has steadily increased, except in
- -------------------
annualized 1999. We have based our estimate on the historical data at $290.00
per space per year or $92,800, which is equal to 10.57% of the estimated
effective gross income.
Property Taxes: This category is project specific due to location. Based on our
- ---------------
analysis of the historical tax trends, we have estimated the tax liability to be
$39,841. This equates to $124.50 per space per year or approximately 4.54% of
the estimated effective gross income.
Utilities: The expense is expected to cover the cost of providing water, sewer
- ----------
and trash pick-up and the utility expense related to the common area. This is
equal to $96,000, or approximately 10.94% of the estimated effective gross
income.
Reserves: This expense category represents the inclusion of set-asides for
- ---------
major recurring or capital type expenditures experienced periodically by any
property. We have used $30.00 per space per year, believed adequate to cover
future capital costs. This equates to $9,600 annually or 1.09% of (EGI).
Total Expenses: To summarize, we have stabilized total operating expenses for
- ---------------
the subject property at $363,092. This estimate is equal to 41.36% of the
Effective Gross Income (EGI) estimate or $1,134.66 per space per year. As
shown, expenses have historically ranged between 39.6% (6 months annualized
1999) and 47.38% (1998).
<PAGE>
===============================================================================
Town & Country Manufactured Housing Community
Stabilized Operating Statement
% of $ per
Amount EGI Space
===============================================================================
Total Effective Gross Income $ 877,824 100.00% $ 2,743.20
Expenses
Insurance $ 6,400 0.73% $ 20.00
Office 44,800 5.10% 140.00
Maintenance & Repairs 32,000 3.65% 100.00
Management Expense 43,891 5.00% 137.16
Wages & Benefits 92,800 10.57% 290.00
Property Taxes 39,841 4.54% 124.50
Utilities 96,000 10.94% 300.00
Reserves 9,600 1.09% 30.00
--------------------------------------
Total Expenses $ 365,332 41.62% $ 1,141.66
Net Operating Income $ 512,492 58.38% $ 1,601.54
================================================================================
<PAGE>
Income Capitalization Approach 22
Selection of a Capitalization Rate
- ----------------------------------
Direct capitalization of terminal net operating income by an overall
capitalization rate extracted from the market provides an excellent indication
of market value. Purchasers of manufactured home communities most often utilize
this method. This method is easily understood, closely related to the market,
and convincing if the overall rates abstracted from recent sales are from
comparable sale properties and accurate income data are available.
Market Data
- -----------
The comparable sale data indicated an overall capitalization rate between
8.22% and 10.30%. The data indicates a narrow range in overall capitalization
rates, which tend to be influenced by the size of the community, its occupancy,
expense ratio, age and condition, amenity package and location.
================================================================================
Sale Sale Date Vacancy Rate Expense Ratio Overall Rate
- --------------------------------------------------------------------------------
1 February 1999 3.0% 32.2% 9.78%
- --------------------------------------------------------------------------------
2 February 1999 7.0% 35.0% 9.00%
- --------------------------------------------------------------------------------
3 December 1998 1.0% 29.5% 10.30%
- --------------------------------------------------------------------------------
4 November 1997 0% 36.8% 10.00%
- --------------------------------------------------------------------------------
5 July 1997 5.0% 35.0% 9.35%
================================================================================
The comparable sale data represents recent sales of all age communities in
Arizona. The upper end of the indicated range is represented by sales that are
inferior in quality and amenities to the subject property. Sale Comparable
Numbers Two, Three and Five are also inferior in terms of condition to the
subject property. However, Sales Comparable Numbers 1 and 5 are situated in
superior residential areas and reflect reduced risk. Based on these
considerations, we have concluded an overall capitalization rate of 9.5%.
Debt Coverage Ratio Method
- --------------------------
We have also developed an overall rate through the Debt Coverage Ratio
analysis. Current commercial lending policies indicate a mortgage loan of 75% of
market value, based on a 20-year amortization schedule at an annual interest
rate of 8.00%, which yields an annual mortgage constant of 10.037%. A minimum
debt coverage ratio (DCR) of 1.25 to 1.00 would likely be required for a
property similar to the subject. Based on these assumptions an overall
capitalization rate has been developed, as presented below:
<PAGE>
Income Captialization Approach 23
<TABLE>
<CAPTION>
==============================================================================================
M F DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
0.75 0.10037 1.25 0.09410
- ----------------------------------------------------------------------------------------------
Rounded 9.4%
==============================================================================================
</TABLE>
The Debt Coverage Ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufactured home
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The rate via the debt coverage ratio is supportive of the rate concluded
from the market data. Our estimate of the market value of the subject, indicated
by the Income Capitalization Approach, is calculated as follows:
Net Operating Income Overall Capitalization Rate Market Value
$514,732 /0.095 $5,418,232
Rounded $5,400,000
<PAGE>
24
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions be weighed, and the data of each transaction
be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject be considered;
differences in physical, functional, and economic characteristics be
noted; and adjustments for the differences be made.
3. The value conclusion is consistent with the analysis of the sales
data.
So that a conclusion from the analysis of the sales data can be drawn, a
unit of comparison has been selected. Calculation of a unit of comparison
provides a common denominator by which the market sales can be related to each
other and to the subject property. The commonly accepted unit of comparison in
the valuation of manufactured home communities is the selling price per space.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For dissimilar features adjustments are made
indicating the price at which the subject could be expected to sell. In making
adjustments, all relevant factors were considered including:
1. Nature of surrounding development.
2. Size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
Based on our investigation, the following five sales of all age communities
are the most significant transactions for direct comparison with the subject.
<PAGE>
25
Summary of Sale Comparables
<TABLE>
<CAPTION>
====================================================================================================================================
No. Name Sale Price/ Total Price/ Average E.G.I.M./ O.A.R.
Address Sale Date Spaces/ Space Lot Rent Expense %
(Adj. For Cash Occupancy
Equivalency)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1 Mesa Dunes $9,500,000 451/ $21,064 $235.00 6.94/ 9.78%
7807 E. Main Street February 1999 97.0% 32.16%
Mesa, Maricopa County, Arizona
- ------------------------------------------------------------------------------------------------------------------------------------
2 Cactus Garden $1,685,000 75/ $22,467 $200.00 7.22/ 9.0%
233 W. Irvington Place February 1999 93.0% 35.0%
Tucson, Pima County, Arizona
- ------------------------------------------------------------------------------------------------------------------------------------
3 El Molina Mobile Home Park $1,675,000 103/ $16,262 $200.00 6.84/ 10.3%
1552 W. Miracle Mile December 1998 99% 29.5%
Tucson, Pima County, Arizona
- ------------------------------------------------------------------------------------------------------------------------------------
4 Fiesta Village $3,500,000 172/ $20,349 $250.00 6.32/ 10.0%
235 W. Southern Avenue November 1997 100% 36.82%
Mesa, Maricopa
County, Arizona
- ------------------------------------------------------------------------------------------------------------------------------------
5 Westward Ho Mobile Home Park $2,150,000 113/ $19,027 $140.00 6.95/ 9.35%
3810 N. Romero Road July 1997 95.0% 35.0%
Tucson , Pima County, Arizona
====================================================================================================================================
</TABLE>
<PAGE>
26
Sales Comparison Approach
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. The properties, which
have been compared to the subject, have been discussed below:
Sale Comparable Number One is Mesa Dunes Mobile Home Park in Mesa, Arizona.
The all age community has 451 spaces and sold in February 1999 for $9,500,000,
or $21,064 per space. Based on an effective gross income of $1,368,869, the EGIM
was 6.94. The overall rate was 9.78%. The average lot rent at the time of sale
was approximately $235.00. The expenses represented approximately 32.16% of the
effective gross income. The community was 97.0% occupied at the time of sale.
Sale Comparable Number Two is the Cactus Garden Mobile Home Park in Tucson,
Arizona. This 75-space all ages community sold for $1,685,000 and equates to a
sale price per space of $22,467. Based on an effective gross income of $233,308,
the EGIM was 7.22. The expenses represented approximately 35.0% of the effective
gross income and the indicated overall capitalization rate was 9.0%, based on a
net operating income of $151,650. This community was built in 1973 and was 93.0%
occupied at the time of sale.
Sale Comparable Number Three is the El Molina Mobile Home Park in Tucson,
Arizona. The 103-space all age community sold for $1,675,000 in December 1998.
The cash equivalent price equates to a sale price per space of $16,262. Based on
an effective gross income of $244,728, the EGIM is 6.84. The indicated overall
capitalization rate was 10.3%, which would indicate a net operating income of
$172,525. The average lot rent at the time of sale was $200.00. The park was
99.0% occupied at the time of sale.
Sale Comparable Number Four is Fiesta Village Mobile Home Park in Mesa,
Arizona. This 172-space all age community sold for a cash equivalent price of
$3,500,000 in November 1997. The price equates to a sale price per space of
$20,349. Based on an effective gross income of $554,000, the EGIM was 6.32. The
expenses represented 36.82% of the effective gross income and the indicated
overall capitalization rate was 10.0%, based on a net operating income of
$350,000. This community was 100% occupied at the time of sale.
Sale Comparable Number Five is the former Westward Ho Mobile Home Park in
Tucson, Arizona. This 113-space all age community sold for $2,150,000 in July
1997. The price equates to a sale price per space of $19,027. Based on an
effective gross income of $309,168, the EGIM was 6.95. The expenses were 35.0%
of the effective gross income and the indicated overall capitalization rate was
9.35%, based on a net operating income of $200,959. This community was 95.0%
occupied at the time of sale. The comparable is now a part of Continental West
manufactured housing community.
<PAGE>
27
Sales Comparison Approach
All of the sales were fee simple transactions, with no abnormal financing.
There were no abnormal sale conditions known to have occurred and all of the
sales represent transactions that have taken place over the last nine months,
having traded under similar market conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the Effective Gross Income Multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 6.32 and 7.22. As previously discussed, the EGIM is essentially a
function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject is an all age community with a 1.2% physical vacancy. The
subject was observed to be in good condition and has a good location in near
Interstate 10 and Valencia Road in Southeast Tucson, Arizona. The comparables
all had an expense ratio lower than the subject, ranging from 29.5% to 35.0%. By
comparison, the subject has a forecast expense ratio of 41.36%. Based on these
considerations, we have concluded an EGIM in the lower end of the indicated
range, processing the subject's Effective Gross Income of $877,844 with an EGIM
of 6.3.
Thus $877,824 x 6.3 is $5,530,291
Rounded, $5,500,000
On a per space basis, this is equivalent to $17,188.
<PAGE>
28
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $5,400,000
Sales Comparison Approach $5,500,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales of similar properties.
In the reconciliation, we reviewed each approach to value (a) to ascertain
the reliability of the data and (b) to weight the approach that best represented
the actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis of
this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the valuation
of the subject property, the sales comparison approach was considered reliable.
The two approaches reflect a narrow range of value. Our opinion of value
is based on the Income Approach, as buyers are most concerned with cash flow to
service debt. Our opinion of the market value of the subject, based on a
reasonable exposure period of six months, as of September 1, 1999 was:
- FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS -
($5,400,000)
<PAGE>
29
CERTIFICATION
- -------------
I certify that, to the best of my knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions and is my personal,
unbiased professional analyses, opinions, and conclusions.
. I have no present or prospective interest in the property that is the
subject of this report, and I have no personal interest or bias with
respect to the parties involved.
. My compensation is not contingent on the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result,
or the occurrence of a subsequent event.
. To the best of my knowledge and belief, the reported analyses,
opinions, and conclusions were developed and this report was prepared
in conformity with the Uniform Standards of Professional Appraisal
Practice of the Appraisal Foundation, the Code of Professional Ethics,
and the Standards of Professional Practice of the Appraisal Institute.
. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
. As of the date of this report, L. Drake Moore, MAI has completed the
requirements under the continuing education program of the Appraisal
Institute.
. L. Drake Moore, MAI has made a personal inspection of the property
that is the subject of this report.
. No one provided significant professional assistance to the person
signing this report.
. I am in compliance with the competency provisions of the Uniform
Standards of professional Appraisal Practice of the Appraisal
Foundation.
. This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
/s/ L. Drake Moore
- ---------------------------
L. Drake Moore, MAI
St. Cert. Gen. REA #TP40569
<PAGE>
30
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the conclusion in
this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to us
and contained in the report or utilized in the formation of the value conclusion
were obtained from sources considered reliable and believed to be true and
correct. However, no representation, liability or warranty for the accuracy of
such items is assumed by or imposed on us, and is subject to corrections,
errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function of the Report. The appraisal report may not be reproduced,
in whole or in part, and the findings of the report may not be utilized by a
third party for any purpose, without the written consent of Whitcomb Real
Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or to be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes which may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
<PAGE>
Assumptions and Limiting Conditions 31
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are not
qualified to render an "opinion of title," and no responsibility is assumed or
accepted for matters of a legal nature affecting the property being appraised.
No formal investigation of legal title was made, and we render no opinion as to
ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed
concerning any matter that may be disclosed by a proper survey. If a subsequent
survey should reflect a differing land area and/or frontages, we reserve the
right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others, and is not meant for use as a reference in legal matters of
survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projection contained in
the appraisal assumes responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures, which would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made
available to us, so statements regarding soil qualities, if made in the report,
are not conclusive but have been considered consistent with information
available to us and provided by others. In addition, unless stated otherwise in
the appraisal, the land and soil of the area under appraisement appears firm and
solid, but the appraisal does not warrant this condition.
The appraisal report covering the subject is limited to surface rights only, and
does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers and we are not qualified to judge the structural and
environmental integrity of the improvements, if any. Consequently, no warranty,
representations or liability are assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services, including the
construction materials, particularly the roof, foundations, and equipment,
including
<PAGE>
Assumptions and Limiting Conditions 32
the HVAC systems, if applicable. Should there be any question concerning them,
it is strongly recommended that an Engineering, Construction, and/or
Environmental inspection be obtained. The value estimate stated in this
appraisal, unless otherwise noted, is predicated on the assumption that all of
the improvements, equipment and building services, if any, are structurally
sound and suffer no concealed or latent defects or inadequacies other than those
noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas which are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We, however,
are not qualified to detect such substances. The existence of these potentially
hazardous materials may have a significant effect on the value of the property.
The client is urged to retain an expert in this field, if desired. The value
conclusion assumes the property is "clean" and free of any of these adverse
conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal
<PAGE>
Assumptions and Limiting Conditions 33
tax or regulatory laws. Therefore, the actual results achieved during the
projected holding period and investor requirements relative to anticipated
annual returns and overall yields could vary from the projection. Thus,
variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992. The
appraiser has not made a specific compliance survey and analysis of this
property to determine whether it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements of the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
PARCEL 1
LOT 3 OF TRAILERANCHO ESTATES, A SUBDIVISION OF PIMA COUNTY, ARIZONA, ACCORDING
TO THE MAP OR PLAT THEREOF OF RECORD IN THE OFFICE OF THE COUNTY RECORDER OF
PIMA COUNTY, ARIZONA, IN BOOK 21 OF MAPS AND PLATS AT PAGE 49 THEREOF.
PARCEL 2
ALL THAT PORTION OF SECTION 10, TOWNSHIP 15 SOUTH, RANGE 14 EAST, GILA AND SALT
RIVER BASE AND MERIDIAN, PIMA COUNTY, ARIZONA, LYING BETWEEN LOTS 1 AND 2 OF
TRAILERANCHO ESTATES, A SUBDIVISION OF PIMA COUNTY, ARIZONA, ACCORDING TO THE
MAP OR PLAT THEREOF OF RECORD IN THE OFFICE OF THE COUNTY RECORDER OF PIMA
COUNTY, ARIZONA, IN BOOK 21 OF MAPS AND PLATS AT PAGE 49 THEREOF, AND SOUTH OF
THE TUCSON-BENSON HIGHWAY.
<PAGE>
MAPS
<PAGE>
[AREA MAP APPEARS HERE]
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
[RENT COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
[SALE COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
PROFILE OF APPRAISER
<PAGE>
PROFILE OF APPRAISER
L. DRAKE MOORE, MAI
St. Cert. Gen. REA #1321098-G
REAL ESTATE EXPERIENCE
- ----------------------
Appraiser
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational
vehicle parks, self-storage facilities, hotels, manufacturing plants,
office buildings, retail buildings and other types of commercial
establishments as well as special use facilities. Mr. Moore has also owned
and operated the L.D. Moore Company, a commercial appraisal firm in
Dallas, Texas since 1991.
Senior Appraiser/Manager
Marshall and Stevens, Inc.
Dallas, TX and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. December 1988 to September 1990.
Appraiser
Appraisal & Acquisition, Inc.
Lakeworth, Florida
Prepared appraisals on hotels and other commercial properties for purposes
of sale/purchase, property tax appeals, financing and allocation of
purchase price. September 1987 to December 1988.
Appraiser
Laventhol & Horwath
Dallas, Texas
Specialized in preparation of appraisals on hotel and commercial
properties. Performed appraisals for purposes of sale/purchase, financing
and allocation of purchase price. September 1985 to September 1987.
<PAGE>
Profile of the Appraiser
BANKING EXPERIENCE
- ------------------
Vice President
BF Saul Mortgage Company
Arlington, Texas
Managed branch office and originated non-conforming single-family mortgages
in addition to investor and commercial mortgages loans for BF Saul and
Chevy Chase Savings. March 1983 to 1985.
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
State Certified General Real Estate Appraiser
Florida #0002401
Georgia #004008
Texas #1321098-G
Real Estate Broker License
Florida #0512812
Texas #0283892
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Apartments
- ----------
Candlelight Lenexa, KS Oaktree Square Grandview, MS
Cedars Irving, Texas Pineridge Arlington, TX
Claridge Dallas, TX Regency Cove Tampa, FL
Elmwood West Palm Beach, FL Parkwood Broken Arrow, OK
Hunters Glen Kansas City, KS Sante Fe Village Kansas City, MS
Monticeto Austin, TX Towne Oaks Austin, TX
Manufactured Home Communities and Recreational Vehicle Parks
- ------------------------------------------------------------
Aberdeen Ormond Beach, FL Oak Hills Kyle, TX
Aztec Kyle, Texas Ramblewood Barnwell, SC
Boulevard Estates Pasadena, TX Regency Cove Tampa, FL
Casa del Monte West Palm Beach, FL Rolling Meadows Columbia, SC
Carolina Village Concorde, NC Rose Bay Port Orange, FL
Denton West Denton, TX Tropic Isles Palmetto, FL
Dessau Austin, TX Victoria Lakes Lexington, SC
<PAGE>
Profile of Appraiser
Hacienda Village New Port Richey, FL Villa del Sol Bradenton, FL
Hermitage Farms Camden, SC Windsor City Sumter, SC
Self-Storage Facilities
- -----------------------
American Self Storage Charlotte, NC American Self Storage Ocala, FL
American Self Storage Monroe, NC Extra Closet Ft Lauderdale, FL
American Self Storage Newel, NC
American Self Storage Stallings, NC
Hotels/Resorts
- --------------
114-Room Ambassador Plaza, Dallas, TX
420-Room Excelsior Hotel, Little Rock, AR
121-Room Lexington Park Suites, Memphis, TN
160-Room Ramada Inn, Kingsland, GA
71 -Room Best Western, Guymon, OK
Office Buildings
- ----------------
AMI Medical Houston, TX Medical Park Hope, AR
Barnett Bank North Palm Beach, FL Okeechobee Commerce W Palm Beach, FL
Carteret Savings Del Ray Beach, FL United Bank Roswell, NM
Enron Houston, TX Schindler Corporate Morris, NJ
Harolds Dallas, TX Texarkana Medical Arts Texarkana, TX
First South Little Rock, AR QVC Network Plymouth, MN
First Union Atlanta, GA
Industrial
- ----------
American Lantern McKenzie, TN Falco Lime Boca Raton, FL
American Lantern Newport, AR High Ridge Commerce Boynton Beach, FL
Campbell Soup Paris, TX John Rust Albuquerque, NM
Carrington Irving, TX Lake Pointe Centre Boca Raton, FL
<PAGE>
Profile of Appraiser
Clients List
- ------------
Bank of America Heller Financial
Barnett Bank Heron Financial
Belgravia Capital Hewlett Packard
Circuit City Internal Revenue Service
Citicorp Real Estate Lexington Hotel
Collateral Mortgage Lincoln Property
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Meyers Group (The)
First Union Corporation National Realty Advisors
GE Capital PA Holdings/Whitman Corporation
Goldman Sachs QVC
Greentree Financial Sullivan Development
EDUCATIONAL BACKGROUND
- ----------------------
University of Texas, B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
<PAGE>
State of Arizona
Board of Appraisal
BE IT KNOWN THAT
LAWRENCE D. MOORE
HAS MET ALL THE REQUIREMENTS AS A
TEMPORARY
Certified General Real Estate Appraiser
[SEAL]
In accordance with Arizona Revised In witness whereof the Arizona Board
Statutes and on authority of the of Appraisal caused to be signed by
Board of Appraisal State of Arizona. the Chair of the Board and the
Executive Director
This certificate shall remain
evidence thereof unless or
until the same is suspended, /s/ [ILLEGIBLE] 9-8-99
revoked or expires in -----------------------------------
accordance with the provisions Chair, Board of Appraisal Date
of law
CERTIFICATE NUMBER /s/ [ILLEGIBLE] 9-8-99
TP40569 -----------------------------------
EXPIRATION DATE Executive Director of the Date
SEPTEMBER 8, 2000 Board of Appraisal
SHALL REMAIN PROPERTY OF ARIZONA BOARD OF APPRAISAL
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St.Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in
industrial, commercial and residential uses. Performed appraisals for
purposes of sale/purchase, property tax appeals, syndication, financing and
allocation of purchase price. September 1985 to March 1990, and June 1992
to April 1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
<PAGE>
Profile of Appraiser 2
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Manufactured Home Communities
- -----------------------------
<TABLE>
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
Profile of Appraiser 3
Recreational Vehicle Parks
- -------------------------
<TABLE>
<S> <C> <C> <C>
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
</TABLE>
Self-Storage Facilities
- -----------------------
<TABLE>
<S> <C> <C> <C>
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
</TABLE>
Hotels/Resorts
- --------------
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D.C.
<PAGE>
Profile of Appraiser 4
Financial
- ---------
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
- ----------------------------------
W.P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
----------------------------------
TESTIMONY
- ---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
EXHIBIT (b)(1)(B)
SUMMARY
REAL ESTATE APPRAISAL REPORT
254-Space Chisholm Creek Manor
Manufactured Housing Community
501 E. 63rd Street North
Wichita, Sedgwick County, Kansas
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6430 South Quebec Street
Englewood, Colorado 80111
AS OF
September 1, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
[LETTERHEAD OF WHITCOMB REAL ESTATE APPEARS HERE]
September 15, 1999
Steve Waite
Windsor Corporation
6430 South Quebec Street
Englewood, Colorado 80111
RE: 254-Space Chisholm Creek Manor
Manufactured Housing Community
501 E. 63/rd/ Street North
Wichita, Sedgwick County, Kansas
Dear Mr. Waite:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of September 1, 1999, based on an exposure period of six months, to
be:
- TWO MILLION NINE HUNDRED FORTY THOUSAND DOLLARS -
($2,940,000)
Our value estimate applies to the land as physically constituted, to the
improvements actually in existence and reflects prevailing trends in the local
real estate market. We have made a careful inspection, study, and analysis of
the property, and have considered all factors which, in our opinion, would tend
to influence the market value of the subject.
Chisholm Creek Manor is a fully developed 254-space manufactured home
community, with a clubhouse and office and playground/recreation area. Recently
the community relocated the playground area behind the office and clubhouse
building, which resulted in an increase of 3 spaces to the current 254 spaces.
Our conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation.
<PAGE>
Mr. Steve Waite
September 15,1999
Page Two
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
We appreciate this opportunity to be of service to you. If you have any
questions, please do not hesitate to contact us.
This is a Summary Appraisal, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of
Professional Appraisal Practice for Summary Appraisal Reports. This report
represents only summary discussions of the data, reasoning, and analyses
employed in the appraisal process toward the development of our opinion of
value. Supporting documentation has been retained in our files.
Very truly yours,
WHITCOMB REAL ESTATE
/s/ L. Drake Moore
L. Drake Moore, MAI
St. Cert. Gen. REA #TP-00-27
<PAGE>
4
TABLE OF CONTENTS
- -----------------
<TABLE>
<S> <C>
Table Of Contents........................................................... 4
Photographs Of The Subject.................................................. 5
Summary Of Facts And Conclusions............................................ 6
Extent Of Confirming, Collecting And Reporting Data......................... 7
Purpose, Function And Date Of The Appraisal................................. 7
Area/Neighborhood Description............................................... 8
Manufactured Home Community Market Overview................................. 9
Land And Site Improvements.................................................. 10
Improvement Description..................................................... 11
Ownership And Property History.............................................. 11
Occupancy................................................................... 11
Zoning And Other Land Use Controls.......................................... 12
Real Estate Assessment And Taxes............................................ 12
Marketability And Marketing Period.......................................... 13
Highest And Best Use........................................................ 14
Valuation Process........................................................... 14
Income Capitalization Approach.............................................. 15
Sales Comparison Approach................................................... 23
Final Estimate Of Value..................................................... 27
Certification............................................................... 28
Assumptions And Limiting Conditions......................................... 29
</TABLE>
Addenda
Legal Description
Maps
Profile Of Appraiser
<PAGE>
5
PHOTOGRAPHS OF THE SUBJECT (Taken August 24, 1999)
[PICTURE APPEARS HERE]
1. Entrance to Subject
[PICTURE APPEARS HERE]
2. Typical Street View
<PAGE>
6
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
Property Appraised: 254-Space Chisholm Creek Manor
-------------------
Manufactured Home Community
501 E. 63/rd/ Street North
Wichita, Sedgwick County, Kansas
Property Rights
---------------
Appraised: Fee Simple Interest, subject to tenant leases
----------
Land Area: 42.92 acres, or 1,869,595 square feet
----------
Improvements: 254-manufactured home spaces, a clubhouse and
-------------
office and playground/recreation area.
Owner: Windsor Park Properties 6
------
Zoning: MH-2, Residential Mobile Home, Park City
-------
Highest and Best Use: As Improved -- Current Use
---------------------
Value Indications: Income Approach $2,940,000
------------------
Sales Comparison Approach $2,850,000
Final Estimate of Value: $2,940,000
------------------------
Date of Appraisal: September 1, 1999
------------------
Date of Inspection: August 24, 1999
-------------------
<PAGE>
7
EXTENT OF CONFIRMING, COLLECTING AND REPORTING DATA
- ---------------------------------------------------
This assignment encompasses providing an "as is" market value of the fee
simple title of the property and improvements, as of the specified date. This
investigation included an overview of the area and local manufactured home
market. We have inspected the subject and its environs, collected and analyzed
market data, inspected the comparable and competitive properties, considered and
applied the appropriate valuation methods and reconciled the final value
estimate.
The real estate interest appraised is that of ownership in fee simple
interest, subject to the existing tenant leases. The property is appraised as
if free and clear of mortgages, liens, servitude's and encumbrances, except
those noted in the body of this appraisal.
PURPOSE, FUNCTION AND DATE OF THE APPRAISAL
- -------------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of September 1, 1999. The information, opinions, and
conclusions contained in this report have been prepared as a basis for portfolio
valuation. The subject was physically inspected on August 24, 1999, and the date
of this appraisal is September 1, 1999.
Market Value is defined as: The most probable price which a property should
bring in a competitive and open market under all conditions requisite to a fair
sale, the buyer and seller each acting prudently, knowledgeably and assuming the
price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a specified
date and the passing of title from seller to buyer under conditions whereby:
. Buyer and Seller are typically motivated;
. Both parties are well informed or well advised, and each acting in
what he considers his own best interest;
. A reasonable time is allowed for exposure in the open market;
. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
. The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale./1/
- ---------------------------
/1/ The Office of the Thrift Supervision, 12 CFR 564.2(f).
<PAGE>
8
AREA/NEIGHBORHOOD DESCRIPTION
- -----------------------------
Location/Access
- ---------------
The property is located approximately 600 feet east of Broadway Street,
with access via E. 63/rd/ Street North, within the limits of incorporated Park
City, Kansas. Park City is located in the northern portion of Sedgwick County
in the Wichita MSA. Sedgwick County is the largest of three counties within the
Wichita MSA and Wichita is the largest city in Kansas
Access to Park City is primarily via Interstate 135, which extends south
from Salina to Wichita and I-35, a major freeway between Kansas City and
Oklahoma City. Interstate 81, also known as Broadway Street, is parallel to
Interstate I35 and was formerly the major north/south route through the central
business district of Wichita.
Interstate 235 is a beltway surrounding the western area of Wichita and
connects with Expressway 96 on the east side of the city. U.S. Highway 54 is
the main east/west traffic artery in Wichita. The subject is located adjacent to
the west side of I-135. Access to the neighborhood is excellent and Park City
is located on the outskirts of Wichita, offering all amenities, shopping,
schools, churches, medical facilities and entertainment and recreation. Ingress
and egress of the subject is rated adequate.
The neighborhood is rural in nature. Development has taken the form of
mixed-use residential, commercial and light industrial type properties located
along the major road frontages, typical of rural areas. Land use in the
immediate vicinity of the subject is characteristic of the entire neighborhood.
The neighborhood is estimated to be 50% developed. There remain large
contiguous tracts of land available for in-fill development.
Population
- ----------
The 1990 MSA population figure was 486,424, which represented approximately
a 9.8% growth from 1980. The most recent MSA population figure as of July 1,
1998 was 544,343, representing a population increase of approximately 11.91%.
The population of Sedgwick County increased approximately 10.74% from 1990 to
1998 to 448,050. The Wichita MSA accounts for approximately 20.7% of the state
of Kansas population (2,629,067), which increased 5.98% from 1990 to 1998.
Future projections indicate a continued population growth.
Employment
- ----------
The Wichita market has diversified to some extent since mid-1970; however,
Boeing, Cessna, Raytheon and Learjet employ approximately 16.5% of the civilian
labor force. Wichita is known as the Air Capital of the World with about 65% of
the general aviation planes produced locally by Beech
<PAGE>
Area/Neighborhood Description
9
Aircraft, Boeing Airplane Company, Cessna Aircraft and Learjet. The service
sector (including finance, insurance, and real estate) accounts for 30%
employment. Wholesale/retail trade accounts for 22% and manufacturing for 26%.
Aircraft manufacturing is a driving force for continued growth in this
metropolitan area. Reflecting the health of the local economic climate, all
sectors of the area's major industries have shown growth in the past decade. The
September 1998 MSA civilian labor force totaled 285,988 persons, with 276,6775
employed for an unemployment rate of 3.3%, well below the state and national
averages over the same period.
Transportation
- --------------
The Wichita area is accredited as a major Kansas transportation center. It
is served by 7 airlines, Greyhound Bus Lines, Santa Fe, Rock Island, and
Missouri-Pacific rail service, freight shipping, as well as the interstate
highway system. Its prime geographic location provides easy access to all
markets. Over 115 truck lines operate out of 20 terminals.
Summary and Conclusion
- ----------------------
The subject is located in Park City, which is located in the northern
portion of Sedgwick County. The subject's location in regard to the local
amenities in the form of shopping, recreational and activity centers is
considered excellent due to the proximity of the City of Wichita. General real
estate values have been static over the last three to four year period.
MANUFACTURED HOME COMMUNITY MARKET OVERVIEW
- -------------------------------------------
According to the 1998 U.S. Housing Market Map, Kansas ranked 27/th/ among
states in the number of homes shipped in 1998. As shown on the following table,
manufactured home shipments in Kansas have varied annually since 1996, with a
significant decrease in 1998.
Manufactured
Home Shipments
===============================================
Year Shipments
-----------------------------------------------
1996 3,610
-----------------------------------------------
1997 3,036
-----------------------------------------------
1998 3,885
===============================================
Source: Kansas Manufactured Housing Association
New communities are not being developed in the urban areas due to
restrictive zoning ordinances. There is a wide range of rental rates in the
marketplace. Generally speaking, lot rent ranges between $155.00 per month to
$195.00 per month. Rates varied within some of the communities as lots on a
corner, lots for multi-section homes and larger lots leased for higher than
standard amounts. Typically, services included in the rental rate vary.
<PAGE>
10
LAND AND SITE IMPROVEMENTS
- --------------------------
The site is an irregularly shaped parcel of land containing approximately
42.92 acres, or approximately 1,869,595 square feet of gross area. The tract is
generally level and at the North 63/rd/ Street grad. Drainage of the tract
appears adequate and no adverse soil or subsoil conditions were observed during
the physical inspection of the site. Utility services connected and in service
on the date of valuation include water, sanitary and storm sewer, electricity
and telephone.
Roadways arranged to maximize the use of the land access the individual
lots in the community. Roadway improvements include:
Street-bed: North 63/rd/ Street is an asphalt paved, two-lane roadway.
-----------
The subject streets are asphalt paved 25-foot wide
roadways.
Sidewalks/Curb: There are no sidewalks or curbs along the public streets
--------------
or in the subject.
Street Lights: North 63/rd/ Street and the subject park have pole mounted
-------------
overhead streetlights along the right of way.
Landscaping: Sodded and planted areas extend along the entire perimeter
-----------
and throughout the site.
Encumbrances: None Noted
-------------
Easements: Standard utility easements are assumed to exist.
----------
Encroachments: None Noted
--------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded or otherwise known liens,
defects in title or adverse easements. There are no rent controls in effect in
Sedgwick County.
Functional Utility
- ------------------
The site, which is irregular in shape and contains approximately 45.2
acres, is large enough to accommodate building improvements and roadways as well
recreational amenities and green areas. The site is considered functional for
various residential development scenarios. The current development equates to
an overall density of approximately 5.92 units per acre, which is consistent
with current development standards that tend toward larger lot sizes, wider
streets and more green areas.
<PAGE>
11
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 254 manufactured housing community pads,
arranged along streets configured to maximize the available lot spaces. All of
the lots vary slightly in size and the density of the park is equal to 5.92
spaces per acre.
The common area amenities include the clubhouse, a storm shelter, and
adjoining children's playground area. We have not estimated a separate value
for these amenities, or equipment, as they are standard items found at most
manufactured home communities. These amenities are typical, adequate and
functional in use.
The community and site improvements were built in the early 1980's, and the
community is approximately 16 years old. The common areas, streets, amenities
and individual mobile homes were observed to be in average overall condition,
having been originally constructed of quality materials and having been
maintained over the years. No significant item of deferred maintenance was
noted and the current maintenance level is rated good.
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject property is in the name of Windsor Park
Properties 6. The subject property was constructed in 1984 and Windsor Park
Properties 6 has been the owner of the property since 1989. In the past three
years, there have been no sales or other transfers of the property of which the
appraisers are aware. The subject is currently not listed for sale nor is there
pending offers or current contracts for the sale of the property.
OCCUPANCY
- ---------
A fully developed 254-space manufactured home community occupies the
property. According to the manager, there are currently 15 vacant lots and the
physical occupancy is 94.1%. The August 1st rent roll indicated the community
was full and the 1998 financials reported vacancy at less than $1,990 for the
year. We have estimated the stabilized occupancy is 95%.
<PAGE>
12
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The property is zoned MH-2, Residential Mobile Home. It is our opinion
that the subject property is in conformance with the zoning code.
Flood Hazard
- ------------
The subject property is located in a designated Flood Zone "B" according
to Flood Map Community Number 200963, Panel 0001A, dated August 19, 1986. Zone
B is defined as "Areas protected from the one percent annual chance (100 Year)
flood by levee, dike, or other structures subject to possible failure or
overtopping during larger floods." Zone B is typically an area between the 100-
year and 500-year flood.
Environmental
- -------------
We observed no obvious areas of contamination on or about the site. We
noted that there is an on-site waster water treatment plant and we have
previously mentioned the spaces that have individual septic systems. We have no
qualifications in environmental hazards and recommend an environmental audit be
performed.
REAL ESTATE ASSESSMENT AND TAXES
- --------------------------------
The subject property is identified in the Sedgwick County records under
Key/Control Numbers KE-PC-01399 and KE-PC-01400. The appraised value of the
subject totals $2,510,000 and the assessed value is $288,651. It is our opinion
that the subject is under assessed. This not uncommon for manufactured housing
communities since large parts of the value can be attributed to the
entrepreneurial skill in acquiring the land and filling the community. Based
upon the 1998 mil levy of $113.992 the current taxes are $32,904.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Kansas, manufactured housing
communities are assessed at 11.5% of the market value. Properties are
reassessed annually and equitability of assessments is not a basis for
assessment in the state of Kansas.
In the State of Kansas, property taxes are paid in arrears. Taxes are due
and payable in two installments with the first half due on or before December
20, 1998, and the second half due on or before June 29, 1999.
<PAGE>
13
MARKETABILITY AND MARKETING PERIOD
- ----------------------------------
The subject is competitive with other properties in the marketplace and is
marketable, although not considered a candidate for a resident purchase.
Discussions with large institutional manufactured home community investor
representatives and local area realtors, indicated that "properly priced",
stable, well kept manufactured home communities should "be under contract"
within a six month period in today's market.
Our discussions also indicated overall capitalization rates were higher for
all-age communities and dependent upon occupancy and condition. Pricing is
established by processing gross income, reduced by a vacancy and credit loss
factor, operating expenses and an additional capital charge based on overall
condition, is deducted to arrive at a net operating income (NOI). Those surveyed
indicated that at properties not operating at stabilized occupancy, they were
unwilling to compensate a seller for any of the upside to be gained in filling
the property.
In early October 1998, commercial mortgage backed securities (CMBS) lenders
restructured their pricing for long term fixed rate loans. These loans had
historically been priced based on an interest rate spread above Treasury
Securities. The secondary market for these loans became illiquid and lenders
were unable to sell the loans profitably. Consequently, although interest rates
on Treasuries have fallen, the interest rates on securitized loans have
increased. Based upon a recent survey by John B. Levy & Company of selected CMBS
spreads and whole loans a spread between 195 and 200 basis points over 10-year
U.S. Treasuries is available for an A rated security. BBB rated CMBS
securities may have a spread ranging from 240 to 250 basis points over the 10-
year treasury. A prime mortgage rate ranging from 8.02 to 8.12 is available for
a loan with a ten-year term.
Interest rates are low and financial institutions are again willing to lend
money for real estate projects with good occupancies. There has also been
significant institutional investor interest in manufactured home community
investments. In our opinion, the marketing period for the property would be
within the range indicated by the industry participants or six months.
<PAGE>
14
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as: The reasonably probable and legal
use of vacant land or an improved property, which is physically possible,
appropriately supported, financially feasible and which results in the highest
value."/2/
We have considered all of the potential uses to which the subject is
legally and physically adaptable. It is our opinion that the current use of the
subject, as a 254-space, manufactured home community, represents the highest and
best use of the subject.
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a fully occupied manufactured home community, investors
are primarily concerned with cash flow to service any debt and the equity
position. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of mobile homes by
offering low space rental rates, an investor would not be willing to compensate
a seller for any more than the income to be received. The subject is fully
developed with no expansion possibilities, therefore a potential investor would
be primarily interested in the cash flow and equity return and we have excluded
the Cost Approach.
- -----------------------------
/2/ The Appraisal Institute, The Appraisal of Real Estate, 10th Ed. Chicago: The
----------------------------
Appraisal Institute, 1992, page 275.
<PAGE>
15
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is, of course, an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms, and within the goal of price minimization seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
facility, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property in the market.
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the subject property. The
estimate of net operating income is derived through the process of estimating
the total potential gross income (PGI from rentals and other sources, less any
vacancy and credit loss producing an effective gross income (EGI) estimate. All
expenses associated with the operation of the property are then deducted to
yield a stabilized net operating income (NOI) estimate.
A survey of the competitive properties is presented in summary form on the
following page.
<PAGE>
<TABLE>
<CAPTION>
RENT COMPARABLE SUMMARY
========================================================================================================================
No. Name Total Monthly Services Amenities
Address Spaces/ Rental Rate Included In Rent
% Occ.
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Navajo Lakes Estates Home Park 160/ $195.00 Trash collection. Playground.
501 E. 63/rd/ North Street 98.1%
Wichita, Sedgwick County, Kansas
- ------------------------------------------------------------------------------------------------------------------------
2 River Oaks Mobile Home Park 273/ $180.00 to Trash collection Clubhouse, playground,
5400 South Hydraulic Road 100% $190.00 and basic cable. storm shelter and pool.
Wichita, Sedgwick County, Kansas
- ------------------------------------------------------------------------------------------------------------------------
3 Lamp Lighter Mobile Home Park 222/ $180.00 to Trash collection Clubhouse, playground,
2320 E. MacArthur Street 100% $190.00 and cable. storm shelter, controlled
Wichita, Sedgwick County, Kansas access gate and pool.
- ------------------------------------------------------------------------------------------------------------------------
4 Lake Side Mobile Home Park 199/ $170.00 to Trash collection. Playground, storm
2625 S. West Street 99% $200.00 security, and small lake.
Wichita, Sedgwick County, Kansas
- ------------------------------------------------------------------------------------------------------------------------
5 Glen Acres 136/ $155.00 to Trash collection. Storm shelter.
500 E.50/th/ Street 98.5% $185.00
Wichita, Sedgwick County, Kansas
- ------------------------------------------------------------------------------------------------------------------------
Subj. Chisholm Creek Manor MHP 254/ $172.00 to Trash collection. Clubhouse, playground
501 E. 63/rd/ North Street 94.1% $190.00 and storm shelter.
Wichita, Sedgwick County, Kansas
========================================================================================================================
</TABLE>
<PAGE>
17
Income Capitalization Approach
Income Analysis
- ---------------
The general market practice is on a base lot rent charged on a monthly
basis. The lot rent in our survey ranged from $155.00 to $195.00 per month, as
indicated by the rent comparables recited in this report. As shown by our
survey, the subject's lot rents are within the market range.
Potential Gross Income
- ----------------------
In our forecast of total rental income, we have projected 12 months at the
current rent levels. Based on the current rent roll, the total monthly rent
amounts to $42,812 and the average monthly rental rate for the 254 units is
equivalent to $168.55. The potential gross income from rentals is $513,744 per
year.
Vacancy and Credit Loss
- -----------------------
The subject is an all-age community currently 94.1% physically occupied with
239 of the 254 sites occupied. Because the subject has typically maintained a
higher occupancy level and the market currently ranges from 98.1% to 100%. We
have estimated vacancy at 5.0% of total potential gross income, or $25,687.
Utility Income
- --------------
Residents are charged an additional $6.00 for trash collection. We have
estimated the utility income from trash collection at $6.00 per month for 254
sites minus five percent for vacancy and credit loss, or $17,377 annually.
Miscellaneous Income
- --------------------
Additional income is typically derived from sources such as storage fees,
labor charges to the tenants, commissions on sales and rentals of the units.
Historically, the subject has generated from $38.37 per space (1996) to $56.74
(1998), in other income. We have based our estimate of other income on the
historical levels, estimating this income at $55.00 per space.
Effective Gross Income (EGI)
- ----------------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated losses due to tenant changes, plus any additional income. Thus
potential gross rental income of $513,744 less a vacancy and credit loss
allowance in the amount of $25,687 or 5.0% produces an effective gross income
from rentals estimate of $488,057. To this we add income derived from other
sources, which totals $31,344, arriving at an effective gross income estimate of
$519,400.
<PAGE>
============================================================================
Chisholm Creek Manufactured Housing Summary of Historical Operations
<TABLE>
<CAPTION>
Pct. of $ Per Pct. of $ Per
1996 Income Space 1997 Income Space
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Rents $379,831 97.49% $1,495.40 $430,951 97.33% $1,696.66
Utility Income 14 0.14% 0.06 11 0.09% 0.04
Miscellaneous/Other 9,747 2.50% 38.37 11,814 2.67% 46.51
------------------------------------------------------------
Total Income $389,592 100.14% 1,533.83 $442,776 100.09% 1,743.21
Expenses:
Insurance 5,339 1.37% 21.02 6,316 1.43% 24.87
Office 47,198 12.11% 185.82 68,757 15.53% 270.70
Maintenance & Supplies 9,374 2.41% 36.91 17,326 3.91% 68.21
Management Expense 19,363 4.97% 76.23 22,075 4.99% 86.91
Wages & Benefits 37,939 9.74% 149.37 47,350 10.69% 186.42
Property Taxes 29,330 7.53% 115.47 30,576 6.91% 120.38
Utilities 32,035 8.22% 126.12 38,722 8.75% 152.45
------------------------------------------------------------
Total Expenses $180,578 46.35% $ 710.94 $231,122 52.20% $ 909.93
Net Operating Income $209,014 53.65% $ 822.89 $211,654 47.80% $ 833.28
====================================================================================
<CAPTION>
6 Months
Pct. of $ Per Annualized Pct. of $ Per
1998 Income Space 1999 Income Space
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Rents $475,666 96.80% $1,872.70 $491,458 94.21% $1,934.87
Utility Income 1,293 8.97% 5.09 17,064 3.27% 67.18
Miscellaneous/Other 14,411 2.93% 56.74 13,154 2.52% 51.79
------------------------------------------------------------
Total Income $491,370 108.71% $1,934.53 $521,676 100.00% $2,053.84
Expenses:
Insurance 6,718 1.37% 26.45 3,492 0.67% 13.75
Office 43,891 8.93% 172.80 38,512 7.38% 151.62
Maintenance & Supplies 25,284 5.15% 99.54 13,308 2.55% 52.39
Management Expense 24,687 5.02% 97.19 25,908 4.97% 102.00
Wages & Benefits 49,892 10.15% 196.43 55,026 10.55% 216.64
Property Taxes 28,596 5.82% 112.58 30,338 5.82% 119.44
Utilities 39,746 8.09% 156.48 40,604 7.78% 159.86
------------------------------------------------------------
Total Expenses $218,814 44.53% $ 861.47 $207,188 39.72% $ 815.70
Net Operating Income $272,556 55.47% $1,073.06 $314,488 60.28% $1,238.14
====================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 19
Operating Expense Analysis
- --------------------------
Insurance: Historically, this expense has exhibited an increasing trend. Our
- ----------
estimate of this expense has been stabilized based on the historical amounts, or
$25.00 per space per year. This is equal to $7,680 annually or approximately
1.22% of the effective gross income.
Administrative/Office: Historically, this expense has shown a variable trend.
- ----------------------
In the financial statements, this expense does include some corporate expense
items, which we have not considered. We have stabilized our estimate of this
expense at $150.00 per space per year, which is equal to $38,100 or
approximately 7.34% of the estimated effective gross income.
Maintenance and Repair: Historically, this expense has varied since 1996. We
- -----------------------
have based our estimate on the indicated historical trend at $75.00 per space
per year or $19,050 annually, believed adequate to properly maintain the
community. This amount is equal to approximately 3.67% of the estimated
effective gross income.
Management Fees: This expense typically includes off-site management, the
- ---------------
oversight of the on-site manager and monthly bookkeeping functions. We used a
rate of 5% of the effective gross income estimate, typical in the market place,
equal to $25,970 or $102.24 per space per year.
Wages and Benefits: Historically, this expense has steadily increased since
- -------------------
1996. We have based our estimate on the historical data at $216.00 per space
per year or $54,864, which is equal to 10.56% of the estimated effective gross
income.
Property Taxes: This category is project specific due to location. Based on our
- ---------------
analysis of the historical tax trends, we have estimated the tax liability to be
$32,904. This equates to $129.54 per space per year or approximately 6.33% of
the estimated effective gross income.
Utilities: We have estimated this expense at $160.00 per space per year. This
- ----------
is equal to $40,640, or approximately 7.82% of the estimated effective gross
income.
Reserves: This expense category represents the inclusion of set-asides for
- ---------
major recurring or capital type expenditures experienced periodically by any
property. We have used $30.00 per space per year, believed adequate to cover
future capital costs. This equates to $7,620 annually or approximately 2.05% of
the estimated effective gross income.
Total Expenses: To summarize, we have stabilized total operating expenses for
- ---------------
the subject property at $225,498. This estimate is equal to 43.42% of the
Effective Gross Income (EGI) estimate or $887.79 per space per year. As shown,
expenses have historically ranged between 39.72% (6 months annualized1999) and
52.2% (1997).
<PAGE>
================================================================================
Chisholm Creek Manufactured Housing Community
Stabilized Operating Statement
<TABLE>
<CAPTION>
% of $ per
Amount EGI Space
================================================================================
<S> <C> <C> <C>
Total Effective Gross Income $519,400 100.00% $2,044.88
Expenses
Insurance $ 6,350 1.22% $ 25.00
Office 38,100 7.34% 150.00
Maintenance & Repairs 19,050 3.67% 75.00
Management Expense 25,970 5.00% 102.24
Wages & Benefits 54,864 10.56% 216.00
Property Taxes 32,904 6.33% 129.54
Utilities 40,640 7.82% 160.00
Reserves 7,620 1.47% 30.00
-----------------------------------
Total Expenses $225,498 43.42% $ 887.79
Net Operating Income $293,903 56.58% $1,157.10
================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 21
Selection of a Capitalization Rate
- ----------------------------------
Direct capitalization of terminal net operating income by an overall
capitalization rate extracted from the market provides an excellent indication
of market value. Purchasers of manufactured home communities most often utilize
this method. This method is easily understood, closely related to the market,
and convincing if the overall rates abstracted from recent sales are from
comparable sale properties and accurate income data are available.
Market Data
- -----------
The comparable sale data indicated an overall capitalization rate between
9.05% and 12.23%. The data indicates a narrow range in overall capitalization
rates, which tend to be influenced by the size of the community, its occupancy,
expense ratio, age and condition, amenity package and location.
<TABLE>
<CAPTION>
Sale Sale Date Vacancy Rate Expense Ratio Overall Rate
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 July 1997 5.0% 39.7% 9.05%
- ------------------------------------------------------------------------------------------------
2 January 1997 5.0% 41.5% 11.57%
- ------------------------------------------------------------------------------------------------
3 January 1997 0.7% 44.5% 8.90%
- ------------------------------------------------------------------------------------------------
4 January 1997 5.0% 48.2% 12.23%
- ------------------------------------------------------------------------------------------------
5 October 1996 23.0% 40.6% 10.75%
================================================================================================
</TABLE>
The subject has a market vacancy and expense ratio. Sale Comparable 1 is
located adjacent to the subject and a good indicator of value, however, we were
unable to locate sales of other comparable manufactured housing communities
within the last two years. Rental rates have increased approximately 20% since
1997 and vacancies remain low. In addition, two new projects have been recently
announced near the subject on the north side of 61st Street North, west of
Broadway and on the north side of 77ths Street, east of Broadway. We were
unable to confirm when ground would break or the number of units; however, it is
anticipated that the both projects will add another 300 to 400 units to the
market. Based on these considerations, we have concluded an overall
capitalization rate of 10.0%.
Debt Coverage Ratio Method
- --------------------------
We have also developed an overall rate through the Debt Coverage Ratio
analysis. Current commercial lending policies indicate a mortgage loan of 75%
of market value, based on a 20-year amortization schedule at an annual interest
rate of 8.00%, which yields an annual mortgage constant of 10.112%. A minimum
debt coverage ratio (DCR) of 1.25 to 1.00 would likely be required for a
property similar to the subject. Based on these assumptions an overall
capitalization rate has been developed, as presented below:
<PAGE>
Income Capitalization Approach 22
<TABLE>
<CAPTION>
==============================================================================================
M F DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.75 0.10112 1.25 0.0948
- ----------------------------------------------------------------------------------------------
Rounded 9.5%
==============================================================================================
</TABLE>
The Debt Coverage Ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufactured home
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The rate via the debt coverage ratio is supportive of the rate concluded
from the market data. Our estimate of the market value of the subject, indicated
by the Income Capitalization Approach, is calculated as follows:
<TABLE>
<CAPTION>
Net Operating Income Overall Capitalization Rate Market Value
<S> <C> <C>
$293,903 /0.10 $2,939,030
Rounded to $2,940,000
</TABLE>
<PAGE>
23
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions be weighed, and the data of each transaction
be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject be considered;
differences in physical, functional, and economic characteristics be
noted; and adjustments for the differences be made.
3. The value conclusion is consistent with the analysis of the sales
data.
So that a conclusion from the analysis of the sales data can be drawn, a
unit of comparison has been selected. Calculation of a unit of comparison
provides a common denominator by which the market sales can be related to each
other and to the subject property. The commonly accepted unit of comparison in
the valuation of manufactured home communities is the selling price per space.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For dissimilar features adjustments are made
indicating the price at which the subject could be expected to sell. In making
adjustments, all relevant factors were considered including:
1. Nature of surrounding development.
2. Size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
Based on our investigation, the following five sales of all age communities
are the most significant transactions for direct comparison with the subject.
<PAGE>
Summary of Sale Comparables
<TABLE>
<CAPTION>
No. Name Sale Price/ Total Price/ Average
Address Sale Date Spaces/ Space Lot Rent
(Adj. For Cash Occupancy
Equivalency)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Navajo Lakes $1,880,000 160/ $11,750 $165.00
501 E. 63rd Street North July 1997 95.0%
Wichita, Sedgwick County, Kansas
- -----------------------------------------------------------------------------------------------------------------------
2 Manchester Village MHP $2,200,000 211/ $10,427 $175.00
3210 Crystal Road January 1997 95.0%
Kansas City, Jackson County, Kansas
- ----------------------------------------------------------------------------------------------------------------------
3 Ridgewood Estates MHP 3,500,000 277/ $12,635 $170.00
4100 SE Adams Street January 1997 99.3%
Topeka, Shawnee County, Kansas
- ----------------------------------------------------------------------------------------------------------------------
4 Silver Spur Mobile Home Park $2,750,000 380/ $ 7,236 $145.00
1915 West MacArthur Road and NEC Carey January 1997 95.0%
& Clarence Road
Wichita, Sedgwick County, Kansas
- ----------------------------------------------------------------------------------------------------------------------
5 Springdale Lake Estates Mobile Home Park $4,417,900 441/ $10,018 $200.00
5 Springdale Drive October 1996 77.0%
Belton, Cass County, Missouri
=====================================================================================================================
No. Name E.G.I.M./E O.A.R.
Address
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Navajo Lakes 6.66/ 9.05%
501 E. 63rd Street North 39.7%
Wichita, Sedgwick County, Kansas
- -----------------------------------------------------------------------------------------------------------------------
2 Manchester Village MHP 5.06/ 11.57%
3210 Crystal Road 41.5%
Kansas City, Jackson County, Kansas
- ----------------------------------------------------------------------------------------------------------------------
3 Ridgewood Estates MHP 6.26/ 8.90%
4100 SE Adams Street 44.5%
Topeka, Shawnee County, Kansas
- ----------------------------------------------------------------------------------------------------------------------
4 Silver Spur Mobile Home Park 4.23/ 12.28%
1915 West MacArthur Road and NEC Carey 48.2%
& Clarence Road
Wichita, Sedgwick County, Kansas
- ----------------------------------------------------------------------------------------------------------------------
5 Springdale Lake Estates Mobile Home Park 5.52/ 10.75%
5 Springdale Drive October 1996 40.6%
Belton, Cass County, Missouri
=====================================================================================================================
</TABLE>
<PAGE>
Sales Comparison Approach 25
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. The properties, which
have been compared to the subject, have been discussed below:
Sale Comparable Number One is Navaho Lakes Mobile Home Park in Wichita.
This 160-space all age community is located adjacent to the subject's northern
boundary and sold for $1,880,000 in July 1997. The price equates to a sale
price per space of $11,750. Based on an effective gross income of $282,150, the
EGIM was 6.66. The expenses represented 39.7% of the effective gross income and
the indicated overall capitalization rate was 9.05%, based on a net operating
income of $170,150. This community was 88.0% occupied at the time of sale, but
pro forma estimated utilizing 95.0% occupancy. Rents were approximately $150.00
per month, but were increased to $165.00 a few months after the sale.
Sale Comparable Number Two is Manchester Village located in Kansas City,
Jackson County, Missouri. This 211-space community sold for $2,400,000 in
January 1997. The sale price included FF&E and 12 mobile homes that had an
estimated value of $200,000 and was deducted. This resulted in a sale price per
space of $10,427. Based on an effective gross income of $434,918, the EGIM was
5.06. The overall rate was 11.57%. The average lot rent at the time of sale
was approximately $175.00.
Sale Comparable Number Three Ridgewood Estates located in Topeka, Shawnee
County, Kansas. This 277-space community sold for $3,500,000 in January 1997.
This price equates to a sale price per space of $12,635. Based on an effective
gross income of $559,202, the EGIM was 6.26. The overall rate was 8.90%. The
average lot rent at the time of sale was approximately $170.00.
Sale Comparable Number Four is the sale of two separate mobile home parks
in Wichita, Kansas: (1) Silver Spur Park at 1915 West MacArthur, and (2) Silver
Spur Park at Northeast corner of Carey and Clarence Road. Affordable Residential
Community purchased both communities containing 380 spaces in January 1997 for
$2,750,000. Improvements in Spur Park include a clubhouse/office containing
approximately 4,058 square feet, swimming pool and two large storm shelters.
The price equates to a sale price per space of $7,237. Based on the Appraiser's
Pro-forma, the effective gross income of $649,800 indicated an EGIM was 4.23.
The expenses were estimated at 48.2% of the effective gross income and the
indicated overall capitalization rate was 12.23%, based on a net operating
income of $336,300. This community was 95.0% occupied at the date of sale, but
in poor condition. The average rent was $145.00 per month plus $5.00 for trash
collection.
Sale Comparable Number Five is Springdale Lake Estates located in Belton,
Cass County, Missouri. This 200-space community sold for $4,000,000 in October
1996. The indicated sale price was adjusted by $417,900 to reflect the deferred
maintenance costs projected by the owner. This resulted in a sale price per
space of $10,018. Based on an effective gross income of $800,086, the EGIM was
5.52. The overall rate was 10.75%. The average lot rent at the time
<PAGE>
Sales Comparison Approach 26
of sale was approximately $200.00.
All of the sales were fee simple transactions, with no abnormal financing.
There were no abnormal sale conditions known to have occurred and all of the
sales represent transactions that have taken place over the last nine months,
having traded under similar market conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the Effective Gross Income Multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 4.23 and 6.66. As previously discussed, the EGIM is essentially
a function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject is an all age community with a 5.91% physical vacancy. The
subject was observed to be in average condition and has a good location in
Sedgwick County, Kansas. The expense ratios are lower, ranging from 39.7% to
48.2%. By comparison, the subject has a forecast expense ratio of 43.42%.
Based on these considerations, we have concluded an EGIM middle of the indicated
range, processing the subject's Effective Gross Income of $519,400 with an EGIM
of 5.50.
Thus $519,400 x 5.50 is $2,856,700
Rounded to $2,860,000
On a per space basis, this is equivalent to $11,260.
<PAGE>
27
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $2,940,000
Sales Comparison Approach $2,860,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales of similar properties.
In the reconciliation, we reviewed each approach to value (a) to ascertain
the reliability of the data and (b) to weight the approach that best represented
the actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis of
this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the valuation
of the subject property, the sales comparison approach was considered reliable.
The two approaches reflect a narrow range of value. Our opinion of value
is based on the Income Approach, as buyers are most concerned with cash flow to
service debt. Our opinion of the market value of the subject, based on a
reasonable exposure period of six months, as of September 1, 1999 was:
- TWO MILLION NINE HUNDRED FORTY THOUSAND DOLLARS -
($2,940,000)
<PAGE>
28
CERTIFICATION
- -------------
I certify that, to the best of my knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions and are my personal, unbiased
professional analyses, opinions, and conclusions.
. I have no present or prospective interest in the property that is the
subject of this report, and I have no personal interest or bias with
respect to the parties involved.
. My compensation is not contingent on the reporting of a predetermined value
or direction in value that favors the cause of the client, the amount of
the value estimate, the attainment of a stipulated result, or the
occurrence of a subsequent event.
. To the best of my knowledge and belief, the reported analyses, opinions,
and conclusions were developed and this report was prepared in conformity
with the Uniform Standards of Professional Appraisal Practice of the
Appraisal Foundation, the Code of Professional Ethics, and the Standards of
Professional Practice of the Appraisal Institute.
. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
. As of the date of this report, L. Drake Moore, MAI has completed the
requirements under the continuing education program of the Appraisal
Institute.
. L. Drake Moore, MAI has made a personal inspection of the property that is
the subject of this report.
. No one provided significant professional assistance to the person signing
this report.
. I am in compliance with the competency provisions of the Uniform Standards
of professional Appraisal Practice of the Appraisal Foundation.
. This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
/s/ L. Drake Moore
- ----------------------------
L. Drake Moore, MAI
St. Cert. Gen. REA #TP-00-27
<PAGE>
29
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the conclusion in
this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function of the Report. The appraisal report may not be reproduced,
in whole or in part, and the findings of the report may not be utilized by a
third party for any purpose, without the written consent of Whitcomb Real
Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or to be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes which may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
<PAGE>
Assumptions and Limiting Conditions 30
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed
concerning any matter that may be disclosed by a proper survey. If a subsequent
survey should reflect a differing land area and/or frontages, we reserve the
right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others, and is not meant for use as a reference in legal matters of
survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projection contained in
the appraisal assumes responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures, which would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made
available to us, so statements regarding soil qualities, if made in the report,
are not conclusive but have been considered consistent with information
available to us and provided by others. In addition, unless stated otherwise in
the appraisal, the land and soil of the area under appraisement appears firm and
solid, but the appraisal does not warrant this condition.
The appraisal report covering the subject is limited to surface rights only, and
does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers and we are not qualified to judge the structural and
environmental integrity of the improvements, if any. Consequently, no warranty,
representations or liability are assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services, including the
construction materials, particularly the roof, foundations, and equipment,
including
<PAGE>
Assumptions and Limiting Conditions 31
the HVAC systems, if applicable. Should there be any question concerning them,
it is strongly recommended that an Engineering, Construction, and/or
Environmental inspection be obtained. The value estimate stated in this
appraisal, unless otherwise noted, is predicated on the assumption that all of
the improvements, equipment and building services, if any, are structurally
sound and suffer no concealed or latent defects or inadequacies other than those
noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas which are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal
<PAGE>
Assumptions and Limiting Conditions 32
tax or regulatory laws. Therefore, the actual results achieved during the
projected holding period and investor requirements relative to anticipated
annual returns and overall yields could vary from the projection. Thus,
variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements of the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
EXHIBIT "A"
PHASE I & II
Lot 1, Block 1, and Lot 1, except the West 200 feet, Block 2, all in Ahlf Mobile
Home Park Addition, Sedgwick County, Kansas, together with that portion of
vacated Newcastle Street described as beginning at the Southeast corner of Lot
1, Block 2 of Ahlf Mobile Home Park Addition, running thence North along the
West line of Newcastle Street as plotted in said Park for a distance of 110.39
feet; thence East 70.0 feet; thence South to the South line of said Addition;
thence West along the South line of said Addition to the place of beginning.
<PAGE>
MAPS
<PAGE>
[AREA MAP APPEARS HERE]
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
[SALES COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
[RENT COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
PROFILE OF APPRAISER
<PAGE>
PROFILE OF APPRAISER
L. DRAKE MOORE, MAI
St.Cert. Gen. REA #1321098-G
REAL ESTATE EXPERIENCE
- ----------------------
Appraiser
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Moore has also owned and operated the
L.D. Moore Company, a commercial appraisal firm in Dallas, Texas since 1991.
Senior Appraiser/Manager
Marshall and Stevens, Inc.
Dallas, TX and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. December 1988 to September 1990.
Appraiser
Appraisal & Acquisition, Inc.
Lakeworth, Florida
Prepared appraisals on hotels and other commercial properties for purposes
of sale/purchase, property tax appeals, financing and allocation of purchase
price. September 1987 to December 1988.
Appraiser
Laventhol & Horwath
Dallas, Texas
Specialized in preparation of appraisals on hotel and commercial properties.
Performed appraisals for purposes of sale/purchase, financing and allocation
of purchase price. September 1985 to September 1987.
<PAGE>
Profile of the Appraiser
BANKING EXPERIENCE
- ------------------
Vice President
BF Saul Mortgage Company
Arlington, Texas
Managed branch office and originated non-conforming single-family mortgages in
addition to investor and commercial mortgages loans for BF Saul and Chevy Chase
Savings. March 1983 to 1985.
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
State Certified General Real Estate Appraiser
Florida #0002401
Georgia #004008
Texas #1321098-G
Real Estate Broker License
Florida #0512812
Texas #0283892
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
<TABLE>
<CAPTION>
Apartments
- ----------
<S> <C> <C> <C>
Candlelight Lenexa, KS Oaktree Square Grandview, MS
Cedars Irving, Texas Pineridge Arlington, TX
Claridge Dallas, TX Regency Cove Tampa, FL
Elmwood West Palm Beach, FL Parkwood Broken Arrow, OK
Hunters Glen Kansas City, KS Santa Fe Village Kansas City, MS
Monticeto Austin, TX Towne Oaks Austin, TX
Manufactured Home Communities and Recreational Vehicle Parks
- ------------------------------------------------------------
Aberdeen Ormond Beach, FL Oak Hills Kyle, TX
Aztec Kyle, Texas Ramblewood Barnwell, SC
Boulevard Estates Pasadena, TX Regency Cove Tampa, FL
Casa del Monte West Palm Beach, FL Rolling Meadows Columbia, SC
Carolina Village Concorde, NC Rose Bay Port Orange, FL
Denton West Denton, TX Tropic Isles Palmetto, FL
Dessau Austin, TX Victoria Lakes Lexington, SC
</TABLE>
<PAGE>
Profile of Appraiser
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Hacienda Village New Port Richey, FL Villa del Sol Bradenton, FL
Hermitage Farms Camden, SC Windsor City Sumter, SC
Self-Storage Facilities
- -----------------------
American Self Storage Charlotte, NC American Self Storage Ocala, FL
American Self Storage Monroe, NC Extra Closet Ft Lauderdale, FL
American Self Storage Newel, NC
American Self Storage Stallings, NC
Hotels/Resorts
- --------------
114-Room Ambassador Plaza, Dallas, TX
420-Room Excelsior Hotel, Little Rock, AR
121-Room Lexington Park Suites, Memphis, TN
160-Room Ramada Inn, Kingsland, GA
71 -Room Best Western, Guymon, OK
Office Buildings
- ----------------
AMI Medical Houston, TX Medical Park Hope, AR
Barnett Bank North Palm Beach, Fl Okeechobee Commerce W Palm Beach, FL
Carteret Savings Del Ray Beach, FL United Bank Roswell, NM
Enron Houston, TX Schindler Corporate Morris, NJ
Harolds Dallas, TX Texarkana Medical Arts Texarkana, TX
First South Little Rock, AR QVC Network Plymouth, MN
First Union Atlanta, GA
Industrial
- ----------
American Lantern McKenzie, TN Falco Lime Boca Raton, FL
American Lantern Newport, AR High Ridge Commerce Boynton Beach, FL
Campbell Soup Paris, TX John Rust Albuquerque, NM
Carrington Irving, TX Lake Pointe Centre Boca Raton, FL
</TABLE>
<PAGE>
Profile of Appraiser
Clients List
- ------------
Bank of America Heller Financial
Barnett Bank Heron Financial
Belgravia Capital Hewlett Packard
Circuit City Internal Revenue Service
Citicorp Real Estate Lexington Hotel
Collateral Mortgage Lincoln Property
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Meyers Group (The)
First Union Corporation National Realty Advisors
GE Capital PA Holdings/Whitman Corporation
Goldman Sachs QVC
Greentree Financial Sullivan Development
EDUCATIONAL BACKGROUND
- ----------------------
University of Texas, B.A.
American Institute of Real Estate Appraisers
The Appraisers Institute
Commercial Investment Real Estate Institute
<PAGE>
[LETTERHEAD OF KANSAS REAL ESTATE APPRAISAL BOARD APPEARS HERE]
September 8, 1999
Mr. Lawrence Drake Moore
5948 Woodland Drive
Dallas TX 75225
Dear Mr. Moore:
This is to notify you of acceptance of your registration for temporary practice
in Kansas (TP-00-27). This will allow you to complete the appraisal report of
the Chisholm Creek Manufactured Housing Community located at 501 E. 63/rd/ North
in Wichita, Kansas.
Please notify us, in writing, when the appraisal assignment is completed. If the
appraisal is not completed within 45 days please notify the board of the
disposition of the appraisal assignment and/or the estimated date of the
appraisal assignment.
Sincerely yours,
/s/ Michael K. Haynes
Michael K. Haynes
Director
MKH/slp
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St.Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida. January
1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff members
throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing plants,
office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation of
purchase price. September 1985 to March 1990, and June 1992 to April 1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial properties.
Performed appraisals for purposes of sale/purchase, property tax appeals,
financing and allocation of purchase price. March 1990 to May 1992.
<PAGE>
Profile of Appraiser 2
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real
Estate Institute
State Certified General Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
<TABLE>
<CAPTION>
Manufactured Home Communities
- -----------------------------
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
Recreational Vehicle Parks
- ----------------------------
<S> <C> <C> <C>
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
Self-Storage Facilities
- -----------------------
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
Hotels/Resorts
- --------------
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D. C.
</TABLE>
<PAGE>
Profile of Appraiser 4
<TABLE>
<CAPTION>
Financial
- ---------
<S> <C>
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
- ----------------------------------
W. P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
</TABLE>
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
----------------------------------
TESTIMONY
- ---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
EXHIBIT (b)(1)(C)
SUMMARY
REAL ESTATE APPRAISAL REPORT
The 406-space Carefree Village Mobile Home Community
8000 Sheldon Road
Tampa, Unincorporated Hillsborough County, Florida 33615
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
AS OF
August 15, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
[LETTERHEAD OF WHITCOMB REAL ESTATE APPEARS HERE]
September 22, 1999
Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
RE: 406-Space Carefree Village Mobile Home Community
8000 Sheldon Road
Tampa, Unincorporated Hillsborough County, Florida
Dear Mr. Waite:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of August 15, 1999, based on an exposure period of six months, to be:
- SIX MILLION SIX HUNDRED THIRTY THOUSAND DOLLARS -
($6,630,000)
Our value estimate applies to the land as physically constituted, to the
improvements actually in existence and reflects prevailing trends in the local
real estate market. We have made a careful inspection, study, and analysis of
the property, and have considered all factors which, in our opinion, would tend
to influence the market value of the subject.
Carefree Village is a fully developed 406-space manufactured home
community, with a clubhouse, tennis and shuffleboard courts, laundry room,
swimming pool, and a playground / recreation area.
Our conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation and those specific
conditions indicated in the engagement letter.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan. The intended user of this report is
the Windsor Corporation.
<PAGE>
Mr. Steve Waite
September 22, 1999
Page Two
We appreciate this opportunity to be of service to you. If you have any
questions, please do not hesitate to contact us.
This is a Summary Appraisal, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of
Professional Appraisal Practice for Summary Appraisal Reports. This report
represents only summary discussions of the data, reasoning, and analyses
employed in the appraisal process toward the development of our opinion of
value. Supporting documentation has been retained in our files.
Very truly yours,
/s/ John H. Whitcomb
John H. Whitcomb, MAI, CCIM
St. Cert. Gen. REA #0001234
/s/ William G. Trask
William G. Trask
St. Cert. Gen. REA #0002347
<PAGE>
4
TABLE OF CONTENTS
- -----------------
Title Page
Transmittal
<TABLE>
<S> <C>
Table Of Contents........................................................ 4
Summary Of Facts And Conclusions......................................... 6
Extent Of Confirming, Collecting And Reporting Data...................... 7
Purpose And Function Of The Appraisal.................................... 7
Area / Neighborhood Description.......................................... 8
Manufactured Home Community Market Overview.............................. 9
Land And Site Improvements............................................... 10
Improvement Description.................................................. 11
Ownership And Property History........................................... 11
Occupancy................................................................ 11
Zoning And Other Land Use Controls....................................... 12
Real Estate Assessment And Taxes......................................... 12
Marketability And Marketing Period....................................... 13
Highest And Best Use..................................................... 14
Valuation Process........................................................ 14
Income Capitalization Approach........................................... 15
Sales Comparison Approach................................................ 23
Final Estimate Of Value.................................................. 27
Certification............................................................ 28
Assumptions And Limiting Conditions...................................... 29
Addenda
Legal Description
Maps
Profiles Of Appraisers
</TABLE>
<PAGE>
5
PHOTOGRAPHS OF THE SUBJECT (Taken August 24, 1999)
[PICTURE APPEARS HERE]
1. Entrance to Subject
[PICTURE APPEARS HERE]
2. Typical Street View
<PAGE>
6
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
Property Appraised: 406-Space Carefree Village Mobile Home Community
-------------------
8000 Sheldon Road
Tampa, Unincorporated Hillsborough County, Florida
Property Rights
---------------
Appraised: Fee Simple Interest, subject to tenant leases.
----------
Land Area: 57.82 acres or 2,518,639 square feet.
----------
Improvements: 406 manufactured home spaces, a clubhouse,
-------------
tennis and Properties, shuffleboard courts,
laundry room, swimming pool, playground /
recreation area.
Owner: Windsor Park Properties, 6 and Windsor Park
------
Properties, 7
Zoning: PD-H, Hillsborough County
-------
Highest and Best Use: As Improved -- Current Use
---------------------
Value Indications: Income Approach $6,630,000
------------------
Sales Comparison Approach $6,640,000
Final Estimate of Value: $6,630,000
------------------------
Date of Appraisal: August 15, 1999
------------------
Date of Inspection: August 24, 1999
-------------------
<PAGE>
7
EXTENT OF CONFIRMING, COLLECTING AND REPORTING DATA
- ---------------------------------------------------
This assignment encompasses providing an "as is" market value of the fee
simple title of the property and improvements, as of the specified date. The
scope of this investigation included an overview of the area and local
manufactured home markets, inspections of the subject properties and their
environs, and the collection and analysis of market data, inspection of the
comparable and competitive properties, consideration and application of the
appropriate valuation methods, and a reconciliation and final estimate of value.
The real estate interest appraised is that of ownership in fee simple
interest, subject to the existing tenant leases. The property is appraised free
and clear of mortgages, liens, servitude's and encumbrances, except those noted
in the body of this appraisal.
PURPOSE AND FUNCTION OF THE APPRAISAL
- -------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of August 15, 1999. The information, opinions, and
conclusions contained in this report have been prepared as a basis for portfolio
valuation. The date of this appraisal is August 15, 1999. The intended user of
this report is the Windsor Corporation.
Market Value is defined as: The most probable price which a property should
bring in a competitive and open market under all conditions requisite to a fair
sale, the buyer and seller each acting prudently, knowledgeably and assuming the
price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a specified
date and the passing of title from seller to buyer under conditions whereby:
. Buyer and Seller are typically motivated;
. Both parties are well informed or well advised, and each acting in
what he considers his own best interest;
. A reasonable time is allowed for exposure in the open market;
. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
. The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale./1/
_________________________
/1/ The Office of the Thrift Supervision, 12 CFR 564.2(f).
<PAGE>
8
AREA / NEIGHBORHOOD DESCRIPTION
- -------------------------------
Location/Access
- ---------------
The property is located along the west side of Sheldon Road, approximately
1/4 mile south of West Waters Avenue. This location is in the western portion of
Hillsborough County, in an area known as Town `n Country. The subject
neighborhood is bounded on the north by Linebaugh Avenue and on the east by the
Veterans Expressway. The Hillsborough Avenue (State Road 580) corridor and
Upper Tampa Bay generally define the southern border and the eastern Pinellas
County line forms the western boundary of the area. The Tampa Bay Region is
strategically situated in the center of Florida's West Coast and is the
commercial and industrial hub of the area.
Primary access to the subject property and neighborhood is via Sheldon
Road, the major north-south surface roadway in the western portion of
Hillsborough County. Sheldon Road is a four lane divided highway extending from
Hillsborough Avenue to Gunn Highway. The Veterans Expressway lies along the
east side of the Town `n Country area, extending from Interstate 275 to North
Dale Mabry Highway. Access to the neighborhood is excellent and the Town `n
Country area is located in proximity to Tampa, offering all amenities, shopping,
schools, churches, medical facilities and entertainment and recreation. Ingress
and egress of the subject is rated adequate.
The neighborhood is rural in nature. Development has taken the form of
mixed-use and strip commercial properties located along the major road frontages
and intersections. Residential developments are intermixed throughout the
neighborhood. The neighborhood also offers all amenities and shopping, schools,
churches and medical facilities. Land use in the immediate vicinity of the
subject is characteristic of the entire neighborhood. The neighborhood is
estimated to be over 75% developed. There remain a few large contiguous tracts
of land available for infill development.
Population
- ----------
The Tampa Bay area has emerged as one of the nation's leading markets. The
1990 MSA population figure was 2,069,959 indicating a 28.2% increase in
population between 1980 and 1990. The most recent MSA population figure was
2,254,756 for 1997, and represents approximately 15.3% of Florida's entire
population (14,712,922). Future projections indicate a continued population
growth although at a declining rate.
<PAGE>
9
Area / Neighborhood Description
Employment
- ----------
The Tampa Bay market has a well-balanced employment base with no single
industry dominating. This diversified industrial base will continue to be the
driving force for continued growth in this metropolitan area. Reflecting the
health of the local economic climate, all sectors of the area's major industries
have shown growth in the past decade. The Hillsborough County civilian work
force stood at 514,896 as of December 1998, with a 4.0% unemployment rate, well
below the state and national averages over the same period.
Transportation
- --------------
The Tampa Bay area is accredited as a major Florida transportation center.
It is served by 14 airlines, Greyhound Bus Lines, Amtrak and CSX rail service,
cruise and freight shipping, as well as the interstate highway system. Its
prime geographic location provides easy access to all markets. Over 40
interstate and intrastate freight carriers service the area, with virtually all
the major trucking firms maintaining terminals throughout the Tampa Bay area.
Concurrency
- -----------
The State of Florida's Local Government Comprehensive Planning Act of 1975
required all counties and municipalities in the state to develop, implement and
monitor local comprehensive growth and management plans. Pursuant to this law,
each county was required to publish Land Use Policy Guides, both in written and
map form, which designate desired types of land use and probable zoning for all
county lands not within their boundaries.
Summary and Conclusion
- ----------------------
The subject is located in the Town `n Country area, which is located in the
western portion of Hillsborough County. The subject's location in regard to the
local amenities in the form of shopping, recreational and activity centers is
considered excellent due to the proximity of the City of Tampa. General real
estate values have been static over the last three to four year period.
MANUFACTURED HOME COMMUNITY MARKET OVERVIEW
- -------------------------------------------
According to the Florida Manufactured Housing Association's 1998
Statistical Package, there are 574 manufactured home communities in Hillsborough
County. Of this total, there are 82 communities (approximately 14% of the
total), with 101 or more spaces. Additionally, 139 of the communities, or
approximately 24% of the total, are in the 26 to 100-space range. Approximately
61% of the manufactured home communities in Hillsborough County have 100 or less
spaces. The large percentage of small communities points to a fragmented
marketplace, with a variety of
<PAGE>
10
Manufactured Home Community Market Overview
ownership forms. The subject, at 406 spaces, is one of the larger communities in
Hillsborough County.
LAND AND SITE IMPROVEMENTS
- --------------------------
The subject site is an irregularly shaped parcel of land containing
approximately 57.82 acres of gross area. The tract is generally level and at
street grade and drainage of the tract appears adequate. No adverse soil or
subsoil conditions were noted during the physical inspection of the site.
Utility services connected and in service on the date of valuation include
water, natural gas, sanitary and storm sewer, electricity, cable television and
telephone. The individual sites are accessed by roadways configured to maximize
the use of the land, common to most manufactured home communities. Roadway
improvements include:
Street-bed: Sheldon Road is an asphalt paved, four-lane divided
----------
highway. The subject streets are asphalt paved 20-foot
wide roadways.
Sidewalks/Curb: Sheldon Road has concrete sidewalks and curbs. There
--------------
are no sidewalks in the subject, however there are
concrete curbs.
Street Lights: Sheldon Road and the subject park all have pole mounted
-------------
overhead streetlights along the right of way.
Landscaping: Sodded and planted areas extend along the entire
-----------
perimeter and throughout the site.
Other: The subject is enclosed by a six-foot wood and chain
------
link fence with a concrete front wall.
Encumbrances: None noted.
-------------
Easements: Standard utility easements assumed to exist.
----------
Encroachments: None noted.
--------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded, or otherwise known
liens, defects in title or adverse easements. There are no rent controls in
effect in Hillsborough County.
Functional Utility
- ------------------
The site, which is irregular in shape and contains approximately 57.82
acres, is large enough to accommodate building improvements and roadways as well
recreational amenities and green areas. The site is considered functional for
various residential development scenarios. The current
<PAGE>
11
Land And Site Improvements
development of 406 total units equates to an overall density of approximately
7.02 units per acre, similar to current development standards, which tend toward
larger lot sizes, wider streets and more green areas.
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 406 manufactured home pads, arranged along
streets configured to maximize the available lots. The lots vary slightly in
size, averaging 4,275 square feet. The density of the property is equal to 7.02
units per acre.
The common area amenities include a clubhouse and adjacent pool area. To
the rear or west of the clubhouse is the recreation area which includes tennis
courts, shuffleboard courts, basketball court, and a children's playground area.
We have not estimated a separate value for these amenities, or equipment,
as they are standard items found at most manufactured housing communities.
These amenities are typical for a park of this age and size and are adequate and
functional in use.
The subject park and site improvements were reportedly built in the early
1970's. The park is, therefore approximately 25 years old. The common areas,
streets, amenities and individual mobile homes were observed to be in average
overall condition, having been originally constructed of high quality materials
and having been well maintained over the years. No significant item of deferred
maintenance was noted and overall maintenance levels in the park are rated good.
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject, as recorded in the Official Records of
Hillsborough County in Official Record Book 6042 at Page 0833, is in the name of
Windsor Park Properties 6 and Windsor Park Properties 7. The deed was recorded
in July 1990, and the indicated consideration was $6,575,000.
OCCUPANCY
- ---------
A fully developed 406-space manufactured home community occupies the
subject. Our inspection confirmed 57 vacant sites, 10 vacant community owned
homes and 2 employee occupied sites. The economic occupancy is 83.0%. The
community is governed, as required by law, by a prospectus, dated November 8,
1988.
<PAGE>
12
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The subject is zoned PD-H, Planned Development - High Density. It is our
opinion that the subject property is in conformance with the zoning code.
Concurrency
- -----------
The subject was developed under less restrictive requirements and has been
"grandfathered in" on many concurrency requirements, therefore is in conformance
with the approved comprehensive plan filed by Hillsborough County and
concurrency is not an issue.
Flood Hazard
- ------------
According to Flood Map Community Number 120112, Panel 0190D, dated August
3, 1992, the subject is located in an "X" flood zone. This zone is defined as
an area of minimal flooding.
Environmental
- -------------
We observed no obvious areas of contamination on or about the site.
However, we have no qualifications in environmental hazards and recommend an
environmental audit be performed.
REAL ESTATE ASSESSMENT AND TAXES
- --------------------------------
The subject property is identified in the Hillsborough County records under
Folio Numbers: 5050.7000 and 5050.8000. The assessed value of the subject
totals $5,542,993. It is our opinion that the subject property is fairly
assessed. The 1998 taxes were $141,913.31 indicating a per space tax liability
of $349.54.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Florida, properties are assessed at
100% of the market value, as required by Florida Statute, Chapter 192.042.
Properties are reassessed annually and equitability of assessments is not a
basis for assessment in the State of Florida. Taxes are due and payable on the
first day of the year, although tax bills are issued in arrears. Discounts up
to 4% of the total bill are available for early payment and taxes become
delinquent after March 31. Our discussions with a number of owner's of
investment real estate and mobile home parks has indicated that "early" payment
of real estate taxes is a very common practice. Additionally, prudent
management would also dictate the payment of real estate taxes to take advantage
of any discounts offered. Our estimate of taxes, in the amount of $137,599,
reflects this practice.
<PAGE>
13
MARKETABILITY AND MARKETING PERIOD
- ----------------------------------
The subject is competitive with other properties in the marketplace and is
marketable, although not considered a candidate for a resident purchase.
Discussions with large institutional manufactured home community investor
representatives and local area realtors, indicated that "properly priced",
stable, well kept manufactured home communities should "be under contract"
within a six month period in today's market.
Our discussions also indicated overall capitalization rates were higher for
all-age communities and dependent upon occupancy and condition. Pricing is
established by processing gross income, reduced by a vacancy and credit loss
factor, operating expenses and an additional capital charge based on overall
condition, is deducted to arrive at a net operating income (NOI). Those surveyed
indicated that at properties not operating at stabilized occupancy, they were
unwilling to compensate a seller for any of the upside to be gained in filling
the property.
In late summer 1998, commercial mortgage backed securities (CMBS) lenders
restructured their pricing for long term fixed rate loans. These loans had
historically been priced based on an interest rate spread above Treasury
Securities. The secondary market for these loans became illiquid and lenders
were unable to sell the loans profitably. Consequently, although interest rates
on Treasuries have fallen, the interest rates on securitized loans have
increased. Prior to this increase, interest rate spreads were available lower
than 150 basis points over the 10-year Treasuries. Since the fall, spreads have
increased to the low 200 basis point range for manufactured housing communities.
Interest rates are low and financial institutions are again willing to lend
money for real estate projects with good occupancies. There has also been
significant institutional investor interest in manufactured home community
investments. In our opinion, the marketing period for the property would be
within the range indicated by the industry participants or six months.
<PAGE>
14
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as: The reasonably probable and legal
use of vacant land or an improved property, which is physically possible,
appropriately supported, financially feasible and which results in the highest
value."/2/
We have considered all of the potential uses to which the subject is
legally and physically adaptable. It is our opinion that the current use of the
subject, as a 406-space, manufactured home community, represents the highest and
best use of the subject.
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a fully occupied manufactured home community, investors
are primarily concerned with cash flow to service any debt and the equity
position. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of mobile homes by
offering low space rental rates, an investor would not be willing to compensate
a seller for any more than the income to be received. The subject is fully
developed with no expansion possibilities, therefore a potential investor would
be primarily interested in the cash flow and equity return and we have excluded
the Cost Approach.
______________________
/2/The Appraisal Institute, The Appraisal of Real Estate, 10th Ed. Chicago: The
----------------------------
Appraisal Institute, 1992, page 275.
<PAGE>
15
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is, of course, an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms, and within the goal of price minimization seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
facility, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property in the market.
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the subject property. The
estimate of net operating income is derived through the process of estimating
the total potential gross income (PGI from rentals and other sources, less any
vacancy and credit loss producing an effective gross income (EGI) estimate. All
expenses associated with the operation of the property are then deducted to
yield a stabilized net operating income (NOI) estimate.
A survey of the competitive properties is presented in summary form on the
following page.
<PAGE>
16
RENTAL COMPARABLE CHART
<TABLE>
<CAPTION>
===============================================================================================================================
No. Name Total Monthly Services Included In Amenities
Address Spaces/ Rental Monthly Rates
Occ. Rates
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Countryside Village 418/ $240.00 Trash collection Clubhouse, pool, tennis,
9001 Sheldon Road 403 to shuffleboard, basketball,
Hillsborough County, Florida $280.00 lake.
- -------------------------------------------------------------------------------------------------------------------------------
2 Fountainview Estates 546/ $285.00 Trash collection Clubhouse, 2 pools,
8800 Sheldon Road 530 to tennis, shuffleboard.
Hillsborough County, Florida $287.00
- -------------------------------------------------------------------------------------------------------------------------------
3 3 Lakes 566/ $248.00 None Clubhouse, pool, laundry,
9800 Sheldon Road 566 to shuffleboard.
Hillsborough County, Florida $253.00
- -------------------------------------------------------------------------------------------------------------------------------
4 Meadowbrook Village 257/ $269.30 None Clubhouse, pool,
8920 Sheldon Road 257 to shuffleboard.
Hillsborough County, Florida $282.50
- -------------------------------------------------------------------------------------------------------------------------------
5 Colonial Coach 386/ $255.00 Trash collection Clubhouse, pool, laundry.
9315 Memorial Highway 326
Hillsborough County, Florida
- -------------------------------------------------------------------------------------------------------------------------------
Subj. Carefree Village 406/ $290.30 Trash collection Clubhouse, pool, tennis,
8000 Sheldon Road 349 to shuffleboard, basketball,
Hillsborough County, Florida $296.30 playground.
===============================================================================================================================
</TABLE>
<PAGE>
17
Income Capitalization Approach
Income Analysis
- ---------------
The general market practice is on a base lot rent charged on a monthly
basis. The lot rent in our survey ranged from $240.00 to $287.00 per month.
The rents at the subject reflect an $11.00 increase effective September 1, 1999.
As shown by our survey, the subject's lot rents are just above the market range,
however it should be noted that the comparable properties will increase rents at
the first of the new year.
Potential Gross Income
- ----------------------
In our forecast of total rental income, we have projected 12 months at the
September 1, 1999 rent levels. Based on the current rent roll, the total
monthly rent amounts to $117,954 and the average monthly rental rate for the 406
units is equivalent to $290.53. The potential gross income from rentals is
$1,415,446 per year.
Vacancy and Credit Loss
- -----------------------
The subject is an all-age community currently 86.0% physically occupied with
527of the 406 sites vacant. To the physical vacancy, we have added a small
percentage to account for credit loss in our estimate of economic vacancy of
18.0% of total potential gross income, or $254,780.
Utility Income
- --------------
This income is attributable to the separately metered utilities.
Historically, the subject has generated from $244.04 per space (1997) to $292.02
per space (1998), in utility income, varying each year. We have estimated
utility income of $280.00 per space or $113,680 annually.
Other Income
- ------------
Additional income is typically derived from sources such as storage fees,
labor charges to the tenants, commissions on sales and rentals of the units.
The subject property also includes rents from a commercial strip building at the
entrance to the community. Historically, the subject has generated from $187.69
per space (1996) to $218.63 per space (1998), in other income. We have based
our estimate of other income on the historical levels, estimating this income at
$200.00 per space.
Effective Gross Income (EGI)
- ----------------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated losses due to tenant changes, plus any additional income. Thus
potential gross rental income of $1,415,446 less a vacancy and credit loss
allowance in the amount of $254,780, or 18.0% produces an effective gross income
from rentals estimate of $1,160,665. To this we add income derived from other
sources, which totals $194,880, arriving at an effective gross income estimate
of $1,355,545.
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
Carefree Village-Summary of Historical Operations
Pct. of $ Per Pct. of $ Per Pct. of $ Per
1996 Income Space 1997 Income Space 1998 Income Space
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $ 1,088,460 85.94% $ 2,680.94 $ 1,032.462 85.17% $2,543.01 $ 1,071,321 83.79% $ 2,638.72
Utility Income 101,848 8.04% 250.86 99.081 8.17% 244.04 118,559 9.27% 292.02
Other Income 76,203 6.02% 187.69 80.686 6.66% 198.73 88,764 6.94% 218.63
-----------------------------------------------------------------------------------------------------
Total Income $ 1,266,511 100.00% $ 3,119.49 $ 1,212,229 100.00% $2,985.79 $ 1,278,644 100.00% $ 3,149.37
Expenses:
Administration/Office $ 85,491 6.75% $ 210.57 $ 68,757 5.66% $ 168.90 $ 67,689 5.29% $ 166.72
Insurance 8,863 0.70% 21.83 13,395 1.10% 32.99 11,457 0.90% 28.22
Maintenance & Repair 34,193 2.70% 84.22 39,663 3.27% 97.69 49,775 3.89% 122.60
Management Expense 64,127 5.06% 157.95 55,094 4.54% 135.70 61,585 4.82% 151.69
Wages & Benefits 85,029 6.71% 209.43 95,742 7.90% 235.82 116,125 9.08% 286.02
Property Taxes 113,809 8.99% 280.32 118,356 9.76% 291.52 134,235 10.50% 330.63
Utilities 207,259 16.36% 510.49 222,147 18.33% 547.16 224,644 17.57% 553.31
-----------------------------------------------------------------------------------------------------
Total Expenses $ 598,771 47.28% $ 1,474.81 $ 612,972 50.57% $1,509.78 $ 665,510 52.05% $ 1,639.19
Net Operating Income $ 667,740 52.72% $ 1,644.68 $ 599,257 49.43% $1,476.00 $ 613,134 47,95% $ 1,510.18
=============================================================================================================================
</TABLE>
<PAGE>
19
Income Capitalization Approach
Operating Expense Analysis
- --------------------------
Administrative/Office: Historically, this expense has shown a decreasing trend.
- ----------------------
In the financial statements, this expense does include some corporate expense
items, which we have not considered. We have stabilized our estimate of this
expense at $175.00 per space per year, which is equal to $71,050 or
approximately 5.24% of the estimated effective gross income.
Insurance: Historically, this expense has exhibited a variable, increasing
- ----------
trend. Our estimate of this expense has been stabilized based on the historical
amounts at $35.00 per space per year. This is equal to $14,210 annually or
approximately 1.05% of the effective gross income.
Maintenance and Repair: Historically, this expense has increased since 1996. We
- -----------------------
have based our estimate on the indicated historical trend at $140.00 per space
per year or $56,840 annually, believed adequate to properly maintain the
community. This amount is equal to approximately 4.19% of the estimated
effective gross income.
Management Fees: This expense typically includes off-site management, the
- ---------------
oversight of the on-site manager and monthly bookkeeping functions. We used a
rate of 5% of the effective gross income estimate, typical in the market place,
equal to $67,777 or $166.94 per space per year.
Wages and Benefits: Historically, this expense has increased since 1996. We
- -------------------
have based our estimate on the historical data at $275.00 per space per year or
$111,650, which is equal to 8.24% of the estimated effective gross income.
Property Taxes: This category is project specific due to location. Based on our
- ---------------
analysis of the historical tax trends, we have estimated the tax liability to be
$137,599. This equates to $338.91 per space per year or approximately 10.15% of
the estimated effective gross income.
Utilities: This expense was equal to $510.49 per space in 1996, $547.16 per
- ----------
space in 1997 and the 1998 amount is equal to $553.31 per space. We have
estimated this expense at $550.00 per space per year. This is equal to
$223,300, or approximately 16.47% of the estimated effective gross income.
Reserves: This expense category represents the inclusion of set-asides for
- ---------
major recurring or capital type expenditures experienced periodically by any
property. We have used $25.00 per space per year, believed adequate to cover
future capital costs. This equates to $10,150 annually or approximately 0.75%
of the estimated effective gross income.
Total Expenses: To summarize, we have stabilized total operating expenses for
- ---------------
the subject property at $692,576. This estimate is equal to 51.09% of the
Effective Gross Income (EGI) estimate or $1,705.85 per space per year. As
shown, expenses have historically ranged between 47.28% (1996) and 52.05%
(1998).
<PAGE>
===================================================================
Carefree Village
Reconstructed Operating Statement
===================================================================
Income
Spaces Monthly Rent Monthly Total Annualized
- -------------------------------------------------------------------
342 $290.30 $ 99,283 $1,191,391
44 $291.30 12,817 153,806
18 $292.30 5,261 63,137
2 $296.30 593 7,111
- -------------------------------------------------------------------
406 $290.53 $117,954 Pct. $
of EGI Per Space
----------------------
Gross Potential Rental Income $ 1,415,446 104.42% $ 3,486.32
Less:
Vacancy & Credit Loss (254,780) 18.0% $ (627.54)
---------------------------------------
Effective Gross Income From Rentals $ 1,160,665 85.62% $ 2,858.78
Add:
Utility Income 113,680 8.39% $ 280.00
Miscellaneous Income 81,200 5.99% $ 200.00
---------------------------------------
Total Effective Gross Income $ 1,355,545 100.00% $ 3,338.78
Expenses
Administrative/Office $ 71,050 5.24% $ 175.00
Insurance 14,210 1.05% 35.00
Maintenance & Repairs 56,840 4.19% 140.00
Management Expense 67,777 5.00% 166.94
Wages & Benefits 111,650 8.24% 275.00
Property Taxes 137,599 10.15% 338.91
Utilities 223,300 16.47% 550.00
Reserves 10,150 0.75% 25.00
---------------------------------------
Total Expenses $ 692,576 51.09% $ 1,705.85
Net Operating Income $ 662,969 48.91% $ 1,632.93
=============================================================================
<PAGE>
Income Capitalization Approach 21
Selection of a Capitalization Rate
- ----------------------------------
Direct capitalization of terminal net operating income by an overall
capitalization rate extracted from the market provides an excellent indication
of market value. Purchasers of manufactured home communities most often utilize
this method. This method is easily understood, closely related to the market,
and convincing if the overall rates abstracted from recent sales are from
comparable sale properties and accurate income data are available.
Market Data
- -----------
The comparable sale data indicated an overall capitalization rate between
8.51% and 9.79%. The data indicates a narrow range in overall capitalization
rates, which tend to be influenced by the size of the community, its occupancy,
expense ratio, age and condition, amenity package and location.
<TABLE>
<CAPTION>
=============================================================================
Sale Sale Date Vacancy Rate Expense Ratio Overall Rate
=============================================================================
<S> <C> <C> <C> <C>
1 March 1997 5.0% 40.7% 9.79%
-----------------------------------------------------------------------------
2 December 1996 3.1% 32.8% 9.17%
-----------------------------------------------------------------------------
3 September 1996 9.6% 37.4% 8.51%
-----------------------------------------------------------------------------
4 July 1997 9.1% 52.7% 9.53%
-----------------------------------------------------------------------------
5 March 1997 10.8% 38.4% 9.30%
=============================================================================
</TABLE>
The subject has an above market vacancy and expense ratio, although there
is upside potential from increased revenue from the water and sewer charges.
Based on these considerations, we have concluded an overall capitalization rate
just above the indicated range at 10.0%.
Debt Coverage Ratio Method
- --------------------------
We have also developed an overall rate through the Debt Coverage Ratio
analysis. Current commercial lending policies indicate a mortgage loan of 75%
of market value, based on a 15-year amortization schedule at an annual interest
rate of 8.00%, which yields an annual mortgage constant of 11.4678%. A minimum
debt coverage ratio (DCR) of 1.20 to 1.00, would likely be required for a
property similar to the subject. Based on these assumptions an overall
capitalization rate has been developed, as presented below:
<TABLE>
<CAPTION>
========================================================================================
M f DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0.75 0.114678 1.20 0.103210
----------------------------------------------------------------------------------------
Rounded 10.3%
=========================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 22
The Debt Coverage Ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufactured home
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The presence of institutional investors in the market and the reduction in
quality of real estate investments has bid down rates on manufactured home
communities. Investors have become more creative in their acquisition
strategies in order to compete. Therefore, actual transactions in the
marketplace better demonstrate investor perceptions of yields on manufactured
home community investments.
We have placed a greater emphasis on the overall capitalization rate
indicated by the market data, as this is a direct reflection of risk perceptions
by market participants, although the rates are almost equivalent. Our estimate
of the market value of the subject, indicated by the Income Capitalization
Approach, is calculated as follows:
<TABLE>
Net Operating Income Overall Capitalization Rate Market Value
<S> <C> <C>
$662,969 /0.100 $6,629,690
Rounded to $6,630,000
</TABLE>
<PAGE>
23
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions be weighed, and the data of each transaction
be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject be considered;
differences in physical, functional, and economic characteristics be
noted; and adjustments for the differences be made.
3. The value conclusion is consistent with the analysis of the sales
data.
So that a conclusion from the analysis of the sales data can be drawn, a
unit of comparison has been selected. Calculation of a unit of comparison
provides a common denominator by which the market sales can be related to each
other and to the subject property. The commonly accepted unit of comparison in
the valuation of manufactured home communities is the selling price per space.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For dissimilar features adjustments are made
indicating the price at which the subject could be expected to sell. In making
adjustments, all relevant factors were considered including:
1. Nature of surrounding development.
2. Size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
Based on our investigation, the following five sales are the most
significant transactions for direct comparison with the subject.
<PAGE>
Summary of Sale Comparables
<TABLE>
<CAPTION>
=================================================================================================================================
No. Name Sale Price/ Total Price/ Average E.G.I.M./ O.A.R.
Address Sale Date Spaces/ Space Lot Rent Expense %
Occupancy
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Coral Lake Mobile Home Park $ 6,500,000 235/ $27,660 $363.88 60.5/ 9.79%
4701 Lyons Road March 1997 95.0% 40.7%
Coconut Creek, Broward County, Florida
- ---------------------------------------------------------------------------------------------------------------------------------
2 Imperial Estates Mobile Home Park $ 8,000,000 261/ $30,651 $372.00 7.33/ 9.17%
5601 North State Road 7 June 1998 96.9% 32.8%
Fort Lauderdale, Broward County, Florida
- ---------------------------------------------------------------------------------------------------------------------------------
3 Country Lakes Mobile Home Park $15,400,000 499/ $29,860 $382.80 7.35/ 8.51%
6800 Northwest 39/th/ Avenue January 1999 90.4% 37.4%
Coconut Creek, Broward County, Florida
- ---------------------------------------------------------------------------------------------------------------------------------
4 Village of Tampa $ 7,200,000 463/ $15,551 $240.08 4.97/ 9.53%
1201 Skipper Road June 1997 90.9% 52.7%
Tampa, Unincorporated Hillsborough
County, Florida
- ---------------------------------------------------------------------------------------------------------------------------------
5 Golden Hills $ 2,160,000 185/ $11,676 $159.39 6.63/ 9.30%
7865 West Highway 40 March 1997 89.2% 38.4%
Ocala, Unincorporated
Marion County, Florida
=================================================================================================================================
</TABLE>
<PAGE>
Sales Comparison Approach 25
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. The properties, which
have been compared to the subject, have been discussed below:
Sale Comparable Number One is Coral Lake Mobile Home Park in Coconut Creek.
This 235-space all age community sold for $6,500,000 in March 1997. The price
equates to a sale price per space of $27,660. Based on an effective gross
income of $1,073,850, the EGIM was 6.05. The expenses represented 40.7% of the
effective gross income and the indicated overall capitalization rate was 9.79%,
based on a net operating income of $636,406. This community was 95.0% occupied
at the time of sale with 223 of the 255 spaces leased.
Sale Comparable Number Two is Imperial Estates Mobile Home Park in Fort
Lauderdale. This 261-space all age community sold for $8,000,000 in June 1998.
The price equates to a sale price per space of $30,651. Based on an effective
gross income of $1,091,720, the EGIM was 7.33. The expenses represented
approximately 32.8% of the effective gross income and the indicated overall
capitalization rate was 9.17%, based on a net operating income of $733,950. This
community was 96.9% occupied at the time of sale with 253 of the 261 spaces
leased.
Sale Comparable Number Three is Country Lakes Mobile Home Park in Coconut
Creek. This 499-space all age community sold in January 1999 for $14,900,000.
The price equates to a sale price per space of $30,862. Based on the Buyer's
Pro-forma, the effective gross income of $2,026,471 indicated an EGIM was 7.35.
The expenses were estimated at 37.4% of the effective gross income and the
indicated overall capitalization rate was 8.51%, based on a net operating income
of $1,268,440. This community is 90.4% occupied with 451 of the 499 spaces
leased.
Sale Comparable Number Four is Village of Tampa in Tampa. This 463-space
all age community sold for $7,200,000 in June 1997. This price equates to a
sale price per space of $15,551. Based on the Buyer's Pro-forma the effective
gross income of $1,450,044 indicated an EGIM was 4.97. The expenses were
estimated at 52.7% of the effective gross income and the indicated overall
capitalization rate was 9.53%, based on a net operating income of $686,496. This
community was 90.9% occupied at the time of sale with 421 of the 463 spaces
leased.
Sale Comparable Number Five is Golden Hills in Ocala. This 185-space all
age community sold for $2,160,000 in March 1997. This price equates to a sale
price per space of $11,676. Based on the Buyer's Pro-forma the effective gross
income of $325,992 indicated an EGIM was 6.63. The expenses were estimated at
38.4% of the effective gross income and the indicated overall capitalization
rate was 9.30%, based on a net operating income of $200,851. This community was
89.2% occupied at the time of sale with 170 of the 185 spaces leased.
<PAGE>
Sales Comparison Approach 26
All of the sales were fee simple transactions, with no abnormal financing.
There were no abnormal sale conditions known to have occurred and all of the
sales represent transactions that have taken place over the last 2 1/2 years,
having traded under similar market conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the Effective Gross Income Multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 4.97 and 7.35. As previously discussed, the EGIM is essentially
a function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject is an all age community with a 14.0% physical vacancy. The
subject was observed to be in average condition and has a good location in
Hillsborough County, Florida. The comparables all had a much higher occupancy
rate than at the subject and with the exception of Comparable Number Four, the
expense ratios are lower, ranging from 32.8% to 40.7%. By comparison, the
subject has a forecast expense ratio of 51.09%. Based on these considerations,
we have concluded an EGIM below the indicated range, processing the subject's
Effective Gross Income of $1,355,545 with an EGIM of 4.90.
Thus $1,355,545 x 4.90 is $6,642,171
Rounded to $6,640,000
On a per space basis, this is equivalent to $16,355.
<PAGE>
27
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $6,630,000
Sales Comparison Approach $6,640,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales of similar properties.
In the reconciliation, we reviewed each approach to value (a) to ascertain
the reliability of the data and (b) to weight the approach that best represented
the actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis of
this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the valuation
of the subject property, the sales comparison approach was considered reliable.
The two approaches reflect the same value. Our opinion of value is based
on the Income Approach, as buyers are most concerned with cash flow to service
debt. Our opinion of the market value of the subject, based on a reasonable
exposure period of six months, as of August 15, 1999 was:
- SIX MILLION SIX HUNDRED THIRTY THOUSAND DOLLARS -
($6,630,000)
<PAGE>
28
CERTIFICATION
- -------------
We certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions and are our personal,
impartial and unbiased professional analyses, opinions, and
conclusions.
. We have no present or prospective interest in the property that is the
subject of this report, and no personal interest with respect to the
parties involved.
. We have no bias with respect to the property that is the subject of
this report or to the parties involved with this assignment.
. Our engagement in this assignment was not contingent upon developing
or reporting predetermined results.
. Our compensation for completing this assignment is not contingent upon
the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this
appraisal.
. Our analysis, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice.
. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
. As of the date of this report, John H. Whitcomb, MAI, CCIM has
completed the requirements under the continuing education program of
the Appraisal Institute.
. John H. Whitcomb, MAI, CCIM and William G. Trask have made a personal
inspection of the property that is the subject of this report.
. No one provided significant professional assistance to the persons
signing this report.
. We are in compliance with the competency provisions of the Uniform
Standards of professional Appraisal Practice of the Appraisal
Foundation.
. This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
/s/ John H. Whitcomb /s/ William G. Trask
- ------------------------------- -----------------------------------
John H. Whitcomb, MAI, CCIM William G. Trask
St. Cert. Gen. REA #0001234 St. Cert. Gen. REA #0002347
<PAGE>
29
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the conclusion in
this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function of the Report. The appraisal report may not be reproduced,
in whole or in part, and the findings of the report may not be utilized by a
third party for any purpose, without the written consent of Whitcomb Real
Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or to be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes which may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
<PAGE>
Assumptions and Limiting Conditions 30
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are not
qualified to render an "opinion of title," and no responsibility is assumed or
accepted for matters of a legal nature affecting the property being appraised.
No formal investigation of legal title was made, and we render no opinion as to
ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed
concerning any matter that may be disclosed by a proper survey. If a subsequent
survey should reflect a differing land area and/or frontages, we reserve the
right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others, and is not meant for use as a reference in legal matters of
survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projection contained in
the appraisal assumes responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures, which would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made available
to us, so statements regarding soil qualities, if made in the report, are not
conclusive but have been considered consistent with information available to us
and provided by others. In addition, unless stated otherwise in the appraisal,
the land and soil of the area under appraisement appears firm and solid, but the
appraisal does not warrant this condition.
The appraisal report covering the subject is limited to surface rights only, and
does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers and we are not qualified to judge the structural and
environmental integrity of the improvements, if any. Consequently, no warranty,
representations or liability are assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services, including the
construction materials, particularly the roof, foundations,
<PAGE>
Assumptions and Limiting Conditions 31
and equipment, including the HVAC systems, if applicable. Should there be any
question concerning them, it is strongly recommended that an Engineering,
Construction, and/or Environmental inspection be obtained. The value estimate
stated in this appraisal, unless otherwise noted, is predicated on the
assumption that all of the improvements, equipment and building services, if
any, are structurally sound and suffer no concealed or latent defects or
inadequacies other than those noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas which are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We, however,
are not qualified to detect such substances. The existence of these potentially
hazardous materials may have a significant effect on the value of the property.
The client is urged to retain an expert in this field, if desired. The value
conclusion assumes the property is "clean" and free of any of these adverse
conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state
<PAGE>
Assumptions and Limiting Conditions 32
and/or federal tax or regulatory laws. Therefore, the actual results achieved
during the projected holding period and investor requirements relative to
anticipated annual returns and overall yields could vary from the projection.
Thus, variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements of the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
A portion of the Southeast 1/4 of the Northeast 1/4 and the East 643.20 feet of
the Southwest 1/4 of the Northeast 1/4 of Section 27, Township 28 S, Range 17 E
of Hillsborough County, Florida, LESS the East 40.0 feet for Sheldon Road,
Right-of-way, being bounded and described as follows:
Commencing at the Northeast corner of the Southeast 1/4 of Section 27, Township
28 South, Range 17 East, Hillsborough County, Florida and go S. 89 deg 19 min 58
sec W., 40.00 feet to a point on the Westerly right-of-way line of Sheldon Road
(SR 589) for a Point of Beginning and the Northeast corner of Lot 1, Block 11 of
Sheldon Heights as recorded in Hillsborough County Official Records, Plat Book
34, Page 50: Thence S. 89 deg 19 min 58 sec W. along the Southerly line of the
Northeast 1/4 of said Section 27, 1932.11 feet; thence N. 00 deg 12 min 34 sec
W., 1324.33 feet; thence N. 89 deg 16 min 59 sec E., 1936.97 feet; to a point on
the aforesaid Westerly right-of-way line of Sheldon Road; thence S. 00 deg 00
min 00 sec W. along said right-of-way line 587.23 feet thence leaving said
right-of-way S. 90 deg. 00 min 00 sec W., 222.69 feet; thence S. 00 deg 00 min
00 sec W., 150.28 feet; thence N. 89 deg 40 min 17 sec E., 222.70 feet; to a
point on said Westerly right-of-way line; thence S. 00 deg 00 min 00 sec W.
along said right-of-way line, 589.83 feet to the POB.
<PAGE>
MAPS
<PAGE>
[BOUNDARY SURVEY APPEARS HERE]
<PAGE>
[AREA MAP APPEARS HERE]
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
[RENT COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
[MANUFACTURED HOME COMMUNITIES COMPARABLE SALES MAP APPEARS HERE]
<PAGE>
[SITE LAYOUT APPEARS HERE]
<PAGE>
PROFILES OF APPRAISERS
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St. Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
<PAGE>
Profile of Appraiser 2
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraiser Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Manufactured Home Communities
- -----------------------------
<TABLE>
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
Profile of Appraiser
Recreational Vehicle Parks
- --------------------------
<TABLE>
<S> <C> <C> <C>
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
</TABLE>
Self-Storage Facilities
- -----------------------
<TABLE>
<S> <C> <C> <C>
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
</TABLE>
Hotels
- ------
<TABLE>
<S> <C>
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Weston Washington, D.C.
</TABLE>
<PAGE>
4
Profile of Appraiser
Financial
- ---------
<TABLE>
<S> <C>
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
</TABLE>
Real Estate/Real Estate Investment
- ----------------------------------
<TABLE>
<S> <C>
W.P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
</TABLE>
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
----------------------------------
TESTIMONY
- ---------
Mr. whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
PROFILE OF APPRAISER
WILLIAM G. TRASK
St.Cert. Gen. REA #0002347
REAL ESTATE APPRAISAL EXPERIENCE
- --------------------------------
Appraiser
Whitcomb Real Estate
Tampa, FL
Specializing in real estate valuations and consulting projects for lending
institutions, public and private corporations and individuals, for a
variety of uses. Property types appraised include manufactured housing
communities, recreational vehicle parks, manufacturing plants, office
buildings, apartment complexes, retail properties and other types of
commercial establishments. February 1998 to Present.
Appraiser
Atlas Real Estate Group, Inc.
Tampa, FL
Specialized in real estate condemnation valuations and related studies.
Property types appraised include agricultural, industrial, residential,
office buildings, retail properties and other types of commercial land and
establishments. August 1991 to January 1998.
PROFESSIONAL AFFILIATIONS
- -------------------------
State Certified General Real Estate Appraiser
Florida # 0002347
Georgia # CG007464
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Manufactured Home Communities
- -----------------------------
<TABLE>
<S> <C> <C> <C>
A Garden Walk Palm Beach Gardens, FL Honeymoon Park Dunedin, FL
Bear Creek Ormond Beach, FL La Buona Vita Port St. Lucie, FL
Bonfire Leesburg, FL Lincolnshire Largo, FL
Briarwood Lake Worth, FL Meadowbrook Lakeland, FL
Camelot East Sarasota, FL Mobiland By The Sea Melbourne, FL
Camelot Lakes Sarasota, FL Oak View Arcadia, FL
Carefree Village Tampa, FL Palmetto Hallandale, FL
Clover Leaf Brooksville, FL Plaza Bradenton, FL
Coquina Crossing St. Augustine, FL Ranchero Village Largo, FL
</TABLE>
<PAGE>
2
Profile of Appraiser
William G. Trask
Manufactured Home Communities (Cont.)
- -------------------------------------
<TABLE>
<S> <C> <C> <C>
Country Club Estates Venice, FL River Bay Tampa, FL
Country Lakes Coconut Creek, FL Riverview Micco, FL
Country Life Leesburg, FL Serendipity Clearwater, FL
Crystal River Village Crystal River, FL Southern Acres St. Cloud, FL
Diamond Point Leesburg, FL Spanish Trails Zephyrhills, FL
Friendly Village Sellersburg, IN Sun Village Largo, FL
Hammock Lake Fort Meade, FL Sundance Zephyrhills, FL
Heron Cay Vero Beach, FL Sunshine Village Lake Worth, FL
Hibiscus Mount Dora, FL Tall Pines Fort Pierce, FL
Hidden Village St. Petersburg, FL Tanglewood Fort Pierce, FL
High Point Clearwater, FL Vero Palms Vero Beach, FL
</TABLE>
Recreational Vehicle Parks
- --------------------------
<TABLE>
<S> <C> <C> <C>
Lazy Lakes RV Sugarloaf Key, FL Ridgecrest TV Leesburg, FL
Lions Lair RV Marathon, FL Sunshine RV Vero Beach, FL
Pioneer Village North Fort Myers, FL Topics RV Spring Hill, FL
</TABLE>
Other
- -----
<TABLE>
<S> <C> <C> <C>
ABC Pizza House Tampa, FL Fabian Enterprises Tampa, FL
Blakie's Restaurant Tampa, FL Florida Power & Light St. Petersburg, FL
Breed Automotive Lakeland, FL Mobil Oil Lakeland, FL
Discount Auto Parts Lakeland, FL Pier 1 Imports Hoover, AL
Discount Auto Parts Sarasota, FL Pizza Hut Brandon, FL
Discount Auto Parts Land O'Lakes, FL Pizza Hut Lakeland, FL
</TABLE>
Financial
- ---------
<TABLE>
<S> <C>
Belgravia Capital Heller Financial
Collateral Mortgage, Ltd. Lehman Brothers
Executive Commercial Funding NationsBank
First Federal Savings Bank, Leesburg, FL Republic Bank, Port Richey, FL
First National Bank, St. Lucie, FL Signature Financial Services, Inc.
First Union National Bank Union Capital Investments, LLC
GE Capital Corporation United Southern Bank, Eustis, FL
Greentree Financial
</TABLE>
<PAGE>
Profile of Appraiser 3
William G. Trask
Real Estate/Real Estate Investment
- ----------------------------------
Continental Communities National Home Communities
Martin Newby Management Pacific Life
Munao Partnership Windsor Corporation
EDUCATIONAL BACKGROUND
- ----------------------
Florida State University
University of South Florida
Edison Community College
Hillsborough Community College
Appraisal Institute
International Right of Way Association
<PAGE>
EXHIBIT (b)(1)(D)
SUMMARY
REAL ESTATE APPRAISAL REPORT
245-Space Rancho Margate
2900 North State Road 7
Margate, Broward County, Florida
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
AS OF
September 1, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
[LETTERHEAD OF WHITCOMB REAL ESTATE APPEARS HERE]
September 22, 1999
Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
RE: 245-Space Rancho Margate
2900 North State Road 7
Margate, Broward County, Florida
Dear Mr. Waite:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of September 1, 1999, based on an exposure period of six months, to
be:
- SIX MILLION FOUR HUNDRED THOUSAND DOLLARS -
($6,400,000)
Our value estimate applies to the land as physically constituted, to the
improvements actually in existence and reflects prevailing trends in the local
real estate market. We have made a careful inspection, study, and analysis of
the property, and have considered all factors which, in our opinion, would tend
to influence the market value of the subject.
Rancho Margate is a fully developed 245-space manufactured home community,
with a clubhouse, pool, laundry, shuffleboard and petanque courts and an on-site
office.
Our conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation and those specific
conditions indicated in the engagement letter.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan. The intended user of this report is
the Windsor Corporation.
We appreciate this opportunity to be of service to you. If you have any
questions, please do not hesitate to contact us.
<PAGE>
Mr. Steve Waite
September 22, 1999
Page Two
This is a Summary Appraisal, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of
Professional Appraisal Practice for Summary Appraisal Reports. This report
represents only summary discussions of the data, reasoning, and analyses
employed in the appraisal process toward the development of our opinion of
value. Supporting documentation has been retained in our files.
Very truly yours,
/s/ John H. Whitcomb
John H. Whitcomb, MAI, CCIM
St. Cert. Gen. REA #0001234
/s/ William G. Trask
William G. Trask
St. Cert. Gen. REA #0002347
<PAGE>
4
TABLE OF CONTENTS
- -----------------
Table Of Contents.......................................................... 4
Photographs Of Subject..................................................... 5
Summary Of Facts And Conclusions........................................... 5
Extent Of Confirming, Collecting And Reporting Data........................ 5
Purpose, Function And Date Of The Appraisal................................ 5
Area And Neighborhood Description.......................................... 5
Manufactured Home Community Market Overview................................ 9
Land And Site Improvements................................................. 5
Improvement Description.................................................... 5
Ownership And Property History............................................. 5
Occupancy.................................................................. 5
Zoning And Other Land Use Controls......................................... 5
Real Estate Assessment And Taxes........................................... 5
Marketability And Marketing Period......................................... 5
Highest And Best Use....................................................... 5
Valuation Process.......................................................... 5
Income Capitalization Approach............................................. 5
Sales Comparison Approach.................................................. 5
Final Estimate Of Value.................................................... 5
Certification.............................................................. 28
Assumptions And Limiting Conditions........................................ 29
Addenda
Legal Description
Maps
Profiles Of Appraisers
<PAGE>
5
PHOTOGRAPHS OF THE SUBJECT (Taken August 27, 1999)
[PICTURE APPEARS HERE]
1. Entrance to Subject
[PITURE APPEARS HERE]
2. Typical Street View
<PAGE>
6
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
Property Appraised: 245-Space Rancho Margate
-------------------
2900 North State Road 7
Margate, Broward County, Florida
Property Rights
---------------
Appraised: Fee Simple Interest, subject to tenant leases
----------
Land Area: 29.44 acres more or less
----------
Improvements: 245-manufactured home spaces, a clubhouse,
-------------
laundry, office, pool and shuffleboard and
petanque courts.
Owner: Windsor Park Properties 456
------
Zoning: T-1, Mobile Home District, Margate
-------
Highest and Best Use: As Improved -- Current Use
---------------------
Value Indications: Income Approach $6,400,000
------------------
Sales Comparison Approach $6,500,000
Final Estimate of Value: $6,400,000
------------------------
Date of Appraisal: September 1, 1999
------------------
Date of Inspection: August 27, 1999
-------------------
<PAGE>
7
EXTENT OF CONFIRMING, COLLECTING AND REPORTING DATA
- ---------------------------------------------------
This assignment encompasses providing an "as is" market value of the fee
simple title of the property and improvements, as of the specified date. This
investigation included an overview of the area and local manufactured home
market. We have inspected the subject and its environs, collected and analyzed
market data, inspected the comparable and competitive properties, considered and
applied the appropriate valuation methods and reconciled the final value
estimate.
The real estate interest appraised is that of ownership in fee simple
interest, subject to the existing tenant leases. The property is appraised as
if free and clear of mortgages, liens, servitude's and encumbrances, except
those noted in the body of this appraisal.
PURPOSE, FUNCTION AND DATE OF THE APPRAISAL
- -------------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of September 1, 1999. The information, opinions, and
conclusions contained in this report have been prepared as a basis for portfolio
valuation. The date of this appraisal is September 1, 1999. The intended user
of this report is the Windsor Corporation.
Market Value is defined as: The most probable price which a property should
bring in a competitive and open market under all conditions requisite to a fair
sale, the buyer and seller each acting prudently, knowledgeably and assuming the
price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a specified
date and the passing of title from seller to buyer under conditions whereby:
. Buyer and Seller are typically motivated;
. Both parties are well informed or well advised, and each acting in
what he considers his own best interest;
. A reasonable time is allowed for exposure in the open market;
. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
. The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale./1/
____________________________
/1/ The Office of the Thrift Supervision, 12 CFR 564.2(f).
<PAGE>
8
AREA AND NEIGHBORHOOD DESCRIPTION
- ---------------------------------
Location/Access
- ---------------
Rancho Margate is located within southeastern Florida in Margate, Broward
County. Broward County is bordered by Palm Beach County on the north, Dade
County on the south, portions of Hendry and Collier Counties to the west and the
Atlantic Ocean to the east, where it has approximately 25 miles of coast line.
Broward County is located approximately 275 miles south/southeast of
Jacksonville, and 25 miles north of Miami and 175 miles southeast of Orlando.
Broward County has 28 municipalities located within its borders. The
largest municipality, in terms of population, is Ft. Lauderdale, which was
estimated to have just over 150,000 persons as of 1997. Ft. Lauderdale is also
the Broward County seat. The municipalities of Hollywood and Pembroke Pines are
the second and third largest communities in the county, numbering approximately
127,000 and 104,000 residents, respectively.
Broward County contains a total of approximately 1,320 square miles
including 111 square miles of water area, and is ranked second in the state,
behind neighboring Dade County, in population density, with approximately 1,178
persons per square mile. The area is known for its mild winters, which result
from the close proximity to the warm Gulf Stream currents of the Atlantic Ocean.
South Florida's sub-tropical climate is a major factor in the area's growth.
The Bureau of Economic and Business Research from the University of Florida
estimated the county's 1990 population at 1,255,531, an increase of
approximately 23% over the 1980 figure. The average growth rate for Broward
County has averaged 1.8% annually over the period between 1990 and 1997. The
1997 population was estimated to be 1,423,729, a 13.4% increase over 1990.
The labor force numbered approximately 749,298 in 1997 and has grown in
proportion with the population. Unemployment for the year averaged 4.9%. The
county economy is heavily reliant on tourism, evidenced by the fact that the
Services and Retail Trade sectors employ over 62% of the total labor force.
Manufacturing and Finance are the next largest sectors, each employing
approximately 9% of the civilian labor force.
The subject is located along the east side of North State Road 7. This
location is in the north central portion of Broward County. The neighborhood is
generally described as the area surrounding State Road 7. The southern boundary
of the neighborhood is Oakland Park Boulevard and Sample Road is the northern
boundary. The eastern boundary is Powerline Road and the western boundary is
University Drive. The subject is situated in the north central portion of the
described neighborhood. The neighborhood is bisected by Florida's Turnpike.
<PAGE>
9
Area And Neighborhood Description
Concurrency
- -----------
The State of Florida's Local Government Comprehensive Planning Act of 1975
required all counties and municipalities in the state to develop, implement and
monitor local comprehensive and growth management plans. Pursuant to this law,
each county was required to publish Land Use Policy Guides, both in written and
map form, which designate desired types of land use and probable zoning for all
county lands not within their boundaries.
Summary
- -------
The real estate market in Broward County is showing signs of recovery. The
growth demands on the county are very evident in light of past trends and the
projections for further population increases. The desirability of south
Florida's climate and the continuing trend toward retirement in the area will
continue to produce populations which will stress the road systems and services
required for the growing population. The county is expected to be among the
highest in absolute population growth in the state for the next four years.
The economic base of the area will broaden due to commitments to attract
clean, light industrial users. Additionally, the expanding population will
require more supporting commercial, service and industrial development
throughout the area.
The future outlook for economic development is positive; however, a decline
in the quality of life for current residents is possible due to congestion, over
population and strains on services. Concurrency is a major concern for Broward
County's future growth within the state's growth management policies.
Concurrency refers to the requirement that adequate infrastructure be available
to serve new development. Eight types of infrastructure are affected,
including: traffic, potable water, sewer, drainage, solid waste, recreation and
open space, mass transit and fire rescue. In the long run, this growth policy
may prove beneficial to both property values and the quality of life in the
county as approval of future development becomes more difficult.
MANUFACTURED HOME COMMUNITY MARKET OVERVIEW
- -------------------------------------------
Within the county, according to the Florida Manufactured Housing
Association data, there are 165 manufactured housing communities, 71 of the
communities or 43% of the total, are communities which have more than 101 spaces
and 70 of the communities, or 42% of the total, are in the 26-100 space range.
Over 56% of the manufactured housing communities have less than 100 spaces.
This large percentage of small communities points to a fragmented marketplace,
with a predominance of single owner/operator and owner/developer communities.
However, the large investors are also present.
<PAGE>
10
LAND AND SITE IMPROVEMENTS
- --------------------------
The site is an irregularly shaped parcel of land containing an estimated
29.44 acres of gross area. The tract is generally level and at the surrounding
street grade. Drainage of the tract appears adequate and no adverse soil or
subsoil conditions were observed during the physical inspection of the site.
Utility services connected and in service on the date of valuation include
water, sanitary and storm sewer, electricity and telephone.
The individual lots in the community are accessed by roadways arranged to
maximize the use of the land. Roadway improvements include:
Street-bed: North State Road 7 is an asphalt paved, six-lane
----------
thoroughfare. The subject streets are asphalt paved 15-
20 foot wide roadways.
Sidewalks/Curb: There are sidewalks and curbs along North State Road 7,
--------------
but none in the subject.
Street Lights: The public and community streets are lighted with pole
-------------
mounted overhead streetlights.
Landscaping: Sodded and planted areas extend along the entire
-----------
perimeter and throughout the site.
Encumbrances: None Noted
-------------
Easements: Standard utility easements are assumed to exist.
----------
Encroachments: None Noted
--------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded, or otherwise known
liens, defects in title or adverse easements. There are no rent controls in
effect in Broward County.
Functional Utility
- ------------------
The site, which is irregular in shape and contains approximately 29.44
acres, is large enough to accommodate building improvements and roadways as well
recreational amenities and green areas. The site is considered functional for
various residential development scenarios. The current development of total
units equates to an overall density of approximately 7.98 units per acre, which
is higher than current development standards which tend toward larger lot sizes,
wider streets and more green areas.
<PAGE>
11
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 245 manufactured home community pads, arranged
along streets configured to maximize the available lot spaces. All of the lots
vary in size.
The common area amenities include the clubhouse and shuffleboard and
petanque courts. The pool, laundry and office are located at the clubhouse. We
have not estimated a separate value for these amenities, or equipment, as they
are standard items found at most manufactured home communities. These amenities
are typical, adequate and functional in use.
The community and site improvements were built in the early 1970's, and the
community is approximately 25 years old. The common areas, streets, amenities
and individual mobile homes were observed to be in average overall condition,
having been originally constructed of quality materials and having been
maintained over the years. No significant item of deferred maintenance was
noted and the current maintenance level is rated good.
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject property, as recorded in the Official Records
of Broward County in Deed Book 23942 at Page 888, is in the name of Windsor Park
Properties 456. The Deed was recorded in September 1995, and the indicated
consideration was $6,350,000.
OCCUPANCY
- ---------
The property is occupied by a fully developed 245-space manufactured home
community. Our inspection confirmed that there are twenty vacant lots and the
physical occupancy is 91.84%. In addition to the 20 vacant spaces, there is one
vacant community-owned home and an employee-occupied home, indicating an
economic occupancy of 91.0%.
The subject is governed, as required by law, by a prospectus, originally
dated February 5, 1986, and revised on January 16, 1996.
<PAGE>
12
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The property is zoned as a T-1, Mobile Home District under the Margate
zoning ordinance. It is our opinion that the subject property is in conformance
with the zoning code.
Concurrency
- -----------
The subject is in conformance with the approved comprehensive plan filed by
Margate and concurrency is not an issue.
Flood Hazard
- ------------
The subject property is located in a designated Flood Zone "AH-14"
according to Flood Map Community Number 120047, Panel 0115F, dated August 18,
1992.
Environmental
- -------------
We observed no obvious areas of contamination on or about the site.
However, we have no qualifications in environmental hazards and recommend an
environmental audit be performed.
REAL ESTATE ASSESSMENT AND TAXES
- --------------------------------
The subject property is identified in the Broward County records under
Parcel Number 18219-01-02710. The assessed value of the subject totals
$5,657,850. It is our opinion that the subject is under assessed. The 1998
taxes were $164,543.05.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Florida, properties are assessed at
100% of the market value, as required by Florida Statute, Chapter 192.042.
Properties are reassessed annually and equitability of assessments is not a
basis for assessment in the state of Florida.
Taxes are due and payable on the first day of the year, although tax bills
are issued in arrears. Discounts up to 4% of the total bill are available for
early payment and taxes become delinquent after March 31. Our discussions with
a number of owner's of investment real estate and Manufactured Home Communities
has indicated that "early" payment of real estate taxes is a very common
practice. Additionally, prudent management would also dictate the payment of
real estate taxes to take advantage of any discounts offered. Our estimate of
taxes of $159,541, in our "Reconstructed Operating Statement" reflects this
common practice.
<PAGE>
13
MARKETABILITY AND MARKETING PERIOD
- ----------------------------------
The subject is competitive with other properties in the marketplace and is
marketable, although not considered a candidate for a resident purchase.
Discussions with large institutional manufactured home community investor
representatives and local area realtors, indicated that "properly priced",
stable, well kept manufactured home communities should "be under contract"
within a six month period in today's market.
Our discussions further indicated that institutional investors required a
minimum of 200 spaces, and pricing would reflect an 8.0% to 9.0% overall
capitalization rate requirement for all-age communities. Pricing is established
by processing gross income, reduced by a vacancy and credit loss factor,
operating expenses and an additional capital charge based on overall condition,
is deducted to arrive at a net operating income (NOI). Those surveyed indicated
that at properties not operating at stabilized occupancy, they were unwilling to
compensate a seller for any of the upside to be gained in filling the property.
In late summer 1998, commercial mortgage backed securities (CMBS) lenders
restructured their pricing for long term fixed rate loans. These loans had
historically been priced based on an interest rate spread above Treasury
Securities. The secondary market for these loans became illiquid and lenders
were unable to sell the loans profitably. Consequently, although interest rates
on Treasuries have fallen, the interest rates on securitized loans have
increased. Prior to this increase, interest rate spreads were available lower
than 150 basis points over the 10-year Treasuries. Since the fall, spreads have
increased to the low 200 basis point range for manufactured housing communities.
Interest rates are low and financial institutions are again willing to lend
money for real estate projects with good occupancies. There has also been
significant institutional investor interest in manufactured home community
investments. In our opinion, the marketing period for the property would be
within the range indicated by the industry participants or six months.
<PAGE>
14
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as: The reasonably probable and legal
use of vacant land or an improved property, which is physically possible,
appropriately supported, financially feasible and which results in the highest
value."/2/
We have considered all of the potential uses to which the subject is
legally and physically adaptable. It is our opinion that the current use of the
subject, as a 245-space, age restricted manufactured home community, represents
the highest and best use of the subject.
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a fully occupied manufactured home community, investors
are primarily concerned with cash flow to service any debt and the equity
position. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of mobile homes by
offering low space rental rates, an investor would not be willing to compensate
a seller for any more than the income to be received. The subject is fully
developed with no expansion possibilities, therefore a potential investor would
be primarily interested in the cash flow and equity return and we have excluded
the Cost Approach.
___________________________
/2/ The Appraisal Institute, The Appraisal of Real Estate, 10th Ed. Chicago:
----------------------------
The Appraisal Institute, 1992, page 275.
<PAGE>
15
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is, of course, an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms, and within the goal of price minimization seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
facility, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property in the market. The first step in the Income Approach
to value involves the estimate of future net operating income to be generated by
the subject property. The estimate of net operating income is derived through
the process of estimating the total potential gross income (PGI from rentals and
other sources, less any vacancy and credit loss producing an effective gross
income (EGI) estimate. All expenses associated with the operation of the
property are then deducted to yield a stabilized net operating income (NOI)
estimate.
A survey of the competitive properties is presented in summary form on the
following page.
<PAGE>
16
RENTAL COMPARABLE SUMMARY
<TABLE>
<CAPTION>
====================================================================================================================================
No. Name/Location Number Monthly Services Amenities
Spaces/ Rental Included In Rent
% Occ. Rates
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Imperial Estates 261/ $380.00 Lawn mowing. Clubhouse, pool,
5601 North State Road 7 99.6% to shuffleboard, petanque
Fort Lauderdale, Broward County, Florida $398.00 and laundry.
- ------------------------------------------------------------------------------------------------------------------------------------
2 Colonies of Margate 819/ $410.00 Trash collection and Clubhouses, pools,
6603 Colonial Drive 98.5% to lawn mowing. Jacuzzi, shuffleboard,
Margate, Broward County, Florida $436.00 petanque and laundry.
-----------------------------------------------------------------------------------------------------------------------------------
3 Aztec Estates 645/ $454.00 Water, sewer, trash Clubhouse, pool,
1A Sundial Drive 95.7% collection and lawn shuffleboard, petanque
Margate, Broward County, Florida mowing. and laundry.
- ------------------------------------------------------------------------------------------------------------------------------------
4 Carefree Cove 164/ $396.00 Lawn mowing. Clubhouse, pool,
3273 Northwest 37th Street 98.8% to shuffleboard, petanque
Lauderdale Lakes, Broward County, Florida $411.00 and laundry.
- ------------------------------------------------------------------------------------------------------------------------------------
5 Village Park 307/ $385.00 Lawn mowing. Clubhouse, pool,
3900 West Prospect Road 99.0% to shuffleboard, petanque
Fort Lauderdale, Broward County, Florida $392.00 and laundry.
-----------------------------------------------------------------------------------------------------------------------------------
Subj. Rancho Margate 245/ $370.00 Trash collection. Clubhouse, pool,
2900 North State Road 7 93.4% to shuffleboard, laundry,
Margate, Broward County, Florida $381.00 and petanque.
====================================================================================================================================
</TABLE>
<PAGE>
17
Income Capitalization Approach
Income Analysis
- ---------------
The general market practice is on a base lot rent charged on a monthly
basis. This ranges between $380.00 and $454.00 per month, as indicated by the
rent comparables recited in this report. As shown by our survey, the subject's
lot rents are within the market range.
Potential Gross Income
- ----------------------
In our forecast of total rental income, we have projected 12 months at the
current rent levels. Based on the current rent roll, the total monthly rent
amounts to $91,915. The potential gross income from rentals is $1,102,980 per
year.
Vacancy and Credit Loss
- -----------------------
The subject is an age-restricted community that has a physically occupancy
of 91.8%, with twenty of the 245 sites vacant. As previously indicated, the
economic occupancy of the subject is 91.0%. To the economic vacancy, we have
added a percentage to account for credit loss in our estimate of total economic
vacancy of 9.0% of total potential gross income, or $99,268.
Utility Income
- --------------
Utility income is derived from water and sewer services used by the tenants.
Historically, the subject generated between $167.15 per space in 1997 and
$180.89 per space in 1998. We have estimated utility income at $180.00 per
space or $44,100 annually.
Miscellaneous Income
- --------------------
Additional income is typically derived from sources such as storage fees,
labor charges to the tenants, commissions on sales and rentals of the units.
Historically, the subject generated $24.70 per space in 1996, decreasing to
$6.54 per space in 1997 and $5.96 per space in 1998. We have estimated
miscellaneous income at $5.00 per space or $1,225 annually.
Effective Gross Income (EGI)
- ----------------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated losses due to tenant changes, plus any additional income. Thus,
potential gross rental income of $1,102,980 less a vacancy and credit loss
allowance of $99,268, or 9.0% produces an effective gross income from rentals
estimate of $1,003,712. To this amount, we have added an estimated income
derived from utility and miscellaneous sources of $45,325, arriving at an
effective gross income estimate of $1,049,037.
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
Ranchero Margate - Summary of Historical Operations
Pct. of $ Per Pct. of $ Per Pct. of $ Per
1996 Income Space 1997 Income Space 1998 Income Space
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $ 986,299 95.21% $4,025.71 $ 998,478 95.91% $4,075.42 $1,029,983 95.74% $4,204.01
Utility Income 43,608 720.67% 177.99 40,951 2556.24% 167.15 44,317 3035.41% 180.89
Other Income 6,051 0.58% 24.70 1,602 0.15% 6.54 1,460 0.14% 5.96
------------------------------------------------------------------------------------------------------
Total Income $1,035,958 816.46% $4,228.40 $1,041,031 2652.31% $4,249.11 $1,075,760 3131.29% $4,390.86
Expenses:
Administration/Office $ 66,175 6.39% $ 270.10 $ 72,521 6.97% $ 296.00 $ 59,968 5.57% $ 244.77
Insurance 12,207 1.18% 49.82 12,340 1.19% 50.37 4,678 0.43% 19.09
Maintenance & Repairs 30,485 2.94% 124.43 26,045 2.50% 106.31 24,304 2.26% 99.20
Management Expense 49,912 4.82% 203.72 51,451 4.94% 210.00 53,060 4.93% 216.57
Wages & Benefits 46,731 4.51% 190.74 47,676 4.58% 194.60 51,534 4.79% 210.34
Property Taxes 144,935 13.99% 591.57 150,732 14.48% 615.23 157,961 14.68% 644.74
Utilities 116,094 11.21% 473.85 119,860 11.51% 489.22 147,439 13.71% 601.79
------------------------------------------------------------------------------------------------------
Total Expenses $ 466,539 45.03% $1,904.24 $ 480,625 46.17% $1,961.73 $ 498,944 46.38% $2,036.51
Net Operating Income $ 569,419 54.97% $2,324.16 $ 560,406 53.83% $2,287.37 $ 576,816 53.62% $2,354.35
===========================================================================================================================
<CAPTION>
===================================================================
1999 Pct. of $ Per 1999
Annualized Income Space thru June
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
Rents $1,052,512 95.47% $4,295.97 526256
Utility Income 48,414 3115.44% 197.61 24207
Other Income 1,554 0.14% 6.34 777
--------------------------------------------
Total Income $1,102,480 3211.05% $4,499.92
Expenses:
Administration/Office $ 34,394 3.12% $ 140.38 17197
Insurance 4,848 0.44% 19.79 2424
Maintenance & Repairs 32,074 2.91% 130.91 16037
Management Expense 54,046 4.90% 220.60 27023
Wages & Benefits 52,910 4.80% 215.96 26455
Property Taxes 169,480 15.37% 691.76 84740
Utilities 139,900 12.69% 571.02 69950
---------------------------------------------
Total Expenses $ 487,652 44.23% $1,990.42
Net Operating Income $ 614,828 55.77% $2,509.50
===================================================================
</TABLE>
<PAGE>
Income capitalization Approach 19
Operating Expense Analysis
- --------------------------
Insurance: Historically, this expense has exhibited a level trend. Our estimate
- ----------
of this expense has been based on the historical amounts, or $20.00 per space
per year. This is equal to $4,900 annually, approximately 0.47% of the
effective gross income.
Administrative/Office: Historically, this expense has shown a varying trend. In
- ----------------------
the financial statements, this expense does include some corporate expense items
that we have not considered. Our stabilized estimate is $200.00 per space per
year, equal to $49,000 or approximately 4.67% of the estimated effective gross
income.
Maintenance and Repair: Historically, this expense was equal to $124.43 per
- -----------------------
space in 1996 decreasing to $99.20 per space in 1998. Our estimate of $120.00
per space per year is equal to $29,400 is believed adequate to properly maintain
the community. This amount is equal to approximately 2.80% of the estimated
effective gross income.
Management Fees: This expense typically includes off-site management, the
- ---------------
oversight of the on-site manager and monthly bookkeeping functions. We used a
5% of estimated effective gross income, typical in the market place, equal to
$52,452 or $214.09 per space per year.
Wages and Benefits: This expense was equal to $190.74 in 1996 and increased to
- -------------------
$210.34 in 1998. We have estimated this expense at $215.00 per space per year or
$52,675, which is equal to 5.02% of the estimated effective gross income.
Property Taxes: This category is project specific due to location. Based on our
- ---------------
analysis of the historical tax trends, we have estimated the tax liability to be
$159,541. This equates to $651.19 per space per year or 15.21% of the estimated
effective gross income.
Utilities: This expense was equal to $473.85 per space in 1996 increasing to
- ----------
$601.79 per space in 1998. We have estimated this expense at $550.00 per space
per year. This is equal to $134,750, or approximately 12.85% of the estimated
effective gross income.
Reserves: This expense category represents the inclusion of set-asides for major
- ---------
recurring or capital type expenditures experienced periodically by any property.
We have used $25.00 per space per year, believed adequate to cover future
capital costs. This equates to $6,125 annually or approximately 0.58% of the
estimated effective gross income.
Total Expenses: To summarize, we have stabilized total operating expenses for
- ---------------
the subject at $488,843. This estimate is equal to 46.60% of the Effective Gross
Income (EGI) estimate or $1,995.28 per space per year. As shown, the historical
expense was equal to 45.03% in 1996, increasing to 46.17% in 1997 and 46.38% in
1998.
<PAGE>
================================================================================
Ranchero Margate
Reconstructed Operating Statement
================================================================================
Income
Spaces Monthly Rent Monthly Total Annualized
- -------------------------------------------------------
130 $370.00 $48,100 $577,200
115 $381.00 43,815 525,780
- -------------------------------------------------------
245 $375.16 $91,915 Pct. $
of EGI Per Space
-----------------------
Gross Potential Rental Income $ 1,102,980 105.14% $ 4,501.96
Less:
Vacancy & Credit Loss (99,268) 9.0% $ (405.18)
-----------------------------------
Effective Gross Income From Rentals $ 1,003,712 95.68% $ 4,096.78
Add:
Utility Income 44,100 4.20% 180.00
Miscellaneous Income 1,225 0.12% 5.00
-----------------------------------
Total Effective Gross Income $ 1,049,037 100.00% $ 4,281.78
Expenses
Administrative/Office $ 49,000 4.67% $ 200.00
Insurance 4,900 0.47% 20.00
Maintenance & Repairs 29,400 2.80% 120.00
Management Expense 52,452 5.00% 214.09
Wages & Benefits 52,675 5.02% 215.00
Property Taxes 159,541 15.21% 651.19
Utilities 134,750 12.85% 550.00
Reserves 6,125 0.58% 25.00
-----------------------------------
Total Expenses $ 488,843 46.60% $ 1,995.28
Net Operating Income $ 560,194 53.40% $ 2,286.51
===============================================================================
<PAGE>
Income Capitalization Approach 21
Selection of a Capitalization Rate
- ----------------------------------
Direct capitalization of terminal net operating income by an overall
capitalization rate extracted from the market provides an excellent indication
of market value. Purchasers of manufactured home communities most often utilize
this method. This method is easily understood, closely related to the market,
and convincing if the overall rates abstracted from recent sales are from
comparable sale properties and accurate income data are available.
Market Data
- -----------
The comparable sale data indicated an overall capitalization rate between
7.44% and 9.83%. The data indicates a narrow range in overall capitalization
rates, which tend to be influenced by the size of the community, its occupancy,
expense ratio, age and condition, amenity package and location.
<TABLE>
<CAPTION>
==================================================================
Sale Sale Date Vacancy Rate Overall Rate
- ------------------------------------------------------------------
<S> <C> <C> <C>
1 July 1997 2.0% 9.18%
- ------------------------------------------------------------------
2 January 1999 1.3% 7.94%
- ------------------------------------------------------------------
3 September 1998 0.0% 7.44%
- ------------------------------------------------------------------
4 July 1998 2.7% 8.29%
- ------------------------------------------------------------------
5 June 1998 5.5% 9.83%
==================================================================
</TABLE>
In this instance, the subject has an economic vacancy of 9.0% and was
observed to be in good overall condition. The market has been competitive in
recent years, indicating increased risk, increasing the going-in capitalization
rate. Based on these considerations, we have concluded an overall
capitalization rate of 8.75%.
Debt Coverage Ratio Method
- --------------------------
We have also developed an overall rate through the Debt Coverage Ratio
analysis. Current commercial lending policies indicate a mortgage loan of 75% of
market value, based on a 20-year amortization schedule at an annual interest
rate of 8.00%, which yields an annual mortgage constant of 10.0373%. A minimum
debt coverage ratio (DCR) of 1.20 to 1.00, would likely be required for a
property similar to the subject. Based on these assumptions an overall
capitalization rate has been developed, as presented below:
<TABLE>
<CAPTION>
==============================================================================================
M f DCR OAR
X X
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.75 0.100373 1.20 0.090336
- ----------------------------------------------------------------------------------------------
Rounded 9.0%
==============================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 22
The Debt Coverage Ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufactured home
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The presence of institutional investors in the market and the reduction in
quality of real estate investments has bid down rates on manufactured home
communities. Investors have become more creative in their acquisition
strategies in order to compete. Therefore, actual transactions in the
marketplace better demonstrate investor perceptions of yields on manufactured
home community investments.
We have placed a greater emphasis on the overall capitalization rate
indicated by the market data, as this is a direct reflection of risk perceptions
by market participants, although the rates are almost equivalent. Our estimate
of the market value of the subject, indicated by the Income Capitalization
Approach, is calculated as follows:
<TABLE>
<CAPTION>
Net Operating Income Overall Capitalization Rate Market Value
<S> <C> <C>
$560,194 /0.0875 $6,402,217
Rounded to $6,400,000
</TABLE>
<PAGE>
23
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions be weighed, and the data of each transaction
be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject be considered;
differences in physical, functional, and economic characteristics be
noted; and adjustments for the differences be made.
3. The value conclusion is consistent with the analysis of the sales
data.
So that a conclusion from the analysis of the sales data can be drawn, a
unit of comparison has been selected. Calculation of a unit of comparison
provides a common denominator by which the market sales can be related to each
other and to the subject property. The commonly accepted unit of comparison in
the valuation of manufactured home communities is the selling price per space.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For dissimilar features adjustments are made
indicating the price at which the subject could be expected to sell. In making
adjustments, all relevant factors were considered including:
1. Nature of surrounding development.
2. Size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
Based on our investigation, the following five sales are the most
significant transactions for direct comparison with the subject.
<PAGE>
Summary of Sale Comparables
<TABLE>
<CAPTION>
=============================================================================================================================
No. Name Sale Price/ Total Price/ Average
Address Sale Date Spaces/ Space Lot Rent
Occupancy
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Tall Pines $ 4,450,000 255/ $17,451 $196.94
314 South Erie Drive June 1997 98.0%
Fort Pierce, Unincorporated St. Lucie County, Florida
- ---------------------------------------------------------------------------------------------------------------------------
2 Honeymoon Park $ 8,500,000 231/ $36,797 $330.87
1100 Curlew Road January 1999 98.7%
1100 Curlew Road Dunedin, Pinellas County, Florida
- ---------------------------------------------------------------------------------------------------------------------------
3 Country Lakes Village I and II $ 14,100,000 472/ $29,873 $273.67
5700 Bayshore Road September 1998 100.0%
Palmetto, Manatee County, Florida
- ----------------------------------------------------------------------------------------------------------------------------
4 Pleasure Cove and Plantation Manor $ 16,600,000 585/ $28,376 $308.31
3030 U.S. Highway 1 July 1998 97.3%
Fort Pierce, St. Lucie County, Florida
- ----------------------------------------------------------------------------------------------------------------------------
5 Village Park $ 8,000,000 307/ $26,059 $391.41
3900 West Prospect Road June 1998 94.5%
Fort Lauderdale, Broward County, Florida
============================================================================================================================
<CAPTION>
=========================================================================================================
No. Name E.G.I.M./ O.A.R.
Address Expense %
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Tall Pines
314 South Erie Drive 7.44/ 9.18%
Fort Pierce, Unincorporated St. Lucie County, Florida 26.7%
- ---------------------------------------------------------------------------------------------------------
2 Honeymoon Park 8.35/ 7.94%
1100 Curlew Road 33.7%
1100 Curlew Road Dunedin, Pinellas County, Florida
- --------------------------------------------------------------------------------------------------------
3 Country Lakes Village I and II 9.40/ 7.44%
5700 Bayshore Road 30.6%
Palmetto, Manatee County, Florida
- -------------------------------------------------------------------------------------------------------
4 Pleasure Cove and Plantation Manor 8.03/ 8.29%
3030 U.S. Highway 1 33.4%
Fort Pierce, St. Lucie County, Florida
- ------------------------------------------------------------------------------------------------------
5 Village Park 6.50% 9.83%
3900 West Prospect Road 36.1%
Fort Lauderdale, Broward County, Florida
======================================================================================================
</TABLE>
<PAGE>
Sales Comparison Approach 25
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. The properties, which
have been compared to the subject, have been discussed below:
Sale Comparable Number One is Tall Pines located in Fort Pierce,
Unincorporated St. Lucie County, Florida. This 255 space senior community sold
in June 1997, for $4,450,000. This price equates to a sale price per space of
$17,451. Based on an effective gross income of $597,773, the EGIM was 7.44 and
the overall rate was 9.18%. Approximately 25% of the spaces are encumbered with
lifetime leases.
Sale Comparable Number Two is Honeymoon Park located in Dunedin, Pinellas
County, Florida. This 231 space age restricted community sold in January 1999
for $8,500,000. This price equates to a sale price per space of $36,797. Based
on an effective gross income of $1,017,882, the EGIM was 8.35 and the overall
rate was 7.94%. The park was 98.7% occupied at the time of sale.
Sale Comparable Three is Country Lakes Village I and II in Palmetto,
Manatee County, Florida. The property has 472 home sites and recently sold for
$14,100,000, or $29,873 per space. Based on an effective gross income of
$1,500,590, the EGIM was 9.40. The expenses represented 30.6% of the effective
gross income and the indicated capitalization rate was 7.44%. This age
restricted community was 100% occupied at the time of sale.
Sale Comparable Number Four is Pleasure Cove and Plantation Manor
Manufactured Housing Communities. The properties are adjacent to one another
and were both built in 1972. There are 585 total spaces and the property sold
in July 1998 for $16,600,000, or $28,376 per space. Based on an effective gross
income of $2,067,085, the EGIM was 8.03. The expenses represented 33.4% of the
effective gross income and the indicated capitalization rate was 8.29%. The
combined occupancy of both communities was 97.3% at the time sale.
Sale Comparable Number Five is Village Park in Fort Lauderdale, Broward
County, Florida. This 307 space rental park sold for $8,000,000 in June 1998.
This price equates to a sale price per space of $26,059. Based on an effective
gross income of $1,230,257, the EGIM was 6.50, and the overall rate was 9.83%.
This park was 94.5% occupied at the time of sale.
All of the sales were fee simple transactions, with abnormal financing
reflected in the cash equivalent price. There were no abnormal sale conditions
known to have occurred and all of the sales represent transactions that have
taken place over a 2 year period, having traded under similar market conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true
<PAGE>
Sales Comparison Approach 26
for amenities, age and other factors. The average lot rent reflects, in most
cases, the market perception of a property's position in the marketplace. It is
also typical that lot rent increases contribute to increases in net operating
income. Alternatively, we have employed the effective gross income multiplier
(EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 6.50 and 9.40. As previously discussed, the EGIM is essentially
a function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject has a higher vacancy level and has an expense ratio higher than
all of the comparables. Based on these considerations, we have concluded an
EGIM just below the indicated range, processing subject's Effective Gross Income
of $1,049,037 with an EGIM of 6.20.
<TABLE>
<S> <C> <C>
Thus, $1,049,037 x 6.20 is $6,504,029
Rounded to $6,500,000
</TABLE>
On a per space basis, this is equivalent to $26,531.
<PAGE>
27
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
<TABLE>
<S> <C>
Income Capitalization Approach $6,400,000
Sales Comparison Approach $6,500,000
</TABLE>
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales of similar properties.
In the reconciliation, we reviewed each approach to value (a) to ascertain
the reliability of the data and (b) to weight the approach that best represented
the actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis
of this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the
valuation of the subject property, the sales comparison approach was considered
reliable. Given the relative homogeneity of the locations, the availability of
market data, we have emphasized this approach in the valuation.
The two approaches reflect a narrow range of values. Our opinion of the
market value of the subject, based on a reasonable exposure period of six
months, as of September 1, 1999 was:
- SIX MILLION FOUR HUNDRED THOUSAND DOLLARS -
($6,400,000)
<PAGE>
28
CERTIFICATION
- -------------
We certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions and are our personal,
impartial and unbiased professional analyses, opinions, and conclusions.
. We have no present or prospective interest in the property that is the
subject of this report, and no personal interest with respect to the
parties involved.
. We have no bias with respect to the property that is the subject of this
report or to the parties involved with this assignment.
. Our engagement in this assignment was not contingent upon developing or
reporting predetermined results.
. Our compensation for completing this assignment is not contingent upon
the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this appraisal.
. Our analysis, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice.
. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
. As of the date of this report, John H. Whitcomb, MAI, CCIM has completed
the requirements under the continuing education program of the Appraisal
Institute.
. John H. Whitcomb, MAI, CCIM and William G. Trask have made a personal
inspection of the property that is the subject of this report.
. No one provided significant professional assistance to the persons
signing this report.
. We are in compliance with the competency provisions of the Uniform
Standards of professional Appraisal Practice of the Appraisal
Foundation.
. This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
/s/ John H. Whitcomb /s/ William G. Trask
- ----------------------------------- ----------------------------------
John H. Whitcomb, MAI, CCIM William G. Trask
St. Cert. Gen. REA #0001234 St. Cert. Gen. REA #0002347
<PAGE>
29
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the conclusion in
this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function of the Report. The appraisal report may not be reproduced,
in whole or in part, and the findings of the report may not be utilized by a
third party for any purpose, without the written consent of Whitcomb Real
Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or to be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes that may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
<PAGE>
Assumptions and Limiting Conditions 30
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed
concerning any matter that may be disclosed by a proper survey. If a subsequent
survey should reflect a differing land area and/or frontages, we reserve the
right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others, and is not meant for use as a reference in legal matters of
survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projection contained in
the appraisal assumes responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures, which would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made
available to us, so statements regarding soil qualities, if made in the report,
are not conclusive but have been considered consistent with information
available to us and provided by others. In addition, unless stated otherwise in
the appraisal, the land and soil of the area under appraisement appears firm and
solid, but the appraisal does not warrant this condition.
The appraisal report covering the subject is limited to surface rights only, and
does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers and we are not qualified to judge the structural and
environmental integrity of the improvements, if any. Consequently, no warranty,
representations or liability are assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services, including the
construction materials, particularly the roof, foundations,
<PAGE>
Assumptions and Limiting Conditions 31
and equipment, including the HVAC systems, if applicable. Should there be any
question concerning them, it is strongly recommended that an Engineering,
Construction, and/or Environmental inspection be obtained. The value estimate
stated in this appraisal, unless otherwise noted, is predicated on the
assumption that all of the improvements, equipment and building services, if
any, are structurally sound and suffer no concealed or latent defects or
inadequacies other than those noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas, which are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest
<PAGE>
Assumptions and Limiting Conditions 32
rates and/or terms or availability of financing altogether; property assessment;
and/or major revisions in current state and/or federal tax or regulatory laws.
Therefore, the actual results achieved during the projected holding period and
investor requirements relative to anticipated annual returns and overall yields
could vary from the projection. Thus, variations could be material and have an
impact on the individual value conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements of the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
TRACT #1: The East 395 feet of the West 435 feet of that part of the Northwest
1/4 of the Northeast 1/4, lying South of the Existing County Road, in Section
11, Township 29 South, Range 25 East, Polk County, Florida.
TRACT #2: Beginning at a point which is 415 feet West of the Southeast corner of
the Northwest 1/4 of the Northeast 1/4 of Section 11, Township 29 South, Range
25 East, run thence West along the South line of said Northwest 1/4 of Northeast
1/4, 464.5 feet more or less, to a point which is 435 feet East of the Southwest
corner of said Northwest 1/4 of Northeast 1/4; thence run North to a point on
the South right-of-way line of the now existing highway which is 435 feet East
of the West line of said Northwest 1/4 of Northeast 1/4; run thence East along
the Southerly right-of-way line of the now existing road right-of-way, 459.12
feet more or less, to a point which is 415 feet West of the East line of the
said Northwest 1/4 of the Northeast 1/4; run thence South to the point of
beginning, all lying and being in Polk County, Florida.
TRACT #3: The East 415 feet of the Northwest 1/4 of the Northeast 1/4 of Section
11, Township 29 South, Range 25 East, lying South of the existing road
right-of-way, all lying and being in Polk County, Florida.
<PAGE>
MAPS
<PAGE>
[AREA MAP APPEARS HERE]
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
[RENT COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
[MANUFACTURED HOME COMMUNITIES COMPARABLE SALES MAP APPEARS HERE]
<PAGE>
[POOL AND LAUNDRY AREA APPEARS HERE]
<PAGE>
PROFILE OF APPRAISERS
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St. Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
<PAGE>
Profile of Appraiser 2
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
<TABLE>
<CAPTION>
Manufactured Home Communities
- -----------------------------
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce. FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, IN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach. FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
Profile of Appraiser 3
<TABLE>
<CAPTION>
Recreational Vehicle Parks
- --------------------------
<S> <C> <C> <C>
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
<CAPTION>
Self-Storage Facilities
- -----------------------
<S> <C> <C> <C>
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
<CAPTION>
Hotels/Resorts
- --------------
<S> <C>
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D. C.
</TABLE>
<PAGE>
Profile of Appraiser 4
Financial
- ---------
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
- ----------------------------------
W. P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
----------------------------------
TESTIMONY
- ---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
PROFILE OF APPRAISER
WILLIAM G. TRASK
St.Cert. Gen. REA #0002347
REAL ESTATE APPRAISAL EXPERIENCE
- --------------------------------
Appraiser
Whitcomb Real Estate
Tampa, FL
Specializing in real estate valuations and consulting projects for lending
institutions, public and private corporations and individuals, for a
variety of uses. Property types appraised include manufactured housing
communities, recreational vehicle parks, manufacturing plants, office
buildings, apartment complexes, retail properties and other types of
commercial establishments. February 1998 to Present.
Appraiser
Atlas Real Estate Group, Inc.
Tampa, FL
Specialized in real estate condemnation valuations and related studies.
Property types appraised include agricultural, industrial, residential,
office buildings, retail properties and other types of commercial land and
establishments. August 1991 to January 1998.
PROFESSIONAL AFFILIATIONS
- -------------------------
State Certified General Real Estate Appraiser
Florida # 0002347
Georgia # CG007464
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
<TABLE>
<CAPTION>
Manufactured Home Communities
- -----------------------------
<S> <C> <C> <C>
A Garden Walk Palm Beach Gardens, FL Honeymoon Park Dunedin, FL
Bear Creek Ormond Beach, FL La Buona Vita Port St. Lucie, FL
Bonfire Leesburg, FL Lincolnshire Largo, FL
Briarwood Lake Worth, FL Meadowbrook Lakeland, FL
Camelot East Sarasota, FL Mobiland By The Sea Melbourne, FL
Camelot Lakes Sarasota, FL Oak View Arcadia, FL
Carefree Village Tampa, FL Palmetto Hallandale, FL
Clover Leaf Brooksville, FL Plaza Bradenton, FL
Coquina Crossing St. Augustine, FL Ranchero Village Largo, FL
</TABLE>
<PAGE>
Profile of Appraiser 2
William G. Trask
<TABLE>
<CAPTION>
Manufactured Home Communities (Cont.)
- -------------------------------------
<S> <C> <C> <C>
Country Club Estates Venice, FL River Bay Tampa, FL
Country Lakes Coconut Creek, FL Riverview Micco, FL
Country Life Leesburg, FL Serendipity Clearwater, FL
Crystal River Village Crystal River, FL Southern Acres St. Cloud, FL
Diamond Point Leesburg, FL Spanish Trails Zephyrhills, FL
Friendly Village Sellersburg, IN Sun Village Largo, FL
Hammock Lake Fort Meade, FL Sundance Zephyrhills, FL
Heron Cay Vero Beach, FL Sunshine Village Lake Worth, FL
Hibiscus Mount Dora, FL Tall Pines Fort Pierce, FL
Hidden Village St. Petersburg, FL Tanglewood Fort Pierce, FL
High Point Clearwater, FL Vero Palms Vero Beach, FL
<CAPTION>
Recreational Vehicle Parks
- --------------------------
<S> <C> <C> <C>
Lazy Lakes RV Sugarloaf Key, FL Ridgecrest RV Leesburg, FL
Lions Lair RV Marathon, FL Sunshine RV Vero Beach, FL
Pioneer Village North Fort Myers, FL Topics RV Spring Hill, FL
<CAPTION>
Other
- -----
<S> <C> <C> <C>
ABC Pizza House Tampa, FL Fabian Enterprises Tampa, FL
Blakie's Restaurant Tampa, FL Florida Power & Light St. Petersburg, FL
Breed Automotive Lakeland, FL Mobil Oil Lakeland, FL
Discount Auto Parts Lakeland, FL Pier 1 Imports Hoover, AL
Discount Auto Parts Sarasota, FL Pizza Hut Brandon, FL
Discount Auto Parts Land 0' Lakes, FL Pizza Hut Lakeland, FL
<CAPTION>
Financial
- ---------
<S> <C>
Belgravia Capital Heller Financial
Collateral Mortgage, Ltd. Lehman Brothers
Executive Commercial Funding NationsBank
First Federal Savings Bank, Leesburg, FL Republic Bank, Port Richey, FL
First National Bank, St. Lucie, FL Signature Financial Services, Inc.
First Union National Bank Union Capital Investments, LLC
GE Capital Corporation United Southern Bank, Eustis, FL
Greentree Financial
</TABLE>
<PAGE>
Profile of Appraiser 3
William G. Trask
Real Estate/Real Estate Investment
- ----------------------------------
Continental Communities National Home Communities
Martin Newby Management Pacific Life
Munao Partnership Windsor Corporation
EDUCATIONAL BACKGROUND
- ----------------------
Florida State University
University of South Florida
Edison Community College
Hillsborough Community College
Appraisal Institute
International Right of Way Association
<PAGE>
EXHIBIT (b)(1)(E)
SUMMARY
REAL ESTATE APPRAISAL REPORT
238-Space Winter Haven Mobile Home Community
50 Charlotte Drive
Winter Haven, Unincorporated Polk County, Florida
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
AS OF
August 15, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
[LETTERHEAD OF WHITCOMB REAL ESTATE APPEARS HERE]
September 22, 1999
Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
RE: 238-Space Winter Haven Mobile Home Community
50 Charlotte Drive
Winter Haven, Unincorporated Polk County, Florida
Dear Mr. Waite:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of August 15, 1999, based on an exposure period of six months, to be:
- THREE MILLION SEVEN HUNDRED TEN THOUSAND DOLLARS -
($3,710,000)
Our value estimate applies to the land as physically constituted, to the
improvements actually in existence and reflects prevailing trends in the local
real estate market. We have made a careful inspection, study, and analysis of
the property, and have considered all factors which, in our opinion, would tend
to influence the market value of the subject.
Winter Haven is a fully developed 238-space manufactured home community,
with a clubhouse, pool, laundry, shuffleboard courts and an on-site office.
Our conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation and those specific
conditions indicated in the engagement letter.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan. The intended user of this report is
the Windsor Corporation.
We appreciate this opportunity to be of service to you. If you have any
questions, please do not hesitate to contact us.
<PAGE>
Mr. Steve Waite
September 22, 1999
Page Two
This is a Summary Appraisal, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of
Professional Appraisal Practice for Summary Appraisal Reports. This report
represents only summary discussions of the data, reasoning, and analyses
employed in the appraisal process toward the development of our opinion of
value. Supporting documentation has been retained in our files.
Very truly yours,
/s/ John H. Whitcomb
John H. Whitcomb, MAI, CCIM
St. Cert. Gen. REA #0001234
/s/ William G. Trask
William G. Trask
St. Cert. Gen. REA #0002347
<PAGE>
4
TABLE OF CONTENTS
- -----------------
Table Of Contents.................................................... 4
Summary Of Facts And Conclusions..................................... 6
Extent Of Confirming, Collecting And Reporting Data.................. 7
Purpose, Function And Date Of The Appraisal.......................... 7
Area/Neighborhood Description........................................ 8
Manufactured Home Community Market Overview.......................... 9
Land And Site Improvements........................................... 10
Improvement Description.............................................. 11
Ownership And Property History....................................... 11
Occupancy............................................................ 11
Zoning And Other Land Use Controls................................... 12
Real Estate Assessment And Taxes..................................... 12
Marketability And Marketing Period................................... 13
Highest And Best Use................................................. 14
Valuation Process.................................................... 14
Income Capitalization Approach....................................... 15
Sales Comparison Approach............................................ 23
Final Estimate Of Value.............................................. 27
Certification........................................................ 28
Assumptions And Limiting Conditions.................................. 29
Addenda
Legal Description
Maps
Profiles Of Appraisers
<PAGE>
5
PHOTOGRAPHS OF THE SUBJECT (Taken August 17, 1999)
[PICTURE APPEARS HERE]
1. Entrance to Subject
[PICTURE APPEARS HERE]
2. Typical Street View
<PAGE>
6
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
Property Appraised: 238-Space Winter Haven Mobile Home Community
-------------------
50 Charlotte Drive
Winter Haven, Unincorporated Polk County, Florida
Property Rights
---------------
Appraised: Fee Simple Interest, subject to tenant leases
----------
Land Area: 30.8 acres more or less
----------
Improvements: 238-manufactured home spaces, a clubhouse,
-------------
laundry, office, pool and shuffleboard courts.
Owner: Windsor Park Properties 456
------
Zoning: Residence R4 Open Density District, Polk County
-------
Highest and Best Use: As Improved -- Current Use
---------------------
Value Indications: Income Approach $3,710,000
------------------
Sales Comparison Approach $3,790,000
Final Estimate of Value: $3,710,000
------------------------
Date of Appraisal: August 15, 1999
------------------
Date of Inspection: August 17, 1999
-------------------
<PAGE>
7
EXTENT OF CONFIRMING, COLLECTING AND REPORTING DATA
- ---------------------------------------------------
This assignment encompasses providing an "as is" market value of the fee
simple title of the property and improvements, as of the specified date. This
investigation included an overview of the area and local manufactured home
market. We have inspected the subject and its environs, collected and analyzed
market data, inspected the comparable and competitive properties, considered and
applied the appropriate valuation methods and reconciled the final value
estimate.
The real estate interest appraised is that of ownership in fee simple
interest, subject to the existing tenant leases. The property is appraised as
if free and clear of mortgages, liens, servitude's and encumbrances, except
those noted in the body of this appraisal.
PURPOSE, FUNCTION AND DATE OF THE APPRAISAL
- -------------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of August 15, 1999. The information, opinions, and
conclusions contained in this report have been prepared as a basis for portfolio
valuation. The date of this appraisal is August 15, 1999. The intended user of
this report is the Windsor Corporation.
Market Value is defined as: The most probable price which a property should
bring in a competitive and open market under all conditions requisite to a fair
sale, the buyer and seller each acting prudently, knowledgeably and assuming the
price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a specified
date and the passing of title from seller to buyer under conditions whereby:
. Buyer and Seller are typically motivated;
. Both parties are well informed or well advised, and each acting in
what he considers his own best interest;
. A reasonable time is allowed for exposure in the open market;
. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
. The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale./1/
- -----------------------------
/1/ The Office of the Thrift Supervision, 12 CFR 564.2(f).
<PAGE>
8
AREA/NEIGHBORHOOD DESCRIPTION
- -----------------------------
Location/Access
- ---------------
The subject is located in an unincorporated area in central Polk County,
approximately two miles southwest of the City of Winter Haven. The parcel is
situated at the southeast corner of Thornhill and Spirit Lake Roads.
Polk County and the Lakeland/Winter Haven SMSA (Standard Metropolitan
Statistical Area) are synonymous. Interstate 4 passes through Polk County and
is the main corridor for central Florida. The Gulf of Mexico is located
approximately 50 miles to the west and the Atlantic Ocean is less than 55 miles
to the east. Polk County lies on the southwest fringe of Central Florida's
tourist center, centered in the Orlando-Kissimmee area.
Population
- ----------
The 1998 population of Polk County is estimated to be 468,588. Nearly 75%
of the population growth in Polk County is the result of in-migration. Future
projections indicate a continued population growth although at a declining rate.
Economic Base
- -------------
The economic base for this general area consists of phosphate mining and
processing, citrus production and processing, and agriculture (cattle and
farming); however, light manufacturing, distribution, tourism, medical services,
and services are becoming more important in the diversification of Polk County's
economic base. The tourism aspects of the local economy result from the area's
close proximity to Cypress Gardens in Winter Haven, Busch Gardens in Tampa,
Disney World/Epcot/Universal Studios and Sea World near Orlando, and a
substantial number of winter season residents.
The county's average unemployment rate, which has been hovered at the 10%
rate for the last five years, has reached a twenty-year low at 7.0%. As
development pressures are moving inland from the coastal areas, Polk County's
large land area and central location are two factors, which are expected to
contribute to its future growth.
Transportation
- --------------
The primary form of transportation in Polk County is the automobile.
Interstate 4 traverses the northern portion of the county. State Road 60 is the
major east-west roadway in the south central portion of the county. U. S.
Highway 17/92 provides east-west access in the north central portion of the
county and north-south travel is accomplished via U. S. Highway 27 in the east
portion of the county, and U. S. Highway 17/98 in the west portion of the
county.
<PAGE>
9
Area/Neighborhood Description
Concurrency
- -----------
The State of Florida's Local Government Comprehensive Planning Act of 1975
required all counties and municipalities in the state to develop, implement and
monitor local comprehensive and growth management plans. Pursuant to this law,
each county was required to publish Land Use Policy Guides, both in written and
map form, which designate desired types of land use and probable zoning for all
county lands not within their boundaries.
Summary
- -------
In conclusion, Polk County enjoys a strategic location between the two
rapidly growing Tampa and Orlando Metropolitan areas. The county is also
centrally located to many of the area's major tourist attractions. This coupled
with its mild winter climate, points to long-term growth and prosperity. Short-
term economic distress has resulted from the current economic recessions, but
Polk County's economy should continue to diversify, which will make it less
vulnerable to economic downturns in any one particular sector. The prospect of
an increasing population base, together with economic improvement is expected to
contribute positively to the overall growth of the area.
MANUFACTURED HOME COMMUNITY MARKET OVERVIEW
- -------------------------------------------
According to the Florida Manufactured Housing Association's 1998
Statistical Package, there are 471 manufactured home communities in Polk County.
Of this total, there are 102 communities (approximately 22% of the total), with
101 or more spaces. Additionally, 115 of the communities, or approximately 24%
of the total, are in the 26 to 100-space range. Approximately 54% of the
manufactured home communities in Polk County have 100 or less spaces. The large
percentage of small communities points to a fragmented marketplace, with a
variety of ownership forms. The subject, at 238 spaces, is one of the larger
communities in Polk County.
<PAGE>
10
LAND AND SITE IMPROVEMENTS
- --------------------------
The site is an irregularly shaped parcel of land containing an estimated
30.8 acres of gross area. The tract is generally level and at the surrounding
street grade. Drainage of the tract appears adequate and no adverse soil or
subsoil conditions were observed during the physical inspection of the site.
Utility services connected and in service on the date of valuation include
water, sanitary and storm sewer, electricity, natural gas and telephone.
The individual lots in the community are accessed by roadways arranged to
maximize the use of the land. Roadway improvements include:
Street-bed: Spirit Lake and Thornhill Roads are asphalt paved, two-
----------
lane thoroughfares. The subject streets are asphalt paved
15-foot wide roadways.
Sidewalks/Curb: There are no sidewalks or curbs along the public streets
--------------
or in the subject.
Street Lights: The public and community streets are lighted with pole
-------------
mounted overhead streetlights.
Landscaping: Sodded and planted areas extend along the entire perimeter
-----------
and throughout the site.
Encumbrances: None Noted
-------------
Easements: Standard utility easements are assumed to exist.
----------
Encroachments: None Noted
--------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded, or otherwise known
liens, defects in title or adverse easements. There are no rent controls in
effect in Polk County.
Functional Utility
- ------------------
The site, which is irregular in shape and contains approximately 30.8
acres, is large enough to accommodate building improvements and roadways as well
recreational amenities and green areas. The site is considered functional for
various residential development scenarios. The current development of total
units equates to an overall density of approximately 7.73 units per acre, which
is higher than current development standards which tend toward larger lot sizes,
wider streets and more green areas.
<PAGE>
11
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 238 manufactured home community pads, arranged
along streets configured to maximize the available lot spaces. All of the lots
vary slightly in size and are generally 40 or 50 feet x 85 feet.
The common area amenities include the clubhouse and adjoining shuffleboard
courts, located on the northern side of the property. The pool, laundry and
office building are located on the south side of the property. We have not
estimated a separate value for these amenities, or equipment, as they are
standard items found at most Manufactured Home Communities. These amenities are
typical, adequate and functional in use.
The community and site improvements were built in the early 1970's, and the
community is approximately 25 to 30 years old. The common areas, streets,
amenities and individual mobile homes were observed to be in average overall
condition, having been originally constructed of quality materials and having
been maintained over the years. No significant item of deferred maintenance was
noted and the current maintenance level is rated good.
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject property, as recorded in the Official Records
of Polk County in Deed Book 3590 at Page 1806, is in the name of Windsor Park
Properties 456. The Deed was recorded on October 11, 1995 and the indicated
consideration was $3,400,000.
OCCUPANCY
- ---------
The property is occupied by a fully developed 238-space manufactured home
community. Our inspection confirmed that there are three vacant lots and the
physical occupancy is 98.7%. In addition to the three vacant spaces, there are
one vacant community-owned home and an employee-occupied home, indicating an
economic occupancy of 97.9%.
The subject is governed, as required by law, by a prospectus, originally
dated June 6, 1985, and revised on January 15, 1996.
<PAGE>
12
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The property is zoned as a Residence R4 Open Density District under the
Polk County zoning ordinance. It is our opinion that the subject property is in
conformance with the zoning code.
Concurrency
- -----------
The subject is in conformance with the approved comprehensive plan filed by
Polk County and concurrency is not an issue.
Flood Hazard
- ------------
The subject property is located in a designated Flood Zone "X" according
to Flood Map Community Number 120112, Panel 0190D, dated August 3, 1992. Zone X
is defined as "Areas of 500-year flood; and areas of 100-year flood with average
depths of less than 1 foot..."
Environmental
- -------------
We observed no obvious areas of contamination on or about the site.
However, we have no qualifications in environmental hazards and recommend an
environmental audit be performed.
REAL ESTATE ASSESSMENT AND TAXES
- --------------------------------
The subject property is identified in the Polk County records under Parcel
Number 11-29-25-000000-013010. The assessed value of the subject totals
$1,556,500. It is our opinion that the subject is under assessed. The 1998
taxes were $38,426.59.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Florida, properties are assessed at
100% of the market value, as required by Florida Statute, Chapter 192.042.
Properties are reassessed annually and equitability of assessments is not a
basis for assessment in the state of Florida.
Taxes are due and payable on the first day of the year, although tax bills
are issued in arrears. Discounts up to 4% of the total bill are available for
early payment and taxes become delinquent after March 31. Our discussions with
a number of owner's of investment real estate and Manufactured Home Communities
has indicated that "early" payment of real estate taxes is a very common
practice. Additionally, prudent management would also dictate the payment of
real estate taxes to take advantage of any discounts offered. Our estimate of
taxes of $37,258, in our "Reconstructed Operating Statement" reflects this
common practice.
<PAGE>
13
MARKETABILITY AND MARKETING PERIOD
- ----------------------------------
The subject is competitive with other properties in the marketplace and is
marketable, although not considered a candidate for a resident purchase.
Discussions with large institutional manufactured home community investor
representatives and local area realtors, indicated that "properly priced",
stable, well kept manufactured home communities should "be under contract"
within a six month period in today's market.
Our discussions further indicated that institutional investors required a
minimum of 200 spaces, and pricing would reflect an 8.0% to 9.0% overall
capitalization rate requirement for age-restricted communities. Pricing is
established by processing gross income, reduced by a vacancy and credit loss
factor, operating expenses and an additional capital charge based on overall
condition, is deducted to arrive at a net operating income (NOI). Those
surveyed indicated that at properties not operating at stabilized occupancy,
they were unwilling to compensate a seller for any of the upside to be gained in
filling the property.
In late summer 1998, commercial mortgage backed securities (CMBS) lenders
restructured their pricing for long term fixed rate loans. These loans had
historically been priced based on an interest rate spread above Treasury
Securities. The secondary market for these loans became illiquid and lenders
were unable to sell the loans profitably. Consequently, although interest rates
on Treasuries have fallen, the interest rates on securitized loans have
increased. Prior to this increase, interest rate spreads were available lower
than 150 basis points over the 10-year Treasuries. Since the fall, spreads have
increased to the low 200 basis point range for manufactured housing communities.
Interest rates are low and financial institutions are again willing to lend
money for real estate projects with good occupancies. There has also been
significant institutional investor interest in manufactured home community
investments. In our opinion, the marketing period for the property would be
within the range indicated by the industry participants or six months.
<PAGE>
14
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as: The reasonably probable and legal
use of vacant land or an improved property, which is physically possible,
appropriately supported, financially feasible and which results in the highest
value."/2/
We have considered all of the potential uses to which the subject is
legally and physically adaptable. It is our opinion that the current use of the
subject, as a 193-space, age-restricted, manufactured home community, represents
the highest and best use of the subject.
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a fully occupied manufactured home community, investors
are primarily concerned with cash flow to service any debt and the equity
position. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of mobile homes by
offering low space rental rates, an investor would not be willing to compensate
a seller for any more than the income to be received. The subject is fully
developed with no expansion possibilities, therefore a potential investor would
be primarily interested in the cash flow and equity return and we have excluded
the Cost Approach.
____________________
/2/ The Appraisal Institute, The Appraisal of Real Estate, 10th Ed. Chicago: The
----------------------------
Appraisal Institute, 1992, page 275.
<PAGE>
15
INCOME CAPITALIZATION APPROACH
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is, of course, an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms, and within the goal of price minimization seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
facility, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property in the market. The first step in the Income Approach
to value involves the estimate of future net operating income to be generated by
the subject property. The estimate of net operating income is derived through
the process of estimating the total potential gross income (PGI from rentals and
other sources, less any vacancy and credit loss producing an effective gross
income (EGI) estimate. All expenses associated with the operation of the
property are then deducted to yield a stabilized net operating income (NOI)
estimate.
A survey of the competitive properties is presented in summary form on the
following page.
<PAGE>
Rental Comparables
<TABLE>
<CAPTION>
=================================================================================================================================
No. Property Name Sites/ Monthly Services Included Amenities
Property Address Occupied Sites Rental In Monthly Rent
% Occupied Rates
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Lucerne Park Mobile Court 140/137 $225.00 - Water, sewer and Clubhouse, shuffleboard
3000 Old Lucerne Park Road 97.9% $260.00 trash collection. and lake frontage/ boat
Winter Haven, Unincorporated Polk County, slips.
Florida
- -----------------------------------------------------------------------------------------------------------------------------------
2 Hidden Cove West 243/243 $191.00 - None Clubhouse, pool,
528 Lake Hendry Drive 100.0% $238.00 shuffle board and lake
Winter Haven, Polk County, Florida frontage.
----------------------------------------------------------------------------------------------------------------------------------
3 Swiss Village 376/376 $225.00 - Water. Clubhouse, pool,
366 Alpine Drive 100.0% $325.00 shuffleboard, miniature
Winter Haven, Polk County, Florida golf and lake frontage.
---------------------------------------------------------------------------------------------------------------------------------
4 Orange Manor East 205/204 $215.00 - Trash collection. Clubhouse, laundry,
206 Orange Manor Drive 99.5% $247.00 shuffleboard, fishing/
Winter Haven, Unincorporated Polk County, boat ramp. Off-site
Florida pool and miniature golf.
----------------------------------------------------------------------------------------------------------------------------------
5 Orange Manor West 253/245 $209.00 - Trash collection. Clubhouse, pool,
18 Kinsmen Drive 96.8% $243.00 shuffleboard and
Winter Haven, Unincorporated Polk County, miniature golf.
Florida
- -----------------------------------------------------------------------------------------------------------------------------------
6 Winter Haven Oaks 343/210 $185.00 - Lawn mowing Clubhouse, pool,
5248 Spirit Lake Drive 61.2% $271.00 shuffleboard and tennis.
Winter Haven, Unincorporated Polk County,
Florida
- -----------------------------------------------------------------------------------------------------------------------------------
S Winter Haven Mobile Home Community 238/235 $232.00 Water, sewer and Clubhouse, pool,
50 Charlotte Drive 98.7% trash collection. laundry, and
Winter Haven, Unincorporated Polk County, shuffleboard.
Florida
===================================================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach
Income Analysis
- ---------------
The general market practice is on a base lot rent charged on a monthly
basis. This ranges between $185.00 and $325.00 per month, as indicated by the
rent comparables recited in this report. As shown by our survey, the subject's
lot rents are within the market range.
Potential Gross Income
- ----------------------
In our forecast of total rental income, we have projected 12 months at the
current rent levels. Based on the current rent roll, the total monthly rent
amounts to $55,216 and the monthly rental rate is $232.00. The potential gross
income from rentals is $662,592 per year.
Vacancy and Credit Loss
- -----------------------
The subject is an age-restricted community that has a physically occupancy
of 98.7%, with three of the 238 sites vacant. As previously indicated, the
economic vacancy of the subject is 2.3%. To the economic vacancy, we have added
a percentage to account for credit loss in our estimate of total economic
vacancy of 5.0% of total potential gross income, or $33,130.
Miscellaneous Income
- --------------------
Additional income is typically derived from sources such as storage fees,
labor charges to the tenants, commissions on sales and rentals of the units.
Historically, miscellaneous income generated at the subject decreased from
$88.82 per space in 1996 to $36.53 per space in 1998, while the 1999 year to
date through June amount annualizes to approximately $5.95 per space. We have
estimated miscellaneous income at $8.00 per space or $1,904 annually.
Effective Gross Income (EGI)
- ----------------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated losses due to tenant changes, plus any additional income. Thus,
potential gross rental income of $662,592 less a vacancy and credit loss
allowance of $33,130, or 5.0% produces an effective gross income from rentals
estimate of $629,462. To this amount, we have added an estimated income derived
from miscellaneous sources of $1,904, arriving at an effective gross income
estimate of $631,366.
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
Winter Haven - Summary of Historical Operations
Pct. of $ Per Pct. of $ Per Pct. of $ Per
1996 Income Space 1997 Income Space 1998 Income Space
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $573,061 96.44% $2,407.82 $605,209 97.91% $2,542.89 $626,836 98.63% $ 2,633.76
Other Income 21,140 3.56% 88.82 12,931 2.09% 54.33 8,695 1.37% 36.53
------------------------------------------------------------------------------------------------------
Total Income $594,201 100.00% $2,496.64 $618,140 100.00% $2,597.23 $635,531 100.00% $ 2,670.30
Expenses:
Administration/Office $ 35,389 5.96% $ 148.69 $ 37,095 6.00% $ 155.86 $ 34,263 5.39% $ 143.96
Insurance 8,128 1.37% 34.15 10,601 1.71% 44.54 3,946 0.62% 16.58
Maintenance & Repairs 35,364 5.95% 148.59 36,194 5.86% 152.08 22,015 3.46% 92.50
Management Expense 30,075 5.06% 126.37 30,789 4.98% 129.37 31,570 4.97% 132.65
Wages & Benefits 52,918 8.91% 222.34 53,091 8.59% 223.07 57,712 9.08% 242.49
Property Taxes 35,616 5.99% 149.65 36,315 5.87% 152.58 36,890 5.80% 155.00
Utilities 69,324 11.67% 291.28 66,434 10.75% 279.13 84,453 13.29% 354.84
------------------------------------------------------------------------------------------------------
Total Expenses $266,814 44.90% $1,121.07 $270,519 43.76% $1,136.63 $270,849 42.62% $ 1,138.02
Net Operating Income $327,387 55.10% $1,375.58 $347,621 56.24% $1,460.59 $364,682 57.38% $ 1,532.28
===========================================================================================================================
<CAPTION>
====================================================================================
Winter Haven - Summary of Historical Operations
1999 Pct. of $ Per
Annualized Income Space
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rents $643,922 99.78% $2,705.55
Other Income 1,416 0.22% 5.95
-----------------------------------------
Total Income $645,338 100.00% $2,711.50
Expenses:
Administration/Office $ 31,988 4.96% $ 134.40
Insurance 4,312 0.67% 18.12
Maintenance & Repairs 22,332 3.46% 93.83
Management Expense 32,582 5.05% 136.90
Wages & Benefits 63,618 9.86% 267.30
Property Taxes 28,732 4.45% 120.72
Utilities 66,612 10.32% 279.88
-----------------------------------------
Total Expenses $250,176 38.77% $1,051.16
Net Operating Income $395,162 61.23% $1,660.34
=============================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 19
Operating Expense Analysis
- --------------------------
Administrative/Office: Historically, this expense has shown a variable trend.
- ----------------------
In the financial statements, this expense does include some corporate expense
items that we have not considered. Our stabilized estimate is $150.00 per space
per year, equal to $35,700 or approximately 5.65% of the estimated effective
gross income.
Insurance: Historically, this expense has exhibited a varying trend. Our
- ----------
estimate of this expense has been based on the historical amounts, or $35.00 per
space per year. This is equal to $8,330 annually, approximately 1.32% of the
effective gross income.
Maintenance and Repair: Historically, this expense was equal to $148.59 per
- -----------------------
space in 1996 increased to $152.08 per space in 1997 and decreased to $92.50 per
space in 1998. Our estimate of $160.00 per space per year is equal to $38,080
is believed adequate to properly maintain the community. This amount is equal
to approximately 6.03% of the estimated effective gross income.
Management Fees: This expense typically includes off-site management, the
- ---------------
oversight of the on-site manager and monthly bookkeeping functions. We used a
5% of estimated effective gross income, typical in the market place, equal to
$31,568 or $132.64 per space per year.
Wages and Benefits: This expense was equal to $222.34 in 1996 and increased to
- -------------------
$242.49 in 1998. We have estimated this expense at $260.00 per space per year or
$61,880, which is equal to 9.79% of the estimated effective gross income.
Property Taxes: This category is project specific due to location. Based on our
- ---------------
analysis of the historical tax trends, we have estimated the tax liability to be
$37,258. This equates to $156.55 per space per year or 5.90% of the estimated
effective gross income.
Utilities: This expense ranged from $279.13 per space in 1997 to $354.84 per
- ----------
space in 1998. We have estimated this expense at $330.00 per space per year.
This is equal to $78,540, or approximately 12.44% of the estimated effective
gross income.
Reserves: This expense category represents the inclusion of set-asides for major
- ---------
recurring or capital type expenditures experienced periodically by any property.
We have used $25.00 per space per year, believed adequate to cover future
capital costs. This equates to $5,950 annually or approximately 0.94% of the
estimated effective gross income.
Total Expenses: To summarize, we have stabilized total operating expenses for
- ---------------
the subject at $297,307. This estimate is equal to 47.09% of the Effective
Gross Income (EGI) estimate or $1,209.29 per space per year. As shown, the
historical expenses ranged from 42.62% in 1998 to 44.90% in 1996.
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================
Winter Haven
Reconstructed Operating Statement
=======================================================================================================
Income:
Gross Potential Rental Income Pct. $
Spaces Monthly Rent Monthly Total Annualized of EGI Per Space
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
238 $232.00 $55,216 $ 662,592 104.95% $ 2,784.00
Less:
Vacancy & Credit Loss (33,130) 5.0% $ (139.20)
-------------------------------------------
Effective Gross Income From Rentals $ 629,462 99.70% $ 2,644.80
Add:
Miscellaneous Income 1,904 0.30% $ 8.00
-------------------------------------------
Total Effective Gross Income $ 631,366 100.00% $ 2,652.80
Expenses:
Administrative/Office $ 35,700 5.65% $ 150.00
Insurance 8,330 1.32% 35.00
Maintenance & Repairs 38,080 6.03% 160.00
Management Expense 31,568 5.00% 132.64
Wages & Benefits 61,880 9.80% 260.00
Property Taxes 37,258 5.90% 156.55
Utilities 78,540 12.44% 330.00
Reserves 5,950 0.94% 25.00
-------------------------------------------
Total Expenses $ 297,307 47.09% $ 1,249.19
Net Operating Income $ 334,060 52.91% $ 1,403.61
=======================================================================================================
</TABLE>
<PAGE>
21
Income Capitalization Approach
Selection of a Capitalization Rate
- ----------------------------------
Direct capitalization of terminal net operating income by an overall
capitalization rate extracted from the market provides an excellent indication
of market value. Purchasers of manufactured home communities most often utilize
this method. This method is easily understood, closely related to the market,
and convincing if the overall rates abstracted from recent sales are from
comparable sale properties and accurate income data are available.
Market Data
- -----------
The comparable sale data indicated an overall capitalization rate between
8.24% and 10.04%. The data indicates a narrow range in overall capitalization
rates, which tend to be influenced by the size of the community, its occupancy,
expense ratio, age and condition, amenity package and location.
=====================================================================
Sale Sale Date Occupancy Rate Overall Rate
---------------------------------------------------------------------
1 July 1998 89.1% 10.04%
---------------------------------------------------------------------
2 July 1998 100.0% 8.24%
---------------------------------------------------------------------
3 March 1999 98.1% 9.27%
---------------------------------------------------------------------
4 June 1998 94.5% 9.83%
---------------------------------------------------------------------
5 October 1998 97.2% 8.72%
=====================================================================
In this instance, the subject has a physical vacancy of 1.3% and was
observed to be in good overall condition. The market has been competitive in
recent years, indicating increased risk, increasing the going-in capitalization
rate. Based on these considerations, we have concluded an overall capitalization
rate in the middle of the indicated range of 9.0%.
Debt Coverage Ratio Method
- --------------------------
We have also developed an overall rate through the Debt Coverage Ratio
analysis. Current commercial lending policies indicate a mortgage loan of 75% of
market value, based on a 20-year amortization schedule at an annual interest
rate of 8.00%, which yields an annual mortgage constant of 10.0373%. A minimum
debt coverage ratio (DCR) of 1.20 to 1.00, would likely be required for a
property similar to the subject. Based on these assumptions an overall
capitalization rate has been developed, as presented below:
=============================================================================
M f DCR OAR
X X
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
-----------------------------------------------------------------------------
0.75 0.100373 1.20 0.090336
-----------------------------------------------------------------------------
Rounded 9.0%
=============================================================================
<PAGE>
22
Income Capitalization Approach
The Debt Coverage Ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufactured home
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The presence of institutional investors in the market and the reduction in
quality of real estate investments has bid down rates on manufactured home
communities. Investors have become more creative in their acquisition strategies
in order to compete. Therefore, actual transactions in the marketplace better
demonstrate investor perceptions of yields on manufactured home community
investments.
We have placed a greater emphasis on the overall capitalization rate
indicated by the market data, as this is a direct reflection of risk perceptions
by market participants, although the rates are almost equivalent. Our estimate
of the market value of the subject, indicated by the Income Capitalization
Approach, is calculated as follows:
Net Operating Income Overall Capitalization Rate Market Value
$334,060 /0.09 $3,711,778
Rounded to $3,710,000
<PAGE>
23
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions be weighed, and the data of each transaction
be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject be considered;
differences in physical, functional, and economic characteristics be
noted; and adjustments for the differences be made.
3. The value conclusion is consistent with the analysis of the sales
data.
So that a conclusion from the analysis of the sales data can be drawn, a
unit of comparison has been selected. Calculation of a unit of comparison
provides a common denominator by which the market sales can be related to each
other and to the subject property. The commonly accepted unit of comparison in
the valuation of manufactured home communities is the selling price per space.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For dissimilar features adjustments are made
indicating the price at which the subject could be expected to sell. In making
adjustments, all relevant factors were considered including:
1. Nature of surrounding development.
2. Size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
Based on our investigation, the following five sales are the most
significant transactions for direct comparison with the subject.
<PAGE>
Summary of Sale Comparables
<TABLE>
<CAPTION>
====================================================================================================================================
Total EGIM/
Sale Price/ Spaces/ Price/ Average %
No. Name/Location Sale Date Occupancy Space Lot Rent Expenses O.A.R.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Manatee Trailer Park $3,275,000 312/ $10,497 $184.19 5.21/ 10.04%
2204 Manatee Avenue East July 1998 89.1% 48.1%
Bradenton, Manatee County, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
2 Ship Reck Harbor $2,450,000 112/ $21,875 $220.00 7.89/ 8.24%
1600 Lake Shipp Drive South July 1998 100.0% 35.0%
Winter Haven, Polk County, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
3 Flamingo Shores & Heritage Estates $4,000,000 206/ $19,417 $217.00 7.83/ 9.27%
3275 West U. S. Highway 92 March 1999 98.1% 27.4%
Winter Haven, Polk County, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
4 Village Park $8,000,000 307/ $26,059 $391.41 6.50/ 9.83%
3900 West Prospect Road June 1998 94.5% 36.1%
Fort Lauderdale, Broward County, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
5 Tyrone Village $2,200,000 110/ $20,000 $260.00 6.67/ 8.72%
13618 North Florida Avenue October 1998 97.2% 41.85%
Tampa, Hillsborough County, Florida
====================================================================================================================================
</TABLE>
<PAGE>
25
Sales Comparison Approach
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject.
Sale Comparable Number One is Manatee Trailer Park in Bradenton, Manatee
County, Florida. This 170 space age restricted community sold for $3,275,000 in
July 1998. This price equates to a sale price per space of $10,497. Based on an
effective gross income of $628,501, the EGIM was 5.21, and the overall rate was
10.04%. This park was 89.1% occupied at the time of sale.
Sale Comparable Number Two is Ship Reck Harbor in Winter Haven, Polk
County, Florida. This 112 space rental park sold for $2,450,000 in July 1998.
This price equates to a sale price per space of $21,875. Based on an effective
gross income of $310,680, the EGIM was 7.89, and the overall rate was 8.24%.
This park was 100.0% occupied at the time of sale.
Sale Comparable Number Three is the combined sale of Flamingo Shores and
Heritage Estates in Winter Haven, Polk County, Florida. This 206 space age
restricted community sold for $4,000,000 in March 1999. This price equates to a
sale price per space of $19,417. Based on an effective gross income of $510,603,
the EGIM was 7.83, and the overall rate was 9.27%. The parks were 98.1% occupied
at the time of sale.
Sale Comparable Number Four is Village Park in Fort Lauderdale, Broward
County, Florida. This 307 space rental park sold for $8,000,000 in June 1998.
This price equates to a sale price per space of $26,059. Based on an effective
gross income of $1,230,257, the EGIM was 6.50, and the overall rate was 9.83%.
This park was 94.5% occupied at the time of sale.
Sale Comparable Number Five is Tyrone Village Mobile Home Park in Tampa,
Hillsborough County, Florida. This 110 space age restricted community sold for
$2,200,000 in October 1998. This price equates to a sale price per space of
$20,000. Based on an effective gross income of $329,839, the EGIM was 6.67, and
the overall rate was 8.72%. This community was 97.2% occupied at the time of
sale.
All of the sales were fee simple transactions, with abnormal financing
reflected in the cash equivalent price. There were no abnormal sale conditions
known to have occurred and all of the sales represent transactions that have
taken place over a ten month period, having traded under similar market
conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the effective gross income multiplier (EGIM), in this analysis.
<PAGE>
26
Sales Comparison Approach
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 5.21 and 7.89. As previously discussed, the EGIM is essentially a
function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject is an older, fully developed age restricted community located
just south of the Winter Haven City limits. As with the subject, all of the
comparable sales are fully developed, stabilized properties and any additional
potential income is available only from rent increases. The subject rents are
well supported in the marketplace.
Based on these considerations, we have concluded an EGIM at the lower end
of indicated range, processing subject's Effective Gross Income of $631,366 with
an EGIM of 6.00.
Thus $631,842 x 6.00 is $3,788,196
Rounded to $3,790,000
On a per space basis, this is equivalent to $15,924.
<PAGE>
27
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $3,710,000
Sales Comparison Approach $3,790,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales of similar properties.
In the reconciliation, we reviewed each approach to value (a) to ascertain
the reliability of the data and (b) to weight the approach that best represented
the actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis of
this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the valuation
of the subject property, the sales comparison approach was considered reliable.
Given the relative homogeneity of the locations, the availability of market
data, we have emphasized this approach in the valuation.
The two approaches reflect the same value. Our opinion of the market value
of the subject, based on a reasonable exposure period of six months, as of
August 15, 1999 was:
- THREE MILLION SEVEN HUNDRED TEN THOUSAND DOLLARS -
($3,710,000)
<PAGE>
28
CERTIFICATION
- -------------
We certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions and are our personal,
impartial and unbiased professional analyses, opinions, and
conclusions.
. We have no present or prospective interest in the property that is the
subject of this report, and no personal interest with respect to the
parties involved.
. We have no bias with respect to the property that is the subject of
this report or to the parties involved with this assignment.
. Our engagement in this assignment was not contingent upon developing
or reporting predetermined results.
. Our compensation for completing this assignment is not contingent upon
the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this
appraisal.
. Our analysis, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice.
. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
. As of the date of this report, John H. Whitcomb, MAI, CCIM has
completed the requirements under the continuing education program of
the Appraisal Institute.
. John H. Whitcomb, MAI, CCIM and William G. Trask have made a personal
inspection of the property that is the subject of this report.
. No one provided significant professional assistance to the persons
signing this report.
. We are in compliance with the competency provisions of the Uniform
Standards of professional Appraisal Practice of the Appraisal
Foundation.
. This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
/s/ John H. Whitcomb /s/ William G. Trask
- ---------------------------- -----------------------------
John H. Whitcomb, MAI, CCIM William G. Trask
St. Cert. Gen. REA #0001234 St. Cert. Gen. REA #0002347
<PAGE>
29
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the conclusion in
this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to us
and contained in the report or utilized in the formation of the value conclusion
were obtained from sources considered reliable and believed to be true and
correct. However, no representation, liability or warranty for the accuracy of
such items is assumed by or imposed on us, and is subject to corrections,
errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function of the Report. The appraisal report may not be reproduced,
in whole or in part, and the findings of the report may not be utilized by a
third party for any purpose, without the written consent of Whitcomb Real
Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or to be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes that may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
<PAGE>
30
Assumption and Limiting Conditions
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are not
qualified to render an "opinion of title," and no responsibility is assumed or
accepted for matters of a legal nature affecting the property being appraised.
No formal investigation of legal title was made, and we render no opinion as to
ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed
concerning any matter that may be disclosed by a proper survey. If a subsequent
survey should reflect a differing land area and/or frontages, we reserve the
right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others, and is not meant for use as a reference in legal matters of
survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projection contained in
the appraisal assumes responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures, which would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made available
to us, so statements regarding soil qualities, if made in the report, are not
conclusive but have been considered consistent with information available to us
and provided by others. In addition, unless stated otherwise in the appraisal,
the land and soil of the area under appraisement appears firm and solid, but the
appraisal does not warrant this condition.
The appraisal report covering the subject is limited to surface rights only, and
does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers and we are not qualified to judge the structural and
environmental integrity of the improvements, if any. Consequently, no warranty,
representations or liability are assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services, including the
construction materials, particularly the roof, foundations, and equipment,
including the HVAC systems, if applicable. Should there be any question
concerning
<PAGE>
31
Assumption and Limating Conditions
them, it is strongly recommended that an Engineering, Construction, and/or
Environmental inspection be obtained. The value estimate stated in this
appraisal, unless otherwise noted, is predicated on the assumption that all of
the improvements, equipment and building services, if any, are structurally
sound and suffer no concealed or latent defects or inadequacies other than those
noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas, which are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We, however,
are not qualified to detect such substances. The existence of these potentially
hazardous materials may have a significant effect on the value of the property.
The client is urged to retain an expert in this field, if desired. The value
conclusion assumes the property is "clean" and free of any of these adverse
conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal tax or regulatory laws. Therefore, the actual results
achieved during the
<PAGE>
32
Assumption and Limiting Conditions
projected holding period and investor requirements relative to anticipated
annual returns and overall yields could vary from the projection. Thus,
variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992. The
appraiser has not made a specific compliance survey and analysis of this
property to determine whether it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements of the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
Tracts 88, 89, 90, 91 and 92 in Block 90 of THE PALM BEACH FARMS CO. PLAT NO. 3,
according to the Plat thereof, as recorded in Plat Book 2, at pages 45 through
54, of the Public Records of Palm Beach County, Florida. Said lands situate
lying and being in Broward County, Florida, LESS the following described
Parcels:
The West 250 feet of said Tract 90 (except the South 50 feet of said West 250
feet) and the West 250 feet of said Tract 91 (except the North 50 feet of said
West 250 feet).
<PAGE>
MAPS
<PAGE>
[AREA MAP APPEARS HERE]
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
[RENT COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
[MANUFACTURED HOME COMMUNITIES COMPARABLE SALES MAP APPEARS HERE]
<PAGE>
[MAP APPEARS HERE]
<PAGE>
PROFILE OF APPRAISERS
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St. Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
<PAGE>
2
Profile of Appraiser
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
Manufactured Home Communities
- -----------------------------
<TABLE>
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, Fl Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
3
Profile of Appraiser
Recreational Vehicle Parks
- --------------------------
<TABLE>
<S> <C> <C> <C>
Avalon R V Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast R V Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine R V Vero Beach, FL
Holiday R V Resort Leesburg, FL Topics Hudson, FL
Horizon R V Park Davenport, FL Twelve Oaks Sanford, FL
Key R V Park Marathon, FL Village Park Orange City,FL
Self-Storage Facilities
- -----------------------
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
</TABLE>
Hotels/Resorts
- -------------
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D.C.
<PAGE>
4
Profile of Appraiser
Financial
- ---------
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
- ----------------------------------
W. P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
-----------------------------------
TESTIMONY
- ---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
PROFILE OF APPRAISER
WILLIAM G. TRASK
St.Cert. Gen REA #0002347
REAL ESTATE APPRAISAL EXPERIENCE
- --------------------------------
Appraiser
Whitcomb Real Estate
Tampa, FL
Specializing in real estate valuations and consulting projects for lending
institutions, public and private corporations and individuals, for a
variety of uses. Property types appraised include manufactured housing
communities, recreational vehicle parks, manufacturing plants, office
buildings, apartment complexes, retail properties and other types of
commercial establishments. February 1998 to Present.
Appraiser
Atlas Real Estate Group, Inc.
Tampa, FL
Specialized in real estate condemnation valuations and related studies.
Property types appraised include agricultural, industrial, residential,
office buildings, retail properties and other types of commercial land
and establishments. August 1991 to January 1998.
PROFESSIONAL AFFILIATIONS
- -------------------------
State Certified General Real Estate Appraiser
Florida # 0002347
Georgia # CG007464
PARTIAL LIST OF CLIENTS AND PROPERTIES
Manufactured Home Communities
- -----------------------------
A Garden Walk Palm Beach Gardens, Fl Honeymoon Park Dunedin, FL
Bear Creek Ormond Beach, FL La Buona Vita Port St. Lucie, FL
Bonfire Leesburg, FL Lincolnshire Largo, FL
Briarwood Lake Worth, FL Meadowbrook Lakeland, FL
Camelot East Sarasota, FL Mobiland By The Sea Melbourne, FL
Camelot Lakes Sarasota, Fl Oak View Arcadia, FL
Carefree Village Tampa, FL Palmetto Hallandale,FL
Clover Leaf Brooksville, FL Plaza Bradenton, FL
Coquina Crossing St. Augustine, FL Ranchero Village Largo, FL
<PAGE>
2
Profile of Appraiser
William G. Trask
Manufactured Home Communities (Cont.)
- -------------------------------------
<TABLE>
<S> <C> <C> <C>
Country Club Estates Venice, FL River Bay Tampa, FL
Country Lakes Coconut Creek, FL Riverview Micco, FL
Country Life Leesburg, FL Serendipity Clearwater, FL
Crystal River Village Crystal River, FL Southern Acres St. Cloud, FL
Diamond Point Leesburg, FL Spanish Trails Zephyrhills, FL
Friendly Village Sellersburg, IN Sun Village Largo, FL
Hammock Lake Fort Meade, FL Sundance Zephyrhills, FL
Heron Cay Vero Beach, FL Sunshine Village Lake Worth, FL
Hibiscus Mount Dora, FL Tall Pines Fort Pierce, FL
Hidden Village St. Petersburg, FL Tanglewood Fort Pierce, FL
High Point Clearwater, FL Vero Palms Vero Beach, FL
Recreational Vehicle Parks
- --------------------------
Lazy Lakes RV Sugarloaf Key, FL Ridgecrest RV Leesburg, FL
Lions Lair RV Marathon, FL Sunshine RV Vero Beach, FL
Pioneer Village North Fort Myers, FL Topics Rv Spring Hill, FL
Other
- -----
ABC Pizza House Tampa, FL Fabian Enterprises Tampa, FL
Blakie's Restaurant Tampa, FL Florida Power & Light St. Petersburg, FL
Breed Automotive Lakeland, FL Mobil Oil Lakeland, FL
Discount Auto Parts Lakeland, FL Pier 1 Imports Hoover, AL
Discount Auto Parts Sarasota, FL Pizza Hut Brandon, FL
Discount Auto Parts Land O' Lakes, FL Pizza Hut Lakeland, FL
Financial
- ---------
Belgravia Capital Heller Financial
Collateral Mortgage, Ltd. Lehman Brothers
Executive Commercial Funding NationsBank
First Federal Savings Bank, Leesburg, FL Republic Bank, Port Richey, FL
First National Bank, St. Lucie, FL Signature Financial Services, Inc.
First Union National Bank Union Capital Investments, LLC
GE Capital Corporation United Southern Bank, Eustis, FL
Greentree Financial
</TABLE>
<PAGE>
Profile of Appraiser 3
William G. Trask
Real Estate/Real Estate Investment
- ----------------------------------
Continental Communities National Home Communities
Martin Newby Management Pacific Life
Munao Partnership Windsor Corporation
EDUCATIONAL BACKGROUND
- ----------------------
Florida State University
University of South Florida
Edison Community College
Hillsborough Community College
Appraisal Institute
International Right of Way Association
<PAGE>
EXHIBIT (b)(1)(F)
SUMMARY
REAL ESTATE APPRAISAL REPORT
The 484-space A Garden Walk Mobile Home Community
8200 North Military Trail
Palm Beach Gardens, Unincorporated Palm Beach County, Florida 33410
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
AS OF
August 27, 1999
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
[LETTERHEAD OF WHITCOMB REAL ESTATE APPEARS HERE]
September 20, 1999
Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
RE: 484-Space A Garden Walk Mobile Home Community
8200 North Military Trail
Palm Beach Gardens, Unincorporated Palm Beach County, Florida 33410
Dear Mr. Waite:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of August 27, 1999, based on an exposure period of six months, to be:
- ELEVEN MILLION THREE HUNDRED FIFTY THOUSAND DOLLARS -
($11,350,000)
Our value estimate applies to the land as physically constituted, to the
improvements actually in existence and reflects prevailing trends in the local
real estate market. We have made a careful inspection, study, and analysis of
the property, and have considered all factors which, in our opinion, would tend
to influence the market value of the subject.
A Garden Walk is a fully developed 484-space manufactured home community,
with a clubhouse, pavilion, tennis and shuffleboard courts, horseshoe pits, and
two swimming pools.
Our conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation and those specific
conditions indicated in the engagement letter.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan. The intended user of this report is
the Windsor Corporation.
<PAGE>
Mr. Steve Waite
September 20, 1999
Page Two
We appreciate this opportunity to be of service to you. If you have any
questions, please do not hesitate to contact us.
This is a Summary Appraisal, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of
Professional Appraisal Practice for Summary Appraisal Reports. This report
represents only summary discussions of the data, reasoning, and analyses
employed in the appraisal process toward the development of our opinion of
value. Supporting documentation has been retained in our files.
Very truly yours,
/s/ John H. Whitcomb
John H. Whitcomb, MAI, CCIM
St. Cert. Gen. REA #0001234
/s/ William G. Trask
William G. Trask
St. Cert. Gen. REA #0002347
<PAGE>
4
TABLE OF CONTENTS
- -----------------
<TABLE>
Title Page
Transmittal
<S> <C>
Table Of Contents........................................................... 4
Summary Of Facts And Conclusions............................................ 6
Extent Of Confirming, Collecting And Reporting Data......................... 7
Purpose And Function Of The Appraisal....................................... 7
Area/Neighborhood Description............................................... 8
Manufactured Home Community Market Overview................................. 10
Land And Site Improvements.................................................. 10
Improvement Description..................................................... 11
Ownership And Property History.............................................. 12
Occupancy................................................................... 12
Zoning And Other Land Use Controls.......................................... 12
Real Estate Assessment And Taxes............................................ 13
Marketability And Marketing Period.......................................... 14
Highest And Best Use........................................................ 14
Valuation Process........................................................... 15
Income Capitalization Approach.............................................. 16
Sales Comparison Approach................................................... 24
Final Estimate Of Value..................................................... 28
Certification............................................................... 29
Assumptions And Limiting Conditions......................................... 30
Addenda
Legal Description
Maps
Profiles Of Appraisers
</TABLE>
<PAGE>
5
[PICTURE APPEARS HERE] (Taken August 27, 1999)
1. Entrance to Subject
[PICTURE APPEARS HERE]
2. Typical Street View
<PAGE>
6
SUMMARY OF FACTS AND CONCLUSIONS
- --------------------------------
Property Appraised: 484-Space A Garden Walk Mobile Home Community
-------------------
8200 North Military Trail
Unincorporated Palm Beach County, Florida
Property Rights
---------------
Appraised: Fee Simple Interest, subject to tenant leases.
----------
Land Area: 71.35 acres or 3,108,006 square feet.
----------
Improvements: 484 manufactured home spaces, with a clubhouse,
-------------
pavilion, tennis and shuffleboard courts,
horseshoe pits, and two swimming pools.
Owner: Windsor Park Properties, 6 and Windsor Park
------
Properties, 7
Zoning: RM, Palm Beach County
-------
Highest and Best Use: As Improved -- Current Use
---------------------
Value Indications: Income Approach $11,350,000
------------------
Sales Comparison Approach $11,400,000
Final Estimate of Value: $11,350,000
------------------------
Date of Appraisal: August 27, 1999
------------------
Date of Inspection: August 27, 1999
-------------------
<PAGE>
7
EXTENT OF CONFIRMING, COLLECTING AND REPORTING DATA
- ---------------------------------------------------
This assignment encompasses providing an "as is" market value of the fee
simple title of the property and improvements, as of the specified date. The
scope of this investigation included an overview of the area and local
manufactured home markets, inspections of the subject properties and their
environs, and the collection and analysis of market data, inspection of the
comparable and competitive properties, consideration and application of the
appropriate valuation methods, and a reconciliation and final estimate of value.
The real estate interest appraised is that of ownership in fee simple
interest, subject to the existing tenant leases. The property is appraised free
and clear of mortgages, liens, servitude's and encumbrances, except those noted
in the body of this appraisal.
PURPOSE AND FUNCTION OF THE APPRAISAL
- -------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of August 27, 1999. The information, opinions, and
conclusions contained in this report have been prepared as a basis for portfolio
valuation. The date of this appraisal is August 27, 1999, corresponding with
the physical inspection of the subject property. The intended user of this
report is the Windsor Corporation.
Market Value is defined as: The most probable price which a property should
bring in a competitive and open market under all conditions requisite to a fair
sale, the buyer and seller each acting prudently, knowledgeably and assuming the
price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a specified
date and the passing of title from seller to buyer under conditions whereby:
. Buyer and Seller are typically motivated;
. Both parties are well informed or well advised, and each acting in
what he considers his own best interest;
. A reasonable time is allowed for exposure in the open market;
. Payment is made in terms of cash in U. S. dollars or in terms of
financial arrangements comparable thereto; and
. The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale./1/
__________________________
/1/ The Office of the Thrift Supervision, 12 CFR 564.2(f).
<PAGE>
8
AREA/NEIGHBORHOOD DESCRIPTION
- -----------------------------
Location/Access
- ---------------
The subject property is located along the east side North Military Trail in
an unincorporated area of northern Palm Beach County, just south of incorporated
Palm Beach Gardens. The neighborhood is generally bounded by North Lake
Boulevard to the north, Interstate 95 to the east, Blue Heron Boulevard to the
south and the Florida Turnpike to the west. The center of the neighborhood is
approximately 4 miles west of the Atlantic Ocean. The eastern boundary of the
site abuts Interstate 95.
Land uses generally consist of commercial development along the major
thoroughfares with residential backup. The neighborhood is approximately 80%
built-up with new development occurring west of the subject property across
Military Trail.
Primary access to the subject property is via Military Trail. Military
Trail is a six lane divided thoroughfare which bisects the neighborhood in a
north/south direction. Access to Interstate 95 is available two miles south of
the subject property via Blue Heron Boulevard and one mile north of the property
via North Lake Boulevard. Access to the Florida Turnpike is available at PGA
Boulevard, four miles northwest of the subject property. Overall, access to the
subject property is considered good.
The subject property's location in regard to the local amenities in the
form of shopping, recreational and activity centers is considered excellent.
The infrastructure is in-place in the neighborhood and concurrency is not an
issue in development. General real estate values have been static over the last
three to four year period, although construction has been continuing at a
moderate pace, on properties purchased during that period.
Future infill development in the neighborhood is expected to be at a much
slower pace, due primarily to the lack of prime available land in the
neighborhood, and the advanced degree of existing development. The subject
property will benefit from its excellent location and the westward trend of
development.
Population
- ----------
The Bureau of Economic and Business Research from the University of Florida
estimated Palm Beach county's 1990 population at 863,503, an increase of
approximately 50% over the 1980 figure. This rate of growth ranked the County as
the sixth fastest growing metropolitan area in the United States and second
fastest in the state. The average growth rate for Palm Beach County has been 5%
to 6% per year over the past 20 years. The 1997 population was 1,003,798, a
16.2%
<PAGE>
9
Area/Neighborhood Description
increase from 1990. The County now ranks as the 49th largest Metropolitan
Statistical Area in the nation, up from 58th in 1980. Palm Beach County is the
third most populated county in the state. Future projections indicate a
continued population growth although at a declining rate.
Employment
- ----------
The Palm Beach market has a well-balanced employment base with no single
industry dominating. This diversified industrial base will continue to be the
driving force for continued growth in this metropolitan area. Reflecting the
health of the local economic climate, all sectors of the area's major industries
have shown growth in the past decade. The Palm Beach County civilian work force
stood at 482,486 as of 1997, with a 6.3% unemployment rate, above the state and
national averages over the same period.
Transportation
- --------------
The Palm Beach area is accredited as a major Florida transportation center.
It is served by 15 airlines, Greyhound Bus Lines, Tri-Rail, Amtrak and CSX rail
service, cruise and freight shipping, as well as the interstate highway system.
Its prime geographic location provides easy access to all markets.
Concurrency
- -----------
The State of Florida's Local Government Comprehensive Planning Act of 1975
required all counties and municipalities in the state to develop, implement and
monitor local comprehensive growth and management plans. Pursuant to this law,
each county was required to publish Land Use Policy Guides, both in written and
map form, which designate desired types of land use and probable zoning for all
county lands not within their boundaries.
Summary and Conclusion
- ----------------------
The subject is located just south of Palm Beach Gardens, which is located
in the northern portion of Palm Beach County. The subject's location in regard
to the local amenities in the form of shopping, recreational and activity
centers is considered excellent due to the proximity of the Cities of Palm Beach
Gardens and West Palm Beach. General real estate values have been static over
the last three to four year period.
<PAGE>
10
MANUFACTURED HOME COMMUNITY MARKET OVERVIEW
- -------------------------------------------
According to the Florida Manufactured Housing Association's 1996
Statistical Package, there are 139 manufactured home communities in Palm Beach
County. Of this total, there are 46 communities (approximately 33% of the
total), with 101 or more spaces. Additionally, 52 of the communities, or
approximately 37% of the total, are in the 26 to 100-space range. Approximately
67% of the manufactured home communities in Palm Beach County have 100 or less
spaces. The large percentage of small communities points to a fragmented
marketplace, with a variety of ownership forms. The subject, at 484 spaces, is
one of the larger communities in Palm Beach County.
LAND AND SITE IMPROVEMENTS
- --------------------------
The subject site is an irregularly shaped parcel of land containing
approximately 71.35 acres of gross area. The tract is generally level and at
street grade and drainage of the tract appears adequate. No adverse soil or
subsoil conditions were noted during the physical inspection of the site.
Utility services connected and in service on the date of valuation include
water, electricity, cable television and telephone. An on-site wastewater
treatment plant handles wastewater and storm sewer is handled by the ponds. The
individual sites are accessed by roadways configured to maximize the use of the
land, common to most manufactured home communities. Roadway improvements
include:
Street-bed: Military Trail is an asphalt paved, six lane thoroughfare.
----------
The subject streets are asphalt paved 20-foot wide
roadways.
Sidewalks/Curb: Military Trail has concrete sidewalks and curbs. There
--------------
are no sidewalks in the subject, however there are concrete
curbs.
Street Lights: Military Trail and the subject park all have pole mounted
-------------
overhead streetlights along the right of way.
Landscaping: Sodded and planted areas extend along the entire
-----------
perimeter and throughout the site.
Other: The subject is enclosed by a six-foot high masonry
------
block and chain link fence.
Encumbrances: None noted.
-------------
Easements: Standard utility easements assumed to exist.
----------
Encroachments: None noted.
--------------
<PAGE>
Land and Site Improvements 11
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded, or otherwise known
liens, defects in title or adverse easements. There are no rent controls in
effect in Palm Beach County.
Functional Utility
- ------------------
The site, which is irregular in shape and contains approximately 71.35
acres, is large enough to accommodate building improvements and roadways as well
recreational amenities and green areas. The site is considered functional for
various residential development scenarios. The current development of 484 total
units equates to an overall density of approximately 6.78 units per acre,
similar to current development standards.
IMPROVEMENT DESCRIPTION
- -----------------------
The subject is improved with 484 manufactured home pads, arranged along
streets configured to maximize the available lots. The lots vary slightly in
size, averaging 4,000 square feet. The density of the property is equal to 6.78
units per acre.
The common area amenities include a clubhouse and adjacent pool area,
pavilion and pool, horseshoe pits, petanque, tennis court and shuffleboard
courts. There are four ponds on site that serve to control drainage and as a
view amenity.
The clubhouse is a frame structure on piers, with a gable style roof
structure. This structure contains approximately 6,450 square feet of area and
is configured to provide a recreation/dining hall, kitchen, storage area,
billiards room and laundry room. There are mens and ladies rest rooms. The
interior construction consists of painted or papered drywall walls and ceilings.
The finish flooring is vinyl tile. The lavatories have ceramic floor coverings
and marble wainscot. There are flush mounted fluorescent light fixture and
ceiling fans. The kitchen contains a refrigerator, combination oven and range,
and microwave oven. The kitchen was being re-floored on the date of our
inspection. A brick manager's residence containing approximately 1,872 square
feet is located on the site.
We have not estimated a separate value for these amenities, or equipment,
as they are standard items found at most mobile home parks. These amenities are
typical for a park of this age and size and are adequate and functional in use.
<PAGE>
Improve Description 12
The subject community and site improvements were built in 1968. The
community is, therefore approximately 30 years old. According to public
records, the clubhouse and manager's residence were built in the mid-1940's.
The common areas, streets, amenities and individual manufactured homes were
observed to be in good overall condition, having been originally constructed of
high quality materials and having been well maintained over the years. No
significant item of deferred maintenance was noted and overall maintenance
levels in the community are rated good.
OWNERSHIP AND PROPERTY HISTORY
- ------------------------------
The ownership of the subject, as recorded in the Official Records of Palm
Beach County in Official Record Book 8881 at Page 0248, is in the name of
Windsor Park Properties 6 and Windsor Park Properties 7. The deed was recorded
in August 1995, and the indicated consideration was $9,280,000.
OCCUPANCY
- ---------
A fully developed 484-space manufactured home community occupies the
subject. Our inspection confirmed 43 vacant sites, 3 model homes and 1 employee
occupied site. The economic occupancy is 90.3%. The community is governed, as
required by law, by a prospectus, dated October 8, 1985, and revised February
23, 1993. Rents were increased based on the CPI on January 1, 1999.
ZONING AND OTHER LAND USE CONTROLS
- ----------------------------------
The subject is zoned RM, Multiple Family Residential. It is our opinion
that the subject property is in conformance with the zoning code.
Concurrency
- -----------
The subject property is in conformance with the approved comprehensive plan
filed by Palm Beach County. Therefore, concurrency is not an issue for the
subject site.
Flood Hazard
- ------------
The subject property is located in a designated Flood Zone "B" according to
Flood Map Community Number 120192, Panel 0130B, dated October 15, 1982. Zone B
is defined as "Areas
<PAGE>
Zoning and Other Land Use Controls 13
between the limits of the 100-year flood and 500-year flood; or certain areas
subject to 100-year flooding with average depths less than one (1) foot...".
Environmental
- -------------
We observed no obvious areas of contamination on or about the site.
However, we have no qualifications in environmental hazards and recommend an
environmental audit be performed.
REAL ESTATE ASSESSMENT AND TAXES
- --------------------------------
The subject property is identified in the Palm Beach County records under
Folio Number 00 42 42 24 00 000 5010. The assessed value of the subject totals
$8,715,015. It is our opinion that the subject property is fairly assessed.
The 1998 taxes were $275,215.56 indicating a per space tax liability of $568.63.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the State of Florida, properties are assessed at
100% of the market value, as required by Florida Statute, Chapter 192.042.
Properties are reassessed annually and equitability of assessments is not a
basis for assessment in the State of Florida. Taxes are due and payable on the
first day of the year, although tax bills are issued in arrears. Discounts up
to 4% of the total bill are available for early payment and taxes become
delinquent after March 31. Our discussions with a number of owner's of
investment real estate and mobile home parks has indicated that "early" payment
of real estate taxes is a very common practice. Additionally, prudent
management would also dictate the payment of real estate taxes to take advantage
of any discounts offered. Our estimate of taxes, in the amount of $266,849,
reflects this practice.
<PAGE>
MARKETABILITY AND MARKETING PERIOD 14
- ----------------------------------
The subject is competitive with other properties in the marketplace and is
marketable, although not considered a candidate for a resident purchase.
Discussions with large institutional manufactured home community investor
representatives and local area realtors, indicated that "properly priced",
stable, well kept manufactured home communities should "be under contract"
within a six month period in today's market.
Our discussions also indicated overall capitalization rates were higher for
all-age communities and dependent upon occupancy and condition. Pricing is
established by processing gross income, reduced by a vacancy and credit loss
factor, operating expenses and an additional capital charge based on overall
condition, is deducted to arrive at a net operating income (NOI). Those surveyed
indicated that at properties not operating at stabilized occupancy, they were
unwilling to compensate a seller for any of the upside to be gained in filling
the property.
In late summer 1998, commercial mortgage backed securities (CMBS) lenders
restructured their pricing for long term fixed rate loans. These loans had
historically been priced based on an interest rate spread above Treasury
Securities. The secondary market for these loans became illiquid and lenders
were unable to sell the loans profitably. Consequently, although interest rates
on Treasuries have fallen, the interest rates on securitized loans have
increased. Prior to this increase, interest rate spreads were available lower
than 150 basis points over the 10-year Treasuries. Since the fall, spreads have
increased to the low 200 basis point range for manufactured housing communities.
Interest rates are low and financial institutions are again willing to lend
money for real estate projects with good occupancies. There has also been
significant institutional investor interest in manufactured home community
investments. In our opinion, the marketing period for the property would be
within the range indicated by the industry participants or six months.
HIGHEST AND BEST USE
- --------------------
Highest and Best Use may be defined as: The reasonably probable and legal
use of vacant land or an improved property, which is physically possible,
appropriately supported, financially feasible and which results in the highest
value."/2/
________________________
/2/The Appraisal Institute, The Appraisal of Real Estate, 10th Ed. Chicago: The
----------------------------
Appraisal Institute, 1992, page 275.
<PAGE>
Highest and Best Use 15
We have considered all of the potential uses to which the subject is
legally and physically adaptable. It is our opinion that the current use of the
subject, as a 484-space, manufactured home community, represents the highest and
best use of the subject.
VALUATION PROCESS
- -----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a fully occupied manufactured home community, investors
are primarily concerned with cash flow to service any debt and the equity
position. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of mobile homes by
offering low space rental rates, an investor would not be willing to compensate
a seller for any more than the income to be received. The subject is fully
developed with no expansion possibilities, therefore a potential investor would
be primarily interested in the cash flow and equity return and we have excluded
the Cost Approach.
<PAGE>
INCOME CAPITALIZATION APPROACH 16
- ------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is, of course, an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms, and within the goal of price minimization seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
facility, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property in the market.
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the subject property. The
estimate of net operating income is derived through the process of estimating
the total potential gross income (PGI from rentals and other sources, less any
vacancy and credit loss producing an effective gross income (EGI) estimate. All
expenses associated with the operation of the property are then deducted to
yield a stabilized net operating income (NOI) estimate.
A survey of the competitive properties is presented in summary form on the
following page.
<PAGE>
RENTAL COMPARABLE CHART
<TABLE>
<CAPTION>
===================================================================================================================================
No. Name Total Monthly Services Included In Amenities
Address Spaces/ Rental Monthly Rates
Occ. Rates
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Sunshine Village
1 2765 10th Avenue North 170/ $295.00 to Water, sewer and trash Laundry, shuffleboard
Lake Worth, Unincorporated 168 $315.00 collection. and horseshoes.
Palm Beach County, Florida
- -----------------------------------------------------------------------------------------------------------------------------------
2 Arrowhead 602/ $364.00 to Water, sewer, lawn Clubhouse, two pools,
6255 Lawrence Road 586 $416.00 maintenance and trash laundry and shuffleboard.
Lantana, Palm Beach County, collection.
Florida
- -----------------------------------------------------------------------------------------------------------------------------------
3 Mas Verde Mobile Estates 300/ $315.00 to Water, sewer and trash Clubhouse, pools,
5656 Lake Worth Road 298 $325.00 collection. laundry and shuffleboard.
Lake Worth, Palm Beach County,
Florida
- -----------------------------------------------------------------------------------------------------------------------------------
4 Lantana Cascade 461/ $415.00 to $445.00 Water, sewer, trash Clubhouse, pools,
6330 South Congress Avenue 443 collection and cable shuffleboard and
Lantana, Unincorporated Palm television. laundries.
Beach County, Florida
- -----------------------------------------------------------------------------------------------------------------------------------
Subj. A Garden Walk 484/ $365.00 to $381.00 Water, sewer and trash Clubhouse, pools, tennis
8200 North Military Trail 441 collection. courts, petanque and
Palm Beach Gardens, Palm Beach shuffleboard.
County, Florida
===================================================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 18
Income Analysis
- ---------------
The general market practice is on a base lot rent charged on a monthly
basis. The lot rent in our survey ranged from $295.00 to $445.00 per month, as
indicated by the rent comparables recited in this report. As shown by our
survey, the subject's lot rents are within the market range.
Potential Gross Income
- ----------------------
In our forecast of total rental income, we have projected 12 months at the
current rent levels. Based on the current rent roll, the total monthly rent
amounts to $178,932 and the average monthly rental rate for the 484 units is
equivalent to $369.69. The potential gross income from rentals is $2,147,184
per year.
Vacancy and Credit Loss
- -----------------------
The subject is an all-age community currently 91.1% physically occupied
with 43 of the 484 sites vacant. To the physical vacancy, we have added a small
percentage to account for credit loss in our estimate of economic vacancy of
12.0% of total potential gross income, or $257,662.
Other Income
- ------------
Additional income is typically derived from sources such as storage fees,
labor charges to the tenants, commissions on sales and rentals of the units.
Historically, the subject has generated from $18,455 (1996) to $19,864 (1997),
in other income. We have based our estimate of other income on the historical
levels, estimating this income at $35.00 per space.
Effective Gross Income (EGI)
- ----------------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated losses due to tenant changes, plus any additional income. Thus
potential gross rental income of $2,147,184 less a vacancy and credit loss
allowance in the amount of $257,662, or 12.0% produces an effective gross income
from rentals estimate of $1,889,522. To this we add income derived from other
sources, which totals $16,940, arriving at an effective gross income estimate of
$1,906,462.
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
A Garden Walk - Summary of Historical Operations
Pct. of $ Per Pct. of $ Per Pct. of $ Per 1999
1996 Income Space 1997 Income Space 1998 Income Space Annualized
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $1,793,820 98.98% $3,706.24 $1,819,173 98.92% $3,758.62 $1,876,704 98.99% $3,877.49 $1,940,162
Utility Income 979 0.05% 2.02 0 0.00% 0.00 0 0.00% 0.00 0
Other Income 17,476 0.96% 36.11 19,864 1.08% 41.04 19,142 1.01% 39.55 17,816
------------------------------------------------------------------------------------------------------
Total Income $1,812,275 100.00% $3,744.37 $1,839,037 100.00% $3,799.66 $1,895,846 100.00% $3,917.04 $1,957,978
Expenses:
Administration/Office $ 73,197 4.04% $ 151.23 $ 67,359 3.66% $ 139.17 $ 59,890 3.16% $ 123.74 $ 54,612
Insurance 11,338 0.63% 23.43 16,816 0.91% 34.74 15,239 0.80% 31.49 8,698
Maintenance & Repairs 32,020 1.77% 66.16 45,287 2.46% 93.57 38,993 2.06% 80.56 31,672
Management Expense 89,589 4.94% 185.10 92,177 5.01% 190.45 94,658 4.99% 195.57 97,578
Wages & Benefits 131,043 7.23% 270.75 134,391 7.31% 277.67 154,975 8.17% 320.20 156,496
Property Taxes 252,873 13.95% 522.46 269,390 14.65% 556.59 252,431 13.31% 521.55 279,210
Utilities 205,861 11.36% 425.33 199,109 10.83% 411.38 222,682 11.75% 460.09 250,548
------------------------------------------------------------------------------------------------------
Total Expenses $ 795,921 43.92% $1,644.46 $ 824,529 44.83% $1,703.57 $ 838,868 44.25% $1,733.20 $ 878,814
Net Operating Income $1,016,354 56.08% $2,099.90 $1,014,508 55.17% $2,096.09 $1,056,978 55.75% $2,183.84 $1,079,164
================================================================================================================================
<CAPTION>
Pct. of $ Per 1999
Income Space thru June
- -----------------------------------------------------------
<S> <C> <C> <C>
Income:
Rents 99.09% $4,008.60 970081
Utility Income 0.00% 0.00
Other Income 0.91% 36.81 8908
--------------------------------
Total Income 100.00% $4,045.41
Expenses:
Administration/Office 2.79% $ 112.83 27306
Insurance 0.44% 17.97 4349
Maintenance & Repairs 1.62% 65.44 15836
Management Expense 4.98% 201.61 48789
Wages & Benefits 7.99% 323.34 78248
Property Taxes 14.26% 576.88 139605
Utilities 12.80% 517.66 125274
-------------------------------
Total Expenses 44.88% $1,815.73
Net Operating Income 55.12% $2,229.68
==========================================================
</TABLE>
<PAGE>
Income Capitalization Approcah 20
Operating Expense Analysis
- --------------------------
Administrative/Office: Historically, this expense has shown a variable,
- ----------------------
decreasing trend. In the financial statements, this expense does include some
corporate expense items, which we have not considered. We have stabilized our
estimate of this expense at $125.00 per space per year, which is equal to
$60,500 or approximately 3.17% of the estimated effective gross income.
Insurance: Historically, this expense has exhibited a varying trend. Our
- ----------
estimate of this expense has been stabilized based on the historical amounts at
$35.00 per space per year. This is equal to $16,940 annually or approximately
0.89% of the effective gross income.
Maintenance and Repair: Historically, this expense has varied since 1996. We
- -----------------------
have based our estimate on the indicated historical trend at $90.00 per space
per year or $43,560 annually, believed adequate to properly maintain the
community. This amount is equal to approximately 2.28% of the estimated
effective gross income.
Management Fees: This expense typically includes off-site management, the
- ---------------
oversight of the on-site manager and monthly bookkeeping functions. We used a
rate of 5% of the effective gross income estimate, typical in the market place,
equal to $95,323 or $196.95 per space per year.
Wages and Benefits: Historically, this expense has increased annually since
- -------------------
1996. We have based our estimate on the historical data at $325.00 per space
per year or $157,300, which is equal to 8.25% of the estimated effective gross
income.
Property Taxes: This category is project specific due to location. Based on our
- ---------------
analysis of the historical tax trends, we have estimated the tax liability to be
$266,849. This equates to $551.34 per space per year or approximately 14.00% of
the estimated effective gross income.
Utilities: This expense was equal to $425.33 per space in 1996, $411.38 per
- ----------
space in 1997 and the 1998 amount is equal to $460.09 per space. We have
estimated this expense at $480.00 per space per year. This is equal to
$232,320, or approximately 12.19% of the estimated effective gross income.
Reserves: This expense category represents the inclusion of set-asides for
- ---------
major recurring or capital type expenditures experienced periodically by any
property. We have used $25.00 per space per year, believed adequate to cover
future capital costs. This equates to $12,100 annually or approximately 0.63%
of the estimated effective gross income.
Total Expenses: To summarize, we have stabilized total operating expenses for
- ---------------
the subject property at $884,892. This estimate is equal to 46.42% of the
Effective Gross Income (EGI) estimate or $1,828.29 per space per year. As
shown, expenses have historically ranged between 43.92% (1996) and 44.83%
(1997).
<PAGE>
<TABLE>
<CAPTION>
======================================================================================
A Garden Walk
Reconstructed Operating Statement
======================================================================================
Income
Spaces Monthly Rent Monthly Total Annualized
- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $365.00 $365 $4,380
270 $366.00 $98,820 $1,185,840
7 $368.00 $2,576 $30,912
34 $371.00 $12,614 $151,368
4 $373.00 $1,492 $17,904
33 $374.00 $12,342 $148,104
118 $375.00 44,250 531,000
4 $380.00 1,520 18,240
13 $381.00 4,953 59,436
- -----------------------------------------------------------
484 $369.69 $178,932 Pct. $
of EGI Per Space
-------------------------
Gross Potential Rental Income $ 2,147,184 112.63% $ 4,436.33
Less:
Vacancy & Credit Loss (257,662) 12.0% $ (532.36)
----------------------------------------
Effective Gross Income From Rentals $ 1,889,522 99.11% $ 3,903.97
Add:
Utility Income 0 0.00% $ -
Miscellaneous Income 16,940 0.89% $ 35.00
----------------------------------------
Total Effective Gross Income $ 1,906,462 100.00% $ 3,938.97
Expenses
Administrative/Office $ 60,500 3.17% $ 125.00
Insurance 16,940 0.89% 35.00
Maintenance & Repairs 43,560 2.28% 90.00
Management Expense 95,323 5.00% 196.95
Wages & Benefits 157,300 8.25% 325.00
Property Taxes 266,849 14.00% 551.34
Utilities 232,320 12.19% 480.00
Reserves 12,100 0.63% 25.00
----------------------------------------
Total Expenses $ 884,892 46.42% $ 1,828.29
Net Operating Income $ 1,021,570 53.58% $ 2,110.68
======================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 22
Selection of a Capitalization Rate
- ----------------------------------
Direct capitalization of terminal net operating income by an overall
capitalization rate extracted from the market provides an excellent indication
of market value. Purchasers of manufactured home communities most often utilize
this method. This method is easily understood, closely related to the market,
and convincing if the overall rates abstracted from recent sales are from
comparable sale properties and accurate income data are available.
Market Data
- -----------
The comparable sale data shown in the Sales Comparison section of this
report indicated an overall capitalization rate from 7.44% to 9.83%. Our
analysis of this data indicated a narrow range in overall capitalization rates,
which tend to be influenced by the size of the community and its age and
condition.
Comparable Sales
<TABLE>
<CAPTION>
===========================================================
Sale Sale Date Overall
Number Capitalization Rate
-----------------------------------------------------------
<S> <C> <C>
1 07/97 9.18%
-----------------------------------------------------------
2 01/99 7.94%
-----------------------------------------------------------
3 09/98 7.44%
-----------------------------------------------------------
4 07/98 8.29%
-----------------------------------------------------------
5 06/98 9.83%
===========================================================
</TABLE>
Based on the comparison of the sale data to the subject and considering the
current investor and interest rate environment, the overall rate for the subject
would likely be in the 9.0% range. We have concluded a rate of 9.0%.
Debt Coverage Ratio Method
- --------------------------
We have also developed an overall rate through the Debt Coverage Ratio
analysis. Current commercial lending policies indicate a mortgage loan of 75%
of market value, based on a 20-year amortization schedule at an annual interest
rate of 7.85%, which yields an annual mortgage constant of 9.8514%. A minimum
debt coverage ratio (DCR) of 1.25 to 1.00, would likely be required for a
property similar to the subject. Based on these assumptions an overall
capitalization rate has been developed, as presented below:
<PAGE>
Income Capitalization Approach 23
<TABLE>
<CAPTION>
==============================================================================================
M f DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0.75 0.098514 1.25 0.092357
----------------------------------------------------------------------------------------------
Rounded 9.2%
==============================================================================================
</TABLE>
The Debt Coverage Ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufactured home
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The presence of institutional investors in the market and the reduction in
quality of real estate investments has bid down rates on manufactured home
communities. Investors have become more creative in their acquisition strategies
in order to compete. Therefore, actual transactions in the marketplace better
demonstrate investor perceptions of yields on manufactured home community
investments.
We have placed a greater emphasis on the overall capitalization rate
indicated by the market data, as this is a direct reflection of risk perceptions
by market participants, although the rates are almost equivalent. Our estimate
of the market value of the subject, indicated by the Income Capitalization
Approach, is calculated as follows:
<TABLE>
<CAPTION>
Net Operating Income Overall Capitalization Rate Market Value
<S> <C> <C>
$1,021,570 /0.090 $11,350,778
Rounded to $11,350,000
</TABLE>
<PAGE>
24
SALES COMPARISON APPROACH
- -------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions be weighed, and the data of each transaction
be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject be considered;
differences in physical, functional, and economic characteristics be
noted; and adjustments for the differences be made.
3. The value conclusion is consistent with the analysis of the sales
data.
So that a conclusion from the analysis of the sales data can be drawn, a
unit of comparison has been selected. Calculation of a unit of comparison
provides a common denominator by which the market sales can be related to each
other and to the subject property. The commonly accepted unit of comparison in
the valuation of manufactured home communities is the selling price per space.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For dissimilar features adjustments are made
indicating the price at which the subject could be expected to sell. In making
adjustments, all relevant factors were considered including:
1. Nature of surrounding development.
2. Size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
Based on our investigation, the following five sales are the most
significant transactions for direct comparison with the subject.
<PAGE>
Summary of Sale Comparables
<TABLE>
<CAPTION>
====================================================================================================================================
No. Name Sale Price/ Total Price/ Average E.G.I.M./ O.A.R.
Address Sale Date Spaces/ Space Lot Rent Expense %
Occupancy
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Tall Pines $ 4,450,000 255/ $17,451 $196.94 7.44/ 9.18%
314 South Erie Drive June 1997 98.0% 26.7%
Fort Pierce, Unincorporated St. Lucie County, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
2 Honeymoon Park $ 8,500,000 231/ $36,797 $330.87 8.35/ 7.94%
1100 Curlew Road January 1999 98.7% 33.7%
Dunedin, Pinellas County, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
3 Country Lakes Village I and II $14,100,000 472/ $29,873 $273.67 9.40/ 7.44%
5700 Bayshore Road September 1998 100.0% 30.6%
Palmetto, Manatee County, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
4 Pleasure Cove and Plantation Manor $16,600,000 585/ $28,376 $308.31 8.03/ 8.29%
3030 U.S. Highway 1 July 1998 97.3% 33.4%
Fort Pierce, St. Lucie County, Florida
- ------------------------------------------------------------------------------------------------------------------------------------
5 Village Park $ 8,000,000 307/ $26,059 $391.41 6.50/ 9.83%
3900 West Prospect Road June 1998 94.5% 36.1%
Fort Lauderdale, Broward County, Florida
====================================================================================================================================
</TABLE>
<PAGE>
Sales Comparison Approach 26
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. The properties, which
have been compared to the subject, have been discussed below:
Sale Comparable Number One is Tall Pines located in Fort Pierce,
Unincorporated St. Lucie County, Florida. This 255 space senior community sold
in June 1997, for $4,450,000. This price equates to a sale price per space of
$17,451. Based on an effective gross income of $597,773, the EGIM was 7.44 and
the overall rate was 9.18%. Approximately 25% of the spaces are encumbered with
lifetime leases.
Sale Comparable Number Two is Honeymoon Park located in Dunedin, Pinellas
County, Florida. This 231 space age restricted community sold in January 1999
for $8,500,000. This price equates to a sale price per space of $36,797. Based
on an effective gross income of $1,017,882, the EGIM was 8.35 and the overall
rate was 7.94%. The park was 98.7% occupied at the time of sale.
Sale Comparable Three is Country Lakes Village I and II in Palmetto,
Manatee County, Florida. The property has 472 home sites and recently sold for
$14,100,000, or $29,873 per space. Based on an effective gross income of
$1,500,590, the EGIM was 9.40. The expenses represented 30.6% of the effective
gross income and the indicated capitalization rate was 7.44%. This age
restricted community was 100% occupied at the time of sale.
Sale Comparable Number Four is Pleasure Cove and Plantation Manor
Manufactured Housing Communities. The properties are adjacent to one another
and were both built in 1972. There are 585 total spaces and the property sold
in July 1998 for $16,600,000, or $28,376 per space. Based on an effective gross
income of $2,067,085, the EGIM was 8.03. The expenses represented 33.4% of the
effective gross income and the indicated capitalization rate was 8.29%. The
combined occupancy of both communities was 97.3% at the time sale.
Sale Comparable Number Five is Village Park in Fort Lauderdale, Broward
County, Florida. This 307 space rental park sold for $8,000,000 in June 1998.
This price equates to a sale price per space of $26,059. Based on an effective
gross income of $1,230,257, the EGIM was 6.50, and the overall rate was 9.83%.
This park was 94.5% occupied at the time of sale.
All of the sales were fee simple transactions, with abnormal financing
reflected in the cash equivalent price. There were no abnormal sale conditions
known to have occurred and all of the sales represent transactions that have
taken place over a 2 year period, having traded under similar market conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other
<PAGE>
Sales Comparison Approach 27
factors, to pay more lot rent for a better located, newer community. This also
holds true for amenities, age and other factors. The average lot rent reflects,
in most cases, the market perception of a property's position in the
marketplace. It is also typical that lot rent increases contribute to increases
in net operating income. Alternatively, we have employed the Effective Gross
Income Multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 6.50 and 9.40. As previously discussed, the EGIM is essentially
a function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject is an age restricted community with a 8.9% physical vacancy.
The subject was observed to be in average condition and has a good location in
Palm Beach County, Florida. All of the comparables had higher occupancy rates
than the subject and the expense ratios are lower, ranging from 26.7% to 36.1%.
By comparison, the subject has a forecast expense ratio of 46.42%. Based on
these considerations, we have concluded an EGIM below the indicated range,
processing the subject's Effective Gross Income of $1,906,462 with an EGIM of
6.00.
<TABLE>
<S> <C>
Thus $1,906,462 x 6.00 is $11,438,772
Rounded to $11,400,000
</TABLE>
On a per space basis, this is equivalent to $23,554.
<PAGE>
28
FINAL ESTIMATE OF VALUE
- -----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
<TABLE>
<S> <C>
Income Capitalization Approach $11,350,000
Sales Comparison Approach $11,400,000
</TABLE>
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales of similar properties.
In the reconciliation, we reviewed each approach to value (a) to ascertain
the reliability of the data and (b) to weight the approach that best represented
the actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis of
this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the valuation
of the subject property, the sales comparison approach was considered reliable.
The two approaches reflect a narrow range of value. Our opinion of value
is based on the Income Approach, as buyers are most concerned with cash flow to
service debt. Our opinion of the market value of the subject, based on a
reasonable exposure period of six months, as of August 27, 1999 was:
- ELEVEN MILLION THREE HUNDRED FIFTY THOUSAND DOLLARS -
($11,350,000)
<PAGE>
29
CERTIFICATION
- -------------
We certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions and are our personal,
impartial and unbiased professional analyses, opinions, and
conclusions.
. We have no present or prospective interest in the property that is the
subject of this report, and no personal interest with respect to the
parties involved.
. We have no bias with respect to the property that is the subject of
this report or to the parties involved with this assignment.
. Our engagement in this assignment was not contingent upon developing
or reporting predetermined results.
. Our compensation for completing this assignment is not contingent upon
the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this
appraisal.
. Our analysis, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice.
. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
. As of the date of this report, John H. Whitcomb, MAI, CCIM has
completed the requirements under the continuing education program of
the Appraisal Institute.
. John H. Whitcomb, MAI, CCIM and William G. Trask have made a personal
inspection of the property that is the subject of this report.
. No one provided significant professional assistance to the persons
signing this report.
. We are in compliance with the competency provisions of the Uniform
Standards of professional Appraisal Practice of the Appraisal
Foundation.
. This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
/s/ John H. Whitcomb /s/ William G. Trask
- ------------------------------ ------------------------------
John H. Whitcomb, MAI, CCIM William G. Trask
St. Cert. Gen. REA #0001234 St. Cert. Gen. REA #0002347
<PAGE>
30
ASSUMPTIONS AND LIMITING CONDITIONS
- -----------------------------------
The primary assumptions and limiting conditions pertaining to the conclusion in
this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function of the Report. The appraisal report may not be reproduced,
in whole or in part, and the findings of the report may not be utilized by a
third party for any purpose, without the written consent of Whitcomb Real
Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or to be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes which may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
<PAGE>
Assumptions and Limiting Conditions 31
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed
concerning any matter that may be disclosed by a proper survey. If a subsequent
survey should reflect a differing land area and/or frontages, we reserve the
right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others, and is not meant for use as a reference in legal matters of
survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projection contained in
the appraisal assumes responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures, which would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made
available to us, so statements regarding soil qualities, if made in the report,
are not conclusive but have been considered consistent with information
available to us and provided by others. In addition, unless stated otherwise in
the appraisal, the land and soil of the area under appraisement appears firm and
solid, but the appraisal does not warrant this condition.
The appraisal report covering the subject is limited to surface rights only, and
does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers and we are not qualified to judge the structural and
environmental integrity of the improvements, if any. Consequently, no warranty,
representations or liability are assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services, including the
construction materials, particularly the roof, foundations,
<PAGE>
Assumptions and Limiting Conditions 32
and equipment, including the HVAC systems, if applicable. Should there be any
question concerning them, it is strongly recommended that an Engineering,
Construction, and/or Environmental inspection be obtained. The value estimate
stated in this appraisal, unless otherwise noted, is predicated on the
assumption that all of the improvements, equipment and building services, if
any, are structurally sound and suffer no concealed or latent defects or
inadequacies other than those noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas which are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state
<PAGE>
Assumptions and Limiting Conditions 33
and/or federal tax or regulatory laws. Therefore, the actual results achieved
during the projected holding period and investor requirements relative to
anticipated annual returns and overall yields could vary from the projection.
Thus, variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992. The
appraiser has not made a specific compliance survey and analysis of this
property to determine whether it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements of the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
<PAGE>
EXHIBIT A
---------
The South 1/2 of the Southeast 1/4 of Section 24, Township 42
South, Range 42 East, Palm Beach County, Florida, less the
Westerly 50 feet for road right of way of State Road 809
(Military Trail), and less the Easterly 150 feet for State Road 9
(I-95), and less the Southerly 33 feet for canal right of way, and
LESS THE FOLLOWING:
Commence at the center of said Section 24; thence South
01 degrees 34'06" West, along the North-South 1/4 section line of
said Section 24, for 1329.19 feet; thence South 88 degrees 25'
54" East 60 feet to the Point of Beginning; thence South
01 degrees 34'06" West for 1034.62 feet to the beginning of a
curve concave Westerly; thence Southerly along said curve, having
a radius of 57,355.80 feet and, a central angle of
00 degrees 35'20", through an angle of 00 degrees 15'40.37" for
an arc distance of 261.49 feet; thence North 88 degrees 23'11"
West for 20 feet to a point on a curve concave Westerly; thence
from a tangent bearing of North 01 degrees 49'47" East run
Northerly along said curve having a radius of 57,335.80 feet and
a central angle of 00 degrees 35'20" through an angle of
00 degrees 15'40.64" for an arc distance of 261.47 feet to the
end of said curve; thence North 01 degrees 34'06" East for
1034.66 feet; thence South 88 degrees 25'54" East for 20 feet to
the Point of Beginning.
<PAGE>
MAPS
<PAGE>
[AREA MAP APPEARS HERE]
<PAGE>
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
[RENT COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
[MANUFACTURED HOME COMMUNITIES COMPARABLE SALES MAP APPEARS HERE]
<PAGE>
[SITE LAYOUT APPEARS HERE]
<PAGE>
PROFILES OF APPRAISERS
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St. Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
- ----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
<PAGE>
2
Profile of Appraiser
PROFESSIONAL AFFILIATIONS
- -------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
<TABLE>
<CAPTION>
Manufactured Home Communities
- -----------------------------
<S> <C> <C> <C>
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estate Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Laieland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TNT ShangriLa Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
</TABLE>
<PAGE>
3
Profile of Appraiser
<TABLE>
<CAPTION>
Recreational Vehicle Parks
- ---------------------------
<S> <C> <C> <C>
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
Self-Storage Facilities
- -----------------------
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
Hotels/Resorts
- --------------
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D.C.
</TABLE>
<PAGE>
4
Profile of Appraiser
<TABLE>
<CAPTION>
Financial
- ---------
<S> <C>
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
- ----------------------------------
W. P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
</TABLE>
EDUCATIONAL BACKGROUND
- ----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
- ------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magzazine.
----------------------------------
TESTIMONY
- ---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
<PAGE>
PROFILE OF APPRAISER
WILLIAM G. TRASK
St.Cert. Gen. REA #0002347
REAL ESTATE APPRAISAL EXPERIENCE
- --------------------------------
Appraiser
Whitcomb Real Estate
Tampa, FL
Specializing in real estate valuations and consulting projects for lending
institutions, public and private corporations and individuals, for a variety
of uses. Property types appraised include manufactured housing communities,
recreational vehicle parks, manufacturing plants, office buildings,
apartment complexes, retail properties and other types of commercial
establishments. February 1998 to Present.
Appraiser
Atlas Real Estate Group, Inc.
Tampa,FL
Specialized in real estate condemnation valuations and related studies.
Property types appraised include agricultural, industrial, residential,
office buildings, retail properties and other types of commercial land and
establishments. August 1991 to January 1998.
PROFESSIONAL AFFILIATIONS
- -------------------------
State Certified General Real Estate Appraiser
Florida # 0002347
Georgia # CG007464
PARTIAL LIST OF CLIENTS AND PROPERTIES
- --------------------------------------
<TABLE>
<CAPTION>
Manufactured Home Communities
- -----------------------------
<S> <C> <C> <C>
A Garden Walk Palm Beach Gardens, FL Honeymoon Park Dunedin, FL
Bear Creek Ormond Beach, FL La Buona Vita Port St. Lucie, FL
Bonfire Leesburg, FL Lincolnshire Largo, FL
Briarwood Lake Worth, FL Meadowbrook Lakeland, FL
Camelot East Sarasota, FL Mobiland By The Sea Melbourne, FL
Camelot Lakes Sarasota, FL Oak View Arcadia, FL
Carefree Village Tampa, FL Palmetto Hallandale, FL
Clover Leaf Brooksville, FL Plaza Bradenton, FL
Coquina Crossing St. Augustine, FL Ranchero Village Largo, FL
</TABLE>
<PAGE>
2
Profile of Appraiser
William G. Trask
<TABLE>
<CAPTION>
Manufactured Home Communities (Cont.)
- -------------------------------------
<S> <C> <C> <C>
Country Club Estates Venice, FL River Bay Tampa, FL
Country Lakes Coconut Creek, FL Riverview Micco, FL
Country Life Leesburg, FL Serendipity Clearwater, FL
Crystal River Village Crystal River, FL Southern Acres St. Cloud, FL
Diamond Point Leesburg, FL Spanish Trails Zephyrhills, FL
Friendly Village Sellersburg, IN Sun Village Largo, FL
Hammock Lake Fort Meade, FL Sundance Zephyrhills, FL
Heron Cay Vero Beach, FL Sunshine Village Lake Worth, FL
Hibiscus Mount Dora, FL Tall Pines Fort Pierce, FL
Hidden Village St. Petersburg, FL Tanglewood Fort Pierce, FL
High Point Clearwater, FL Vero Palms Vero Beach, FL
Recreational Vehicle Parks
- --------------------------
Lazy Lakes RV Sugarloaf Key, FL Ridgecrest RV Leesburg, FL
Lions Lair RV Marathon, FL Sunshine RV Vero Beach, FL
Pioneer Village North Fort Myers, FL Topics RV Spring Hill, FL
Other
- -----
ABC Pizza House Tampa, FL Fabian Enterprises Tampa, FL
Blakie's Restaurant Tampa, FL Florida Power & Light St. Petersburg, FL
Breed Automotive Lakeland, FL Mobil Oil Lakeland, FL
Discount Auto Parts Lakeland, FL Pier I Imports Hoover, AL
Discount Auto Parts Sarasota, FL Pizza Hut Brandon, FL
Discount Auto Parts Land O' Lakes, FL Pizza Hut Lakeland, FL
</TABLE>
<TABLE>
<CAPTION>
Financial
- ---------
<S> <C>
Belgravia Capital Heller Financial
Collateral Mortgage, Ltd. Lehman Brothers
Executive Commercial Funding NationsBank
First Federal Savings Bank, Leesburg, FL Republic Bank, Port Richey, FL
First National Bank, St. Lucie, FL Signature Financial Services, Inc.
First Union National Bank Union Capital Investments, LLC
GE Capital Corporation United Southern Bank, Eustis, FL
Greentree Financial
</TABLE>
<PAGE>
Profile of Appraiser 3
William G. Trask
Real Estate/Real Estate Investment
- ----------------------------------
Continental Communities National Home Communities
Martin Newby Management Pacific Life
Munao Partnership Windsor Corporation
EDUCATIONAL BACKGROUND
- ----------------------
Florida State University
University of South Florida
Edison Community College
Hillsborough Community College
Appraisal Institute
International Right of Way Association
<PAGE>
EXHIBIT 99.(b)(2)
LEGG MASON
Corporate Finance
Legg Mason Wood Walker, Incoporated
100 Light Street, 34/th/ Floor, Baltimore, MD 21202
410-539-0000 Fax: 410-454-4508
Member New York Stock Exchange, Inc./Member SIPC
November 15, 1999
The General Partners of
Windsor Park Properties 6, A California Limited Partnership
c/o The Windsor Corporation
6160 South Syracuse Way
Greenwood Village, Colorado 80111
General Partners:
We have been advised by the managing general partner (the "Managing
General Partner") of Windsor Park Properties 6, A California Limited Partnership
(the "Partnership"), that the Partnership intends to sell its one wholly-owned
property and its partial ownership interests in five other properties
(collectively, the "Properties") to N'Tandem Trust, a California business trust
("N'Tandem"), for a net aggregate amount of $9,113,100 on terms and conditions
more fully described in the consent solicitation statement (the "Consent
Solicitation Statement") relating to the purchase and sale of the Properties
(the transaction is referred to herein as the "Sale").
You have requested our opinion, as investment bankers, as to the
fairness to the limited partners (the "Limited Partners") of the Partnership,
from a financial point of view, of the aggregate purchase price to be paid by
N'Tandem in the Sale.
In connection with our opinion, we have, among other things, reviewed:
(i) the management agreement between the Partnership and the
Managing General Partner and other agreements pertaining to the
operation and management of the Properties;
(ii) the partnership agreement of the Partnership;
(iii) the financial statements and the related filings of the
Partnership on Form 10-K for the year ended December 31, 1998
and Form 10-Q for the six months ended June 30, 1999;
(iv) certain market and economic data applicable to the Sale;
(v) an analysis of comparable publicly traded real estate
investment trusts;
<PAGE>
The General Partners of the Windsor Park Properties 6, A California Limited
Partnership
November 15, 1999
Page 2
(vi) the draft Consent Solicitation Statement;
(vii) certain financial and other information relating to the
Partnership and the Properties that was furnished to Legg Mason
by the Managing General Partner, including certain internal
financial analyses, financial and operating forecasts and
reports and other information prepared by the Managing General
Partner or its representatives;
(viii) the appraisals of the Properties prepared by Whitcomb Real
Estate, Inc; and
(ix) conducted such other financial studies, analyses and
investigations and considered such other information as we
deemed appropriate.
In connection with our review, we relied, without independent
verification, on the accuracy and completeness of all information that was
publicly available, supplied or otherwise communicated to Legg Mason on behalf
of the Partnership and we have further relied upon the assurances of the
Managing General Partner that it is unaware of any facts that would make the
information provided to us incomplete or misleading.
Legg Mason has also relied upon the Managing General Partner as to the
reasonableness and achievability of the financial forecasts and projections (and
the assumptions and bases therein) provided to us for the Partnership, and we
have assumed such forecasts and projections were reasonably prepared on bases
reflecting the best currently available estimates and judgments of management as
to the future operating performance of the Partnership. Neither the Managing
General Partner nor the Partnership publicly discloses internal management
forecasts and projections of the type provided to Legg Mason. Such forecasts
and projections were not prepared with the expectation of public disclosure.
The forecasts and projections were based on numerous variables and assumptions
that are inherently uncertain, including, without limitation, facts related to
general economic conditions. Accordingly, actual results could vary
significantly from those set forth in such forecasts and projections. Legg Mason
has relied on these forecasts and does not in any respect assume any
responsibility for the accuracy or completeness thereof.
Legg Mason has not been requested to make, and has not made, an
independent evaluation or appraisal of the assets, properties, facilities, or
liabilities (contingent or otherwise) of the Partnership and, with the exception
of the appraisal of the underlying properties of the Partnership referred to
above, we have not been furnished with any such appraisals or evaluations.
Estimates of value of the Partnership and its assets do not purport to be
appraisals or necessarily reflect the prices at which the Partnership and assets
may actually be sold. Because such estimates are inherently subject to
uncertainty, Legg Mason assumes no responsibility for their accuracy. We note
that the Managing General Partner and N'Tandem are under common control of the
parent of the Managing General Partner, and we have assumed that this potential
conflict of interest had no effect on the Sale. Our opinion is necessarily
based upon financial, economic, market and other conditions and circumstances
existing and disclosed to us on the date hereof. We were not requested to, nor
did we, solicit the interest of any other party in acquiring interests in the
Partnership or its assets. We have also assumed that the Sale will be
consummated on the terms and conditions described in the Consent Solicitation
Statement, without any waiver of material terms or conditions by the
Partnership.
It is understood that this letter is directed to the General Partners.
The opinion expressed herein is provided for the use of the General Partners in
their evaluation of the Sale and
<PAGE>
The General Partners of the Windsor Park Properties 6, A California Limited
Partnership
November 15, 1999
Page 3
our opinion does not constitute a recommendation to the General Partners or to
any Limited Partner as to how such partners should vote or otherwise respond on
the Sale. In addition, this letter does not constitute a recommendation of the
Sale over any other alternative transaction which may be available to the
Partnership and does not address the underlying business decision of the
Managing General Partner to proceed with or effect the Sale. This letter is not
to be quoted or referred to, in whole or in part, in any registration statement,
prospectus, or in any other document used in connection with the offering or
sale of securities, nor shall this letter be used for any other purposes,
without the prior written consent of Legg Mason; provided that this opinion may
be included in its entirety in any filing made by the Partnership or N'Tandem
with the Securities and Exchange Commission with respect to the Sale.
Legg Mason will receive a fee for providing this opinion to the
General Partners.
Based upon and subject to the foregoing, we are of the opinion that,
as of the date hereof, the aggregate amount of consideration to be paid by
N'Tandem in the Sale is fair to the Limited Partners from a financial point of
view.
Very truly yours,
/s/ Legg Mason Wood Walker, Incorporated
Legg Mason Wood Walker, Incorporated
<PAGE>
EXHIBIT 4
AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 6,
A California Limited Partnership
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. FORMATION OF LIMITED PARTNERSHIP..................................................................... 1
1.01 FORMATION AND AGREEMENT OF LIMITED PARTNERSHIP..................................... 1
1.02 NAME AND PRINCIPAL PLACE OF BUSINESS............................................... 1
1.03 TERM OF PARTNERSHIP................................................................ 1
1.04 DEFINITIONS........................................................................ 1
1.05 PURPOSE OF PARTNERSHIP AND INVESTMENT OBJECTIVES................................... 3
1.06 GENERAL AND LIMITED PARTNERS....................................................... 3
(A) GENERAL PARTNERS................................................................... 3
(B) GENERAL PARTNERS CAPITAL CONTRIBUTION.............................................. 3
(C) GENERAL PARTNERS PURCHASE OF UNITS................................................. 3
(D) AUTHORIZED UNITS AND ORIGINAL AND ADDITIONAL LIMITED PARTNERS...................... 4
(E) ADMISSION OF ORIGINAL ADDITIONAL LIMITED PARTNERS.................................. 4
II. MANAGEMENT OF THE PARTNERSHIP....................................................................... 4
2.01 POWERS AND DUTIES OF THE GENERAL PARTNERS.......................................... 4
2.02 INDEMNIFICATION.................................................................... 5
2.03-1 POWERS AND DUTIES OF THE LIMITED PARTNERS.......................................... 6
2.03-2 ACTS NOT DEEMED "PARTICIPATION IN CONTROL"......................................... 6
2.03-3 THE RIGHTS AND DUTIES OF THE PARTNERS IN RELATIONSHIP TO THE PARTNERSHIP SHALL
BE DETERMINED BY THE FOLLOWING RULES............................................... 7
2.04 COMPENSATION OF GENERAL PARTNERS AND AFFILIATES.................................... 7
(1) PROPERTY MANAGEMENT FEE............................................................ 7
(2) AFFILIATE ACQUISITION FEES......................................................... 8
(3) MORTGAGE FINANCING FEE............................................................. 8
(4) LIMITATION......................................................................... 8
2.05 INVESTMENT IN PROPERTIES........................................................... 8
2.06 CERTAIN MORTGAGING................................................................. 9
2.07 REINVESTMENT....................................................................... 9
III. FINANCING OF THE PARTNERSHIP....................................................................... 9
3.01 CAPITAL CONTRIBUTIONS OF THE GENERAL PARTNERS...................................... 9
3.02 CAPITAL CONTRIBUTIONS OF THE LIMITED PARTNERS...................................... 9
(A) PARTNERSHIP UNITS.................................................................. 9
(B) INITIAL SUBSCRIPTIONS.............................................................. 9
3.03 ADDITIONAL CONTRIBUTIONS........................................................... 9
3.04 INTEREST........................................................................... 9
</TABLE>
i
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.05 TIME FOR RETURN OF CONTRIBUTIONS................................................... 9
3.06 LOANS BY THE PARTNERS.............................................................. 10
3.07 ALLOCATION OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS FROM CASH AVAILABLE
FOR DISTRIBUTION................................................................... 10
3.08. CONDITIONS AND CONSENT TO ALLOCATIONS AND DISTRIBUTIONS............................ 11
3.09 PARTNERSHIP EXPENSES............................................................... 12
IV. BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL MATTERS........................................... 13
4.01 BOOKS OF ACCOUNT................................................................... 13
4.02 REPORTS AND FINANCIAL STATEMENTS................................................... 13
(A) ANNUAL REPORT...................................................................... 13
(B) REPORT OF FEES..................................................................... 14
(C) QUARTERLY REPORTS.................................................................. 14
(D) TAX INFORMATION.................................................................... 14
(E) SPECIAL REPORTS.................................................................... 14
(F) REPORTS DURING OFFERING............................................................ 14
(G) FILING OF REPORTS.................................................................. 14
4.03 TAX RETURNS AND RECORDS............................................................ 14
4.04 FISCAL YEAR........................................................................ 15
4.05 BANK ACCOUNTS, FUNDS AND ASSETS.................................................... 15
4.06 ADJUSTMENT OF TAX BASIS............................................................ 15
4.07 INSURANCE.......................................................................... 15
4.08 APPRAISALS......................................................................... 15
4.09 TAX MATTERS PARTNER................................................................ 16
V. ASSIGNABILITY OF LIMITED PARTNERS' INTERESTS......................................................... 16
5.01 LIMITED PARTNERS' INTEREST......................................................... 16
5.02 FURTHER RESTRICTION ON TRANSFERS................................................... 16
5.03 SUBSTITUTED PARTNERS............................................................... 16
5.04 ADDITIONAL RESTRICTIONS............................................................ 16
5.05 WITHDRAWAL OF LIMITED PARTNER...................................................... 16
5.06 DEATH OF LIMITED PARTNER........................................................... 17
5.07 RECOGNITION OF SUBSTITUTED AND ASSIGNEE LIMITED PARTNERS........................... 17
VI. REPURCHASE OF UNITS................................................................................. 17
VII. RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY OTHER THAN CASH...................................... 17
VIII. TERMINATION OF A GENERAL PARTNER.................................................................. 17
8.01 CEASING TO BE A GENERAL PARTNER.................................................... 17
</TABLE>
ii
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
(continued)
<TABLE>
Page
----
<S> <C>
8.02 CONTINUATION OF BUSINESS OF REMAINING GENERAL PARTNER.............................. 18
8.03 REMOVAL OF A GENERAL PARTNER....................................................... 18
8.04 DISSOLUTION OF PARTNERSHIP AND CONTINUANCE OF PARTNERSHIP BUSINESS................. 18
8.05 PAYMENT TO TERMINATED GENERAL PARTNER.............................................. 18
8.06 TERMINATION OF EXECUTORY CONTRACTS................................................. 19
IX. DISTRIBUTION ON TERMINATION......................................................................... 19
9.01 EVENTS OF DISSOLUTION.............................................................. 19
9.02 GAIN AND LOSS ON DISSOLUTION AND ORDER OF DISTRIBUTION............................. 19
9.03 EMINENT DOMAIN..................................................................... 19
9.04 PERIOD OF LIQUIDATION.............................................................. 19
X. CERTIFICATES AND OTHER DOCUMENTS..................................................................... 20
10.01 GENERAL PARTNERS ATTORNEYS FOR LIMITED PARTNERS.................................... 20
10.02 MAKING, FILING, ETC. OF CERTIFICATES, ETC.......................................... 21
XI. NOTICES............................................................................................. 21
XII. CONVEYANCES, CONTRACTS AND DOCUMENTS............................................................... 21
XIII. DISPUTES AND ARBITRATION.......................................................................... 21
XIV. MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS................................................... 21
XV. CAPTIONS -- PRONOUNS................................................................................ 23
XVI. BINDING EFFECT AND EXHIBITS........................................................................ 24
XVII. AMENDMENT OF THE AGREEMENT........................................................................ 24
XVIII ENTIRE AGREEMENT.................................................................................. 24
XIX. TAX CONTROVERSIES.................................................................................. 24
XX. COUNTERPARTS AND EXECUTION.......................................................................... 25
XXI. INVESTMENT IN OTHER PROGRAMS OF SPONSOR............................................................ 25
XXII. PROCEEDS FROM FINANCING PROPERTIES................................................................ 25
</TABLE>
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AN EXTRA SECTION BREAK HAS BEEN INSERTED ABOVE THIS PARAGRAPH. DO NOT DELETE
THIS SECTION BREAK IF YOU PLAN TO ADD TEXT AFTER THE TABLE OF
CONTENTS/AUTHORITIES. DELETING THIS BREAK WILL CAUSE TABLE OF
CONTENTS/AUTHORITIES HEADERS AND FOOTERS TO APPEAR ON ANY PAGES FOLLOWING
THE TABLE OF CONTENTS/AUTHORITIES.
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AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 6,
A California Limited Partnership
This Agreement of Limited Partnership is made June 28, 1988, as amended, if
any amendments, to the date stated on the signature page, by and among The
Windsor Corporation, a California corporation (Corporate General Partner) and
John A. Coseo, Jr. (Individual General Partner), as General Partners and
Patricia Ann Coseo as the original Limited Partner.
The original Limited Partner and each other person, partnership,
corporation, trust or other entity who or which shall hereafter be admitted to
the Partnership as a limited partner as hereinafter provided, are referred to
collectively as the "Limited Partners" and individually as a "Limited Partner."
I.
FORMATION OF LIMITED PARTNERSHIP
1.01 Formation and Agreement of Limited Partnership. The parties hereby
form a limited partnership (the "Partnership") pursuant to the provisions of the
California Revised Limited Partnership Act as set forth in Title 2, Chapter 3,
of the California Corporations Code, upon the terms and conditions set forth
herein. On the execution of this Agreement (the "Agreement"), the parties will
execute, acknowledge and file a Certificate of Limited Partnership pursuant to
the provisions of Section 15,621 of the California Corporations Code.
1.02 Name and Principal Place of Business. The name of the Partnership is
Windsor Park Properties 6, a California Limited Partnership, and the office and
principal place of business shall be 120 West Grand Avenue, Escondido,
California 92025, and hereafter such other place or places as the General
Partners may from time to time determine.
1.03 Term of Partnership. The Partnership shall commence as of the date
of this Agreement (the "effective date") and shall continue for a period ending
the earlier of:
(a) Six months after the commencement of its public offering
registered with the Securities and Exchange Commission, provided that on
said date the Partnership has not received a minimum of $1,250,000 of
capital contributions from Limited Partners
(b) December 31, 1999;
(c) The date on which all of the assets acquired by the Partnership
are sold or otherwise disposed of;
(d) The date on which the Partnership is voluntarily dissolved by
the agreement of the Partners;
(e) The date on which the Partnership is dissolved by operation of
law or judicial decree; or
(f) The date on which the last remaining original General Partner
retires, dies, becomes legally incapacitated, dissolves, withdraws, is
adjudicated bankrupt or is removed, unless a majority in interest of the
Limited Partners by written consent or vote elect one or more new General
Partners to continue the Partnership business.
1.04 Definitions. The following terms used in this Agreement shall
(unless otherwise expressly provided herein or unless the context otherwise
requires) have the following respective meanings:
(a-1) "Acquisition Fees" shall mean the total of all fees and
commissions paid by any party, including any sponsor, in connection with
the purchase of any property by the Partnership, whether designated as a
real estate commission, acquisition fee, nonrecurring management fee or any
fee of a similar nature, and including the fee described in (a-2) next.
<PAGE>
(a-2) "Affiliate Acquisition Fees" mean the acquisition fee paid to
the General Partners for their services in connection with the evaluation
of potential acquisitions by the partnership and in connection with the
acquisition of properties. This fee shall not exceed 7% of the public
offering proceeds.
(b) "Affiliate" shall include (i) any person directly or indirectly
controlling, controlled by or under common control with another person,
(ii) a person owning or controlling 10% or more of the outstanding voting
securities of such other persons, (iii) any officer, director, partner,
general trustee or anyone acting in a substantially similar capacity as to
such person, and (iv) any person who is an officer, director, general
partner, trustee, or holder of 10% or more of the voting securities or
beneficial interests of any of the foregoing.
(c) "Appraised Value" means value according to an appraisal made by
an independent appraiser who is a member in good standing of a professional
appraisal association.
(d) "Cash Available For Distribution" means the cash funds provided
from Partnership operations, including lease payments on net leases from
builders and sellers, without deduction for depreciation, but after
deducting cash funds used to pay all other expenses, debt payments, capital
improvements, amounts set aside for restoration or creation of reserves,
and replacements.
(e) "Capital Contributions" means the total investment and
contribution to the capital of the Partnership in cash by Limited or
General Partners without deduction of selling, organization or other
expenses.
(f) "Distributions" shall mean any cash or other property
distributed to the Limited and General Partners arising from their
interests in the Partnership, but shall not include any payments to the
General Partners under the provisions of Section 2.04.
(g) "Expenses of Acquisition" includes, but is not limited to, legal
fees and expenses, travel and communication expense, costs of appraisals,
non-refundable option payments on property not acquired, accounting fees
and expenses, title insurance, and miscellaneous expenses related to
selection and acquisition of properties, whether or not acquired.
(h) "Invested Capital" means General or Limited Partner's original
capital contribution.
(i) "Net Profits and Net Losses" means the profits or losses of the
Partnership in accordance with accounting method followed for federal
income tax purposes.
(j) "Person" means any natural person, partnership, corporation,
association or other legal entity.
(k) "Purchase Price" means the price paid upon the purchase or sale
of a particular property, including the amount of acquisition fees and all
liens and mortgages on the property, but excluding points and prepaid
interest.
(l) "Sponsor" shall mean any person directly or indirectly
instrumental in organizing, wholly or in part, the Partnership, or any
person who will manage or participate in the management of the Partnership,
including the General Partners and any affiliate of such person, excluding
any person whose only relation with the Partnership is that of independent
property manager and whose only compensation is as such. Sponsor shall not
include wholly independent third parties such as attorneys, accountants,
and underwriters whose only compensation is for professional services
rendered in connection with the offering of Partnership interest.
(m) "Units" shall mean the partnership interests of the Limited and
General Partners, and each unit shall represent a capital contribution of
$100 to the Partnership and entitle the holder thereof to the rights and
interests of Limited or General Partners as herein provided.
(n) "Adjusted Invested Capital" means the original capital
contribution paid for each Unit reduced by the total cash distributed from
net proceeds from refinancing and net proceeds from the sale of Properties
with respect to each Unit.
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(o) "Organization and Offering Expenses" means those expenses
incurred in connection with and in preparing the Partnership for
registration and subsequently offering and distributing the offering to the
public, including sales commissions paid to broker-dealers in connection
with the distribution of the Partnership's units and all advertising
expenses.
(p) "Competitive Real Estate Commission" means that real estate or
brokerage commission paid for the purchase or sale of property which is
reasonable, customary and competitive in light of the size, type and
location of the property.
1.05 Purpose of Partnership and Investment Objectives. (a) The principal
purpose of the Partnership is to acquire, own, operate, improve, lease and
otherwise manage for investment purposes, either alone or in association with
others, a portfolio of improved, income-producing mobile home properties as
shall from time to time be acquired by the Partnership and which offers the
potential for (i) preserving and protecting the Limited Partners' original
invested capital; (ii) generating an annual cash flow for distribution to the
partners; and (iii) to engage in any and all general business activities related
to and incidental to those purposes; provided however that the Partnership shall
not own or lease property jointly in partnership with others unless (a) such
partner or joint owner is an independent third person who is not a sponsor, (b)
the management of such partnership or joint ownership is under control of the
Partnership which has a majority interest therein, (c) the Partnership, as a
result of such joint ownership or partnership ownership of an investment
property, is not charged, directly or indirectly, more than once for the same
services, (d) the joint ownership or partnership does not authorize or require
the Partnership to do anything as a partner or joint venturer with respect to
the property which the Partnership or the General Partners could not do directly
because of this Agreement: and (e) the General Partners and their affiliates are
prohibited from receiving any compensation, fee or expenses which are not
permitted to be paid by this Agreement. See, however, Article XXI for joint
investment with affiliates.
(b) Until invested in properties (except for reserves), the Partnership
may temporarily invest all or a part of its capital contributions in short-term,
highly liquid investments with appropriate safety of principal, such as U.S.
Treasury Bonds or Bills, insured savings accounts, or similar investments.
(c) All properties, except those acquired after January 1, 1995, are to be
acquired free and clear of any encumbrances. Properties may later be financed.
See Article XXII. Unimproved or non income producing property will not be
acquired. Investment in junior trust deeds or similar obligations shall be
prohibited.
(d) In the event the General Partners or an Affiliate of the General
Partners are presented with a potential investment which might be made by more
than one investment entity which it advises or manages, the decision as to the
suitability of the property for investment by a particular entity will be based
upon a review of the investment portfolio of each entity and upon factors such
as cash flow, the effect of the acquisition on diversification of each entity's
portfolio, the estimated income tax effects of the purchase on each entity, the
policies of each entity relating to leverage, the funds of each entity available
for investment and the length of time such funds have been available for
investment. To the extent that a particular property might be determined to be
suitable for more than one public entity, priority will generally be given to
the public entity having uninvested funds for the longest period of time. If a
property is found to be inappropriate for any public entity then. and only then,
may it be considered for private placement. Nothing herein shall be deemed to
diminish the General Partners' overriding fiduciary obligation to the
Partnership or as a waiver of any right or remedy the Partnership or Limited
Partners may have in the event of a breach by a General Partner of such
obligation.
1.06 General and Limited Partners.
(a) General Partners. The address of the General Partners is as follows:
120 West Grand Avenue, Escondido, California 92025. The General Partners'
interest in net profits, net losses and distributions shall be allocated between
them (so long as they act as General Partners) as they determine.
(b) General Partners Capital Contribution. The General Partners may, but
(except as provided in Section 3.07.7) are not required to, contribute to the
capital of the Partnership.
(c) General Partners Purchase of Units. The General Partners may purchase
limited partnership units for investment and not with a view to distribution.
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(d) Authorized Units and Original and Additional Limited Partners.
Patricia Ann Coseo, the original Limited Partner, has contributed the sum of
$1,000 cash to the capital of the Partnership and has received 10 units for such
contribution. The Partnership intends to make a public offering of 300,000 units
of limited partnership interests ("Units") and to admit as additional Limited
Partners the persons whose subscriptions for such Units are accepted by the
General Partners. The names and places of residence of such Limited Partners
will be set forth in the Subscription Agreements and Signature Pages attached
hereto. The General Partners may admit an unlimited number of additional Limited
Partners who subscribe from time to time for Units upon such terms and
conditions and in such amount as the General Partners in their sole discretion
shall deem reasonable. No action or consent by Limited Partners shall be
required in connection with such admission of additional Limited Partners
pursuant to this Section 1.06. This Agreement shall be executed by the General
Partners, and an amendment of any Certificate of Limited Partnership, reflecting
such admissions, shall be executed by the General Partners and filed, if and
when and in such jurisdictions as may be required or appropriate. The offering
period of program interests shall cease not later than one year from the date of
the partnership's registration statement as filed with the Securities and
Exchange Commission.
(e) Admission of Original Additional Limited Partners. Upon the original
sale of Partnership units by the Partnership, the purchasers will be admitted as
Limited Partners not later than fifteen (15) days after the release from impound
of the purchaser's funds to the Partnership. and thereafter purchasers will be
admitted into the Partnership not later than the last day of the calendar month
following the date their subscriptions are accepted by the Partnership.
Subscriptions shall be accepted or rejected by the Partnership within thirty
(30) days of their receipt: if rejected all funds will be returned to the
subscriber within ten (10) business days.
II.
MANAGEMENT OF THE PARTNERSHIP
2.01 Powers and Duties of the General Partners. (a) The General Partners
shall have full and complete charge of all affairs of the Partnership. and the
management and control of the Partnership's business shall rest exclusively with
the General Partners, subject to the terms and conditions of this Agreement. The
General Partners shall have a fiduciary responsibility for the safekeeping and
use of all funds and assets of the Partnership, whether or not in the General
Partners' immediate possession or control. The General Partners shall not
employ or permit another to employ such funds or assets in any manner except for
the exclusive benefit of the Partnership. The General Partners shall have the
rights, powers and authority granted to the General Partners hereunder or by
Law, or both, to obligate and bind the Partnership and, on behalf and in the
name of the Partnership, to take such action as the General Partners deem
necessary or advisable including, without limitation, making, executing and
delivering purchase and sale, management and other agreements; leases,
assignments, deeds and other transfers and conveyances; agreements to purchase,
sell, lease or otherwise deal with personal property; escrow instructions;
checks, drafts and other negotiable instruments; and all other documents and
agreements which the General Partners deem reasonable or necessary in connection
with the purchase of the Partnership's properties and the operation and
management thereof. The execution and delivery of any such instrument by the
General Partners shall be sufficient to bind the Partnership. The Limited
Partners cannot contract away the fiduciary duty owed by the General Partners
and the Partnership to Limited Partners under common law.
(b) The General Partners or their affiliates may acquire Units from time
to time on their own behalf and for their own benefit. Such units will be held
by them for investment and not with a view to distribution.
(c) The General Partners or their affiliates may from time to time employ
on behalf of the Partnership such persons, firms or corporations as they in
their sole judgment shall deem advisable in the operation of the business of the
Partnership, including accountants and attorneys, on such terms and for such
compensation as they, in their sole judgment shall determine, provided, however,
that the Partnership shall not: (1) make any loans to any sponsor or affiliate;
(2) grant an exclusive right to sell or exclusive employment to sell property
for the Partnership to a sponsor; (3) offer Limited Partnership interests in
exchange for property; (4) employ a sponsor to constrict or develop Partnership
property; (5) after two years after the public offering terminates, invest any
surplus funds; (6) purchase limited partnership interests in other partnerships;
and (7) incur any indebtedness or place any loans or encumbrances against
Partnership properties (except as provided in Article XXII).
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(d) The Partnership shall not purchase or lease property in which a
sponsor or affiliate has an interest. The Partnership shall not acquire property
from any person in whom a sponsor or affiliate has an interest. Notwithstanding
the foregoing, a sponsor or affiliate may purchase property in its own name and
temporarily hold title thereto for the purpose of facilitating the acquisition
of such property, or any other purpose related to the business of the
Partnership, provided that such property is purchased by the Partnership for a
price no greater than the cost of such property to the sponsor or affiliate and
provided there is no difference in interest rates of the loans secured by the
property at the time acquired by the sponsor or affiliate and the time acquired
by the program, and no other benefit is provided to the sponsor or affiliate
arising out of such transaction apart from compensation otherwise permitted by
this Agreement. The Partnership shall not sell or lease property to a sponsor or
affiliate, or receive any loans from any sponsor or affiliate. See, however,
Article XXI for joint investment with affiliates.
(e) Sponsors shall not receive a rebate, give-up or similar payment or
enter into any reciprocal business arrangement which would circumvent any
provisions contained in this Agreement.
(f) No sponsor shall: (1) commingle the Partnership funds with those of
any other person or entity; (2) operate the Partnership in such a manner as to
have the Partnership classified as an "investment company" for purposes of the
Investment Company Act of 1940; (3) cause the Partnership to enter into any
agreements with the General Partner or their affiliates which shall not be
subject to termination without penalty by either party upon not more than sixty
(60) days' written notice.
(g) Neither the Partnership nor any sponsor shall, directly or indirectly,
pay or award any finder's fees, commissions or other compensation to any person
engaged by a potential investor for investment advice as an inducement to such
advisor to advise the potential investor to purchase Limited Partnership
interests of the Partnership, provided, however, that the Partnership shall not
be prohibited from paying the normal sales commissions payable to registered
broker dealers or other properly licensed persons for selling Units.
(h) The General Partners may place record title to, or the right to use,
Partnership assets in, the name or names of a nominee or nominees, trustee or
trustees for any purpose convenient or beneficial to the Partnership.
(i) The Partnership shall provide from the offering proceeds adequate
reserves, of at least 1.5% of offering proceeds, for normal repair, replacements
and contingencies.
2.02 Indemnification.
(a) The General Partners and their affiliates shall have no liability to
the Partnership or to any Partner for any loss suffered by the Partnership which
arises out of any action or inaction of the General Partners or their affiliates
if the General Partners, in good faith, determined that such course of conduct
was in the best interests of the Partnership and such course of conduct did not
constitute negligence or misconduct of the General Partners and their
affiliates.
(b) The General Partners and their affiliates shall be indemnified by the
Partnership against any losses, judgments, liabilities, expenses, and amounts
paid in settlement of any claims sustained by them in connection with the
Partnership, provided that the same were not the result of negligence or
misconduct on the part of the General Partners or their affiliates, and provided
the General Partners, in good faith, determined that such course of action was
in the best interests of the Partnership.
(c) Notwithstanding the above, the General Partners and their affiliates
shall not be indemnified for liabilities arising under federal and state
securities laws unless (1) there has been a successful adjudication on the
merits of each count involving securities law violations, or (2) such claims
have been dismissed with prejudice on the merits by a court of competent
jurisdiction, and provided that a court either (A) approves any settlement and
finds that indemnification of the settlement and related costs should be made,
or (B) approves indemnification of litigation costs if a successful defense is
made and, in this regard, a dismissal with prejudice on the merits is considered
a successful defense.
(d) The Partnership shall not pay for any insurance covering liability of
a General Partner or its affiliates, agents or employees for actions or
omissions to act for which indemnification is not permitted hereunder. The
Partnership may purchase and pay for such types of insurance, including extended
coverage liability and casualty and workmen's compensation, as would be
customary for any person owning comparable property and engaged in a
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similar business and may name the General Partners and their affiliates as
additional insured parties thereunder, provided that such addition does not add
to the cost of premiums payable by the Partnership.
(e) The Partnership shall not indemnify any underwriters, including any
person acting as a broker-dealer, for liabilities under federal and state
securities laws.
(f) Any recovery by the General Partners hereunder is recoverable only out
of assets of the Partnership and not from the Limited Partners.
(g) The Partnership and the General Partners undertake that any and all
parties seeking indemnification will apprise the court of the position of the
Securities and Exchange Commission and state securities commissions/authorities
(including Massachusetts) with respect to indemnification for securities laws
violations before seeking court approval for indemnification.
(h) For the purposes of this section 2.02, the term "affiliates" shall
mean any person performing services on behalf of the Partnership who: (1)
directly or indirectly controls, is controlled by or is under common control
with the General Partners; or (2) owns or controls 10% or more of the
outstanding voting securities of the General Partner; or (3) is an officer,
director, partner or trustee of the General Partner; or (4) if the General
Partner is an officer, director, partner or trustee, is any company for which
the General Partner acts in any such capacity.
(i) For the purposes of this section 2.02. "affiliates" must be performing
services on behalf of the Partnership and acting within the scope of the General
Partners' authority.
(j) For the purposes of this section 2.02, the General Partners must be
acting on behalf of or performing services for the Partnership.
2.03-1 Powers and Duties of the Limited Partners. The Limited Partners
shall not participate in the control of the business affairs of the Partnership,
transact any business on behalf of the Partnership. or have any power or
authority to bind or obligate the Partnership.
2.03-2 Acts Not Deemed "Participation in Control". A Limited Partner does
not participate in the control of the business within the meaning of Section
2.03-1 solely by doing one or more of the following:
(1) Being a contractor for or an agent or employee of the Partnership or of
a General Partner, or an officer, director, or shareholder of the Corporate
General Partner.
(2) Consulting with and advising a General Partner with respect to the
business of the Partnership.
(3) Acting as surety for the Partnership or guaranteeing one or more
specific debts of the Partnership.
(4) Approving or disapproving an amendment to the Partnership Agreement.
(5) Voting on or calling a meeting of the partners for one or more of the
following matters:
(A) The dissolution and winding up of the Partnership.
(B) The sale, exchange, lease, mortgage, pledge, or other transfer of
all or a substantial part of the assets of the Partnership other than in
the ordinary course of its business.
(C) The incurrence of indebtedness by the Partnership other than in the
ordinary course of its business.
(D) A change in the nature of the business.
(E) Transactions in which the General Partners have an actual or
potential conflict of interest with the Limited Partners or the
Partnership.
(F) The removal of a General Partner, and the election of a General
Partner.
(G) An election to continue the business of the Partnership other than
under the circumstances described in subparagraph (I) or (J) of this
paragraph (5).
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(H) The admission of a General Partner other than under the
circumstances described in subparagraph (I) or (J) of this paragraph (5).
(I) The admission of a General Partner or an election to continue the
business of the Partnership after a General Partner ceases to be a General
Partner other then by removal where there is no remaining or surviving
General Partner.
(J) The admission of a General Partner or an election to continue the
business of the limited partnership after the removal of a General Partner
where there is no remaining or surviving General Partner.
(6) Winding up the partnership pursuant to Section 15683 of the California
Corporations Code.
(7) Executing and filing a certificate pursuant to Section 15633 of the
California Corporations Code or a certificate of amendment pursuant to Section
15625 of the California Corporations Code or a certificate of dissolution
pursuant to paragraph (1) of subdivision (a) of Section 15623 of the California
Corporations Code or a certificate of cancellation of certificate of limited
partnership pursuant to paragraph (1) of subdivision (b) of Section 15623 of the
California Corporations Code.
(8) Serving on an audit committee or committee performing the functions of
an audit committee.
The enumeration in this Section 2.03-2 does not mean that any other conduct
or the possession or exercise of any other power by a Limited Partner
constitutes participation by the Limited Partner in the control of the business
of the Partnership.
2.03-3 The Rights and Duties of the Partners in Relationship to the
Partnership Shall Be Determined by the Following Rules: (a) No Limited Partner
shall be required to make any additional contribution to the Partnership.
(b) No Limited Partner shall have a priority over any other Limited
Partner, as to return of contributions or as to compensation as a Limited
Partner by way of income.
(c) The obligation of a partner to make a contribution or return money or
property distributed in violation of this chapter may be compromised only by the
written consent of all the partners.
(d) No Limited Partner shall have the right to receive property other than
money upon any distribution.
(e) A partner may not be compelled to accept a distribution of any asset in
kind from the Partnership in lieu of a proportionate distribution of money being
made to other partners.
(f) The Limited Partners shall have the right to vote on all matters
specified in paragraph (4) and in subparagraphs (A) to (H) and (J), inclusive,
of paragraph (5) of Section 2.03-2 and the actions specified therein may be
taken by the General Partners only with the affirmative vote of a majority in
interest of the Limited Partners, and without the necessity of the consent of
the General Partners.
(g) The Limited Partners shall also have the right to vote on matters
specified in subparagraphs (H) and (I) of paragraph (5) of Section 2.03-2.
Notwithstanding any other provision of the Partnership Agreement to the
contrary, the actions specified in such subparagraphs may only be taken by the
affirmative vote of a majority in interest of the limited partners.
2.04 Compensation of General Partners and Affiliates.
(a) The General Partners and/or their affiliates, or any sponsor shall be
entitled to receive, as an expense of the Partnership, each and all of the
following amounts:
(1) Property Management Fee. For providing property management
services (including all rent-up, leasing and re-leasing fees and bonuses,
and leasing services paid to any person, and including bookkeeping services
for property management and fees paid to unrelated persons for property
management services) actually rendered, the General Partners or affiliate
will be paid a fee of 5% of actual gross receipts collected and received
from all sources; but said property management fees shall not exceed
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in any event an amount which is competitive in price and terms with other
non-affiliated persons rendering comparable services which would reasonably
be made available to the Partnership. "Property Management" means the day-
to-day professional management services in connection with the
Partnership's properties. Property management fees paid by anyone to anyone
may not exceed the lesser of (i) the competitive rate, or (ii) 5% of actual
gross receipts collected and received from all sources. On site personnel
for maintenance, etc., will be paid by the Partnership. Property management
services must be rendered pursuant to a written agreement which precisely
describes the services to be rendered. Such agreement may only be modified
by a majority in interest of limited partners, and may be terminated by
majority vote or consent of the limited partners following sixty days prior
notice thereof by the limited partners.
(2) Affiliate Acquisition Fees. The General Partners may be paid an
Affiliate Acquisition Fee as defined and in the amount stated in Section
l.04(a-2), and as such services are substantially rendered by the General
Partners. Acquisition Fees paid (including, but not limited to, Affiliate
Acquisition Fees paid to the General Partners and any commissions to non-
affiliated brokers) shall not exceed the lesser of the compensation
customarily charged in arms-length transactions by others rendering similar
services as an ongoing public activity in the same geographical location
and for comparable property, or an amount equal to 7% of the initial
capital contributions (less any uninvested funds returned to Limited
Partners pursuant to Section 3.05 relating to funds not invested within two
years) of Limited Partners applicable to the property which is the subject
of the transaction (adjusted to include a pro-rata amount of any selling
expenses). Notwithstanding any other provisions in this agreement, the
General Partners may not be reimbursed for their travel, communication, and
miscellaneous expenses in connection with the rendering of acquisition
services.
(3) Mortgage Financing Fee. At such time as the Partnership's
properties are financed (mortgaged), see Article XXII, the General Partners
shall be paid a mortgage financing fee equal to 1% of the gross financing
proceeds for their services performed in obtaining such financing. The
mortgage financing services to be rendered by the General Partners must
meet the conditions specified in Section 3.09(b). The General Partners
must be previously engaged in the business of rendering such services to
unaffiliated persons independently of the Partnership and as an ordinary
and ongoing business.
(4) Limitation. No sponsor shall render any service to the
Partnership nor receive any fee or other compensation from the Partnership
other than those explicitly provided in this Section 2.04, except for
amounts otherwise permitted pursuant to Sections 3.07, and 3.09 hereof.
(b) Sales commission may be paid to the General Partners upon the sale of
partnership properties; provided, however, that General Partners may receive a
portion of the commission only if the General Partners provide a substantial
amount of the services in the sales effort. Any such compensation payable to the
General Partners shall not exceed, on sale of each property, 3% of the gross
sales price or 50% of the standard real estate brokerage commission, whichever
is lesser. The total real estate brokerage commission paid on resale of each of
the Partnership's properties shall be limited to a competitive real estate
commission, not to exceed 6% of the contract price for the sale of the property.
No such commission shall be paid, however, to the General Partners until each
Limited Partner has received an amount equal to his original invested capital
from the proceeds from the sale or refinancing of properties and cumulative
distributions (including distributed cash from operations and financing) equal
to a 9% cumulative, non-compounded, annual return, commencing at the time each
Limited Partner is admitted to the Partnership, with respect to his adjusted
invested capital.
2.05 Investment in Properties. This section is subject to section
2.04(a)(2).
(a) The General Partners will commit at least 80% of the Partnership's
capital contributions toward Investment in Properties. The remaining capital
contributions may be used to pay Front-End Fees. When "Acquisition Fees" are
paid by the seller of properties, such fees shall not be included in satisfying
the required minimum Investment in Properties. Additionally, in determining the
amount committed to Investment in Properties, such calculation shall not take
into account any Front-End Fees.
(b) The following definitions apply to this section:
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(1) Front-End Fees -- fees and expenses paid by any party for any
services rendered during the Partnership's organizational or acquisition
phase including Organization and Offering Expenses, Acquisition Fees,
Expenses of Acquisition (as those terms are defined in Section 1.04), and
any other similar fees (including the mortgage financing fee, Section
2.04(a)(3)), however designated by the General Partners.
(2) Investment in Properties -- the amount of capital contributions
actually paid or allocated to the purchase, development, construction or
improvement of properties acquired by the Partnership (including the
purchase of properties, working capital reserves allocable thereto (except
that working capital reserves in excess of 5% shall not be included), and
reserves for unit repurchase and other cash payments such as interest and
taxes but excluding Front-End Fees).
2.06 Certain Mortgaging. The partnership will not obtain financing,
including wrap-around deeds of trust, containing a balloon payment which does
not contain the following provisions, unless prior approval of the California
Department of Corporations has been attained: All mortgage financing obtained by
the program or retained upon acquired properties must be fully amortized in
equal payment over not more than 30 years. All financing (including financing to
which properties were subject when purchased by the partnership) including all-
inclusive and wrap-around loans and interest-only loans must provide that no
balloon payment will become due sooner than the earlier of: (1) ten years from
the date the program acquired the property, (2) or two years beyond the
anticipated holding period of the property, but in no event sooner than seven
years from the date the program acquires the property. The foregoing balloon
payment limitation does not apply to financing representing, in the aggregate,
25% or less of the total purchase price of the properties acquired, or to
interim financing, including construction financing, with a full take out
commitment.
2.07 Reinvestment. There shall be no reinvestment of cash flow, cash
available for distribution or proceeds from sale or refinancing of property.
III.
FINANCING OF THE PARTNERSHIP
3.01 Capital Contributions of the General Partners. The General Partners
shall contribute capital to the Partnership in their capacity as General
Partners as provided in Section 1.06(b), and may purchase units as Limited
Partners as provided in Section 1.06(c).
3.02 Capital Contributions of the Limited Partners.
(a) Partnership Units. The Limited Partners shall contribute to the
capital of the Partnership, for each Unit subscribed, cash in the amount
determined by the General Partners; provided, however, that all Units subscribed
for as part of the initial public offering of such Units, as contemplated by
Section 1.06(d), shall be paid for in cash in an amount equal to One Hundred
Dollars ($100) for each Unit subscribed.
(b) Initial Subscriptions. All funds of initial subscribers will be placed
in a separate interest-bearing account in a bank or savings and loan association
or invested in short term highly liquid investments as provided in Section 1.05,
and if not more than $1,250,000 is subscribed and contributed on or before six
months after the public offering commences, the Partnership will not accept any
subscription and each subscriber will promptly receive his or her original
investment together with interest actually earned thereon.
3.03 Additional Contributions. In no event shall any Limited Partner be
required to make any additional contributions to the capital of the Partnership
in excess of those set forth in Section 3.02 hereof.
3.04 Interest. No interest shall be paid on the initial or any subsequent
capital contribution to the Partnership.
3.05 Time for Return of Contributions. None of the Partners, either
General or Limited, shall be entitled to a return of the capital contribution
made by any of them until the full and complete winding up and liquidation of
the business and affairs of the Partnership, except as may be permitted pursuant
to Article VI hereof; provided, however, that those portions of the proceeds of
a public offering of Units which have not been invested or
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committed for investment (evidenced by executed written agreement in principle
or letters of understanding) in properties within two (2) years of the effective
date of the registration of the Units in such offering shall be distributed to
the Limited Partners of record together with any undistributed interest earned
by the Partnership on such funds, and the General Partners will return to
Limited Partners a proportionate share of Partnership Organization and Offering
Expenses (other than selling commissions paid to independent broker dealers)
along with the uninvested proceeds of the offering.
3.06 Loans by the Partners. Neither the General Partners nor the Limited
Partners shall make any loans to the Partnership. No loans or any other
financing may be made by or obtained from any General Partner or other sponsor
of the Partnership.
3.07 Allocation of Net Profits and Net Losses and Distributions From
Cash Available For Distribution.
3.07.1 Net Profits and Net Losses of the Partnership for each fiscal year
of the Partnership shall be allocated 99% to the Limited Partners and 1% to the
General Partner. Net Profits and Net Losses to be allocated to the Limited
Partners will be allocated to Limited Partners based on the number of Units held
by each Limited Partner and the period during the fiscal year that the Limited
Partner owned the Units. Upon the transfer of a Partnership Unit, the transferor
and the transferee shall be allocated a pro rata share of Net Profits and Net
Losses based on the portion of the fiscal year that the transferred Unit was
effectively held by the transferor and transferee, respectively.
3.07.2 Cash Available for Distribution, if any, shall be determined for
each month (or quarter) and, within 30 days after the close of each month (or
quarter), shall be distributed 99% to the Limited Partners pro rata in
accordance with their respective ownership of Units and 1% to the General
Partner. Cash Available for Distribution shall be distributed to the persons who
are Unit holders of record as of the last day of the month (or quarter) for
which such distribution is made. Limited Partners may individually opt for
quarterly distributions.
3.07.3 Net proceeds from refinancing and net proceeds from the sale of
properties. to the extent available for distribution after the establishment of
any reserves that the General Partners may deem reasonably necessary for any
contingent or future liabilities of the Partnership or after the payment in the
discretion of the General Partners of any debts and liabilities of the
Partnership, and subject to the provisions of Section 2.04(b), shall be
distributed among the Partners in the following amounts and order of priority:
(a) To the Limited Partners, an amount equal to the sum of:
(i) The Adjusted Invested Capital attributable to each
Limited Partner; and
(ii) The excess, if any, of an amount equal to 9% per annum
cumulative (but not compounded) return on Adjusted Invested
Capital, calculated from each Limited Partner's respective date of
admission to the Partnership, over total prior distributions of
Cash Available For Distribution with respect to the Units.
(b) To the extent of any balance remaining, 85% to the Limited
Partners to be shared on a pro rata basis in accordance with their
respective ownership of Units and 15% to the General Partners.
Provided, however, that notwithstanding the provisions of this Section 3.07 to
the contrary, the General Partners shall receive at least 1% of the
distributions of net proceeds from refinancing or net proceeds from the sale of
properties.
3.07.4 Except as otherwise provided by this Agreement, profit or loss on
the sale of properties shall be allocated to and among the Partners as follows:
(a) Profit on the sale of properties shall first be allocated to
each Partner with a negative Capital Account proratably in an amount equal
to (or in proportion to if less than) the amount of the negative Capital
Account of each Partner;
(b) Profit on the sale of properties shall next be allocated to the
Limited Partners until each Limited Partner's Capital Account shall be a
positive amount equal to the sum of:
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(i) The Adjusted Invested Capital attributable to each
Limited Partner; and
(ii) The excess, if any, of an amount equal to 9% per annum
cumulative (but not compounded) return on Adjusted Invested Capital,
calculated from each Limited Partner's respective date of admission to
the Partnership, over total prior distributions of Cash Available For
Distribution with respect to the Units.
(c) To the extent of any remaining profit on the sale of properties,
85% to the Limited Partners to be shared on a pro rata basis in accordance
with their respective ownership of Units and 15% to the General Partners;
(d) To the extent that there is a loss on the sale of properties
arising from a transaction, such loss on the sale of properties shall be
allocated among the Partners with positive balances in their Capita
Accounts pro rata in accordance with their respective positive balances
until the aggregate positive balance of their Capital Accounts is reduced
to zero, and any balance shall be allocated in accordance with the
allocation of Net Profits and Net Loss pursuant to Section 3.07(1) hereof;
(e) The provisions of this Section 3.07.4 notwithstanding, the General
Partner shall be allocated at least 1% of the profit or loss on the sale of
properties, and, to the extent possible, in characterizing the allocated
profit on the sale of properties, that portion which constitutes ordinary
income by reason of recapture of depreciation, if any, shall be allocated
among the Partners such that a Partner (or successor) who realized the
benefit of the deduction or credit will bear the tax burden of the
corresponding recapture.
3.07.5 A Capital Account shall be maintained by the Partnership on behalf
of each Partner. The Capital Account of each Partner shall be credited with the
amount of such Partner's capital contribution as such is contributed. The
Capital Account of each Partner shall be credited with the amount of Net Profit
and profit on the sale of properties of the Partnership allocated to such
Partner and shall be debited with the amount of Net Losses and loss on the sale
of properties allocated to such Partner and with the amount of any distributions
or return of capital made by the Partnership to such Partner.
3.07.6 The Capital Account of a Partner shall also be credited or debited,
as the case may be, with items of income, expense, or other adjustments which do
not enter into the calculation of Net Profits or Net Losses. The Capital Account
of a transferor Partner shall become the Capital Account of the transferee
Partner as it existed at the effective date of the transfer. Any special basis
adjustment resulting from a Internal Revenue Code Section 754 election shall not
be taken into account for purposes of establishing and maintaining Capital
Accounts pursuant to the terms of this Section 3.07.6.
3.07.7 If upon the liquidation of the Partnership, there is a deficit
balance in the Capital Account of the General Partner, after making the
allocations provided in this Agreement, then the General Partner will contribute
an amount equal to such deficit balance in its Capital Account, provided that in
no event shall the General Partner be required to contribute to the Partnership,
as its pro rata share, more than 1% of the total capital contributed by the
Partners plus four-fifths of the Cash Available For Distribution received by the
General Partner pursuant this Agreement.
3.07.8 The provisions of this Agreement notwithstanding, the General
Partners will receive at least 1% of the distributions of net proceeds from the
sale of properties and, at such time as the Partnership is to be liquidated
hereunder, such adjustments, if any, as are appropriate to properly reflect such
minimum distribution shall be made with respect to the allocation of profit or
loss on the sale of properties pursuant to Section 3.07.4 and with respect to
the Capital Accounts of the Partners. Provided, further, that any deduction
which might accrue to the Partnership and which is attributable to said 1%
minimum distribution requirement shall be specially allocated to the General
Partners.
3.07.9 The General Partners shall also distribute, after the completion of
each calendar year, such amount of cash from sales or financing sufficient to
allow a Limited Partner in a 36% federal tax bracket to pay the income taxes due
with respect to net income derived by him from the disposition or financing of
Partnership properties.
3.08. Conditions and Consent to Allocations and Distributions. The
methods, hereinabove set forth, by which Net Profits and Net Losses are
allocated and by which Distributions of Cash Available For Distribution
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and surplus funds are allocated and distributed, are hereby expressly consented
to by each General and Limited Partner as an express condition to becoming a
General or Limited Partner. All Distributions of Cash Available For Distribution
and surplus funds are subject to the payment of Partnership expenses and to the
maintenance of reasonable working capital reserves deemed sufficient for
Partnership business by the General Partners.
3.09 Partnership Expenses. (a) Reimbursement to the General Partners or
their affiliates may be made for the actual cost to the General Partners or
their affiliates of goods and materials provided by unaffiliated parties and
used for or by the Partnership. The General Partners will pay (and shall not be
reimbursed by the Partnership for): (i) salaries and other compensation of their
affiliates and their officers, directors and employees incidental to the
organization of the Partnership, the sale of Units and the acquisition of
Partnership properties; (ii) expenses incurred by the General Partners or their
affiliates in connection with the administration of the Partnership, including
the overhead expenses (including rent, utilities, capital equipment, other
administrative items, etc.) of the General Partners or their affiliates; (iii)
expenses related to the performance of those services for which the General
Partners or their affiliates are entitled to compensation (and the General
Partners shall not be reimbursed therefore except as provided in subsection (b)
next following).
(b) (1) The General Partners may be reimbursed for administrative services
necessary to the prudent operation of the Partnership. Such services include
transfer agent, legal, accounting, partner relations and similar services.
(2) The services will be provided at a price which does not exceed the
lesser of actual cost of such services to the General Partners or 90% of the
competitive price which would be charged by non-affiliated persons rendering
similar services in the same or comparable geographic location. Cost of services
as used herein means the pro rata cost of personnel, based on the amount of time
such personnel spent on such services, or other method of allocation acceptable
to the Partnership's independent certified public accountant.
(3) This section 3.09(b) and any contract entered into pursuant hereto may
be modified only with a vote of a majority of the limited partnership interests.
This provision and any such contract may be terminated without penalty on 60
days' notice.
(4) The General Partners represent that they have adequate staff which they
utilize in the conduct of their business and are able to render such services to
the Partnership. The General Partners have been previously and are now rendering
such services to other programs as an ordinary and ongoing business.
(5) Any general or administrative overhead incurred by the General Partners
in connection with the administration of the Partnership which is not directly
attributable to the rendering of services authorized by this section 3.09(b)
shall not be charged to the Partnership. Such general or administrative overhead
includes but is not limited to salaries, rent, travel expenses and other items
generally falling under the category of overhead. Excluded from allowable
reimbursement shall be (i) rent or depreciation, utilities, capital equipment,
other administrative items; and (ii) salaries, fringe benefits, travel expenses,
and other administrative items incurred or allocated to any controlling persons
of the General Partners or their affiliates. Controlling person, for purpose of
the subsection, includes but is not limited to, any person, whatever his or her
title who performs functions for the General Partners similar to those of: (1)
chairman or member of the board of directors; (2) executive management, such as
(i) president, (ii) vice president or senior vice president, (iii) corporate
secretary, (iv) treasurer; (3) senior management, such as the vice president of
an operating division who reports directly to executive management; or (4) those
holding 5% or more equity interest in the General Partners or a person having
the power to direct or cause the direction of the General Partners whether
through the ownership of voting securities, by contract, or otherwise.
(6) No payment will be made for services for which the General Partners or
their affiliates are entitled to compensation by way of a separate fee, other
than as specifically permitted by this Agreement.
(7) Except as provided in Section 2.04 and this Section 3.09(b) no other
services may be performed by the General Partners or their affiliates for the
Partnership except in extraordinary circumstances. Extraordinary circumstances
exist only where there is an emergency situation requiring immediate action by
the General Partners or their affiliates and the service is not immediately
available from unaffiliated parties. Payment for any such services must meet
the requirements of this section 3.09(b).
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(c) All other expenses of the Partnership shall be billed directly to and
paid by the Partnership as follows: (1) costs of taxes and assessments on
Partnership properties and other taxes applicable to the Partnership; (2) legal,
audit, accounting, and brokerage fees incurred after the offering of Units is
completed; (3) fees and expenses paid to on-site managers, real estate brokers,
and insurance brokers; (4) expenses in connection with the disposition,
replacement, alteration, repair, remodeling, refurbishment, refinancing and
operation of Partnership properties (including the costs and expenses of
foreclosures, insurance premiums, and maintenance of such properties); (5) the
cost of insurance as required in connection with the business of the
Partnership; (6) expenses of revising, amending, converting, modifying or
terminating the Partnership; (7) the costs of printing and mailing to Limited
Partners, evidences of ownership of Units and reports of meetings of the
Partnership, and of preparation of proxy statements and solicitations of proxies
in connection therewith; (8) expenses in connection with preparing and mailing
distribution checks and reports required to be furnished to Limited Partners for
tax reporting purposes; and (9) the cost of preparation and dissemination of the
informational material and documentation relating to potential sale or other
disposition of Partnership property.
IV.
BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL MATTERS
4.01 Books of Account. The General Partners shall, for income tax
purposes, keep on an accrual basis, adequate books of account of the Partnership
wherein shall be recorded and reflected all of the capital contributions of the
Partnership and all of the expenses and transactions of the Partnership. Such
books of account shall be kept at the principal place of business of the
Partnership, and each Limited Partner and his or her authorized representatives
shall have at all times, during reasonable business hours, free access to and
the right to inspect and copy such books of account and all records of the
Partnership, including the right to obtain by mail or to inspect a list of the
names and addresses and interests owned of the Limited Partners. All books and
records of the Partnership shall be kept on the basis of an annual accounting
period ending December 31, except for the final accounting period which shall
end on the dissolution or termination of the Partnership without reconstitution,
provided, however, that the General Partners in their sole discretion may,
subject to approval by the Internal Revenue Service and applicable state taxing
authorities, at any time, without approval of the Limited Partners, change the
Partnership's accounting period and tax year to a period to be determined by the
General Partners. All references herein to a "year of the Partnership" are to
such an annual accounting period.
4.02 Reports and Financial Statements. The General Partners shall provide
the following reports and financial statements to the Limited Partners:
(a) Annual Report. Within 120 days after the end of each fiscal
year, (1) a balance sheet as of the end of such fiscal year together with
statements of income, Partners' equity, and of cash flows for such year.
The balance sheet and such statements shall be prepared in accordance with
generally accepted accounting principles and shall be accompanied by an
auditor's report containing an unqualified opinion of the independent
certified public accountants preparing such report; (2) an unaudited
statement of cash flow disclosing cash available for distributions; (3) a
report of the activities of the Partnership for such year; (4) a report on
distributions to the Limited Partners for such period, separately
identifying distributions from (a) funds from operations during such
period, (b) reserved funds from operations from prior periods, (c) proceeds
from disposition of property and investments, (d) reserves from the
proceeds of public offerings of Units; (5) a detailed statement of any
transactions with the General Partners or their affiliates and fees,
commissions, compensation. and other benefits paid or accrued to the
General Partners or their affiliates for the fiscal year completed, showing
the amount paid or accrued to each recipient and the services performed;
and (6) the annual report must contain a breakdown of the costs reimbursed
to the General Partners. Within the scope of the annual audit of the
General Partner's financial statement, the independent certified public
accountants must verify the allocation of such costs to the Partnership.
The method of verification shall at minimum provide:
(1) A review of the time records of individual employees, the
costs of whose services were reimbursed;
(2) A review of the specific nature of' the work performed by
each such employee.
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The methods of verification shall be in accordance with general
accepted auditing standards and shall accordingly include such tests
of the accounting records and such other auditing procedures which the
General Partners' independent certified public accountants consider
appropriate in the circumstance. The additional costs of such
verification will be itemized by said accountants on a Partnership by
Partnership basis and may be reimbursed to the General Partners by the
Partnership in accordance with subsection 3.09 only to the extent that
such reimbursement when added to the cost for administrative services
rendered does not exceed the allowable rate as determined in
subsection 3.09.
(b) Report of Fees. Within 45 days of the end of each quarter of a
fiscal year during which a sponsor received fees for services from the
Partnership, a report setting forth (i) a statement of the services
rendered and (ii) the amount of fees received. This report may generally be
set forth in a footnote in the quarterly report under section 402(c).
(c) Quarterly Reports. Within 45 days after the end of each fiscal
quarter a report for such period containing an unaudited balance sheet,
statement of income, statement of changes in financial position and a cash
flow statement and a report covering the activities of the Partnership for
such quarter which contains the information specified on Form 10-Q (if such
report is required to be filed with the Securities and Exchange
Commission).
(d) Tax Information. Within 75 days after the end of each fiscal
year, all information necessary for the preparation of the Limited
Partners' federal income tax returns.
(e) Special Reports. Within 60 days after the end of each quarter
during which there have been real property acquisitions, a "Special Report"
(which may be part of the quarterly report) shall be sent to all Limited
Partners until the proceeds of the offering are committed or returned to
the Limited Partners. The report shall contain the following information:
(1) the location and a description of the general character of all
materially important real properties acquired or presently intended to be
acquired by or leased to the Partnership, during the quarter; (2) the
present or proposed use of such properties and their suitability and
adequacy for such use; (3) the terms of any material lease affecting the
property; (4) the proposed method of financing, including estimated down
payment, leverage ratio, prepaid interest, balloon payment(s), prepayment
penalties, due-on-sale or encumbrance clauses and possible adverse effects
thereof and similar details of the proposed financing plan; and (5) a
statement that title insurance and any required construction, permanent or
other financing and performance bonds or other assurances with respect to
builders have been or will be obtained on all properties acquired. This
report may be in substance the information included in Forms 8-K, if such
reports are required to be filed with the Securities and Exchange
Commission.
(f) Reports During Offering. During the offering period and until the
Partnership is fully invested, the Partnership will file any prospectus
required by Section 10(a)(3) of the Securities Act of 1933 as post-
effective amendments to the registration statement. The Partnership will
additionally file after the end of the distribution period, a current
report on Form 8-K containing the financial statements and any additional
information required by Rule 3-14 of Regulation S-X, to reflect each
commitment (i.e., the signing of a binding purchase agreement) made after
the end of the distribution period involving the use of 10% or more (on a
cumulative basis) of the net proceeds of the offering and to provide the
information contained in such report to the limited partners at least once
each quarter after the distribution period of the offering has ended. The
Partnership will also file a sticker supplement pursuant to Rule 424 under
the Securities Act of 1933 during the offering period describing each
property not identified in the prospectus at such time as there arises a
reasonable probability that such property will be acquired (also disclosing
all compensation and fees received by the General Partners and their
affiliates in connection with such acquisition) and to consolidate all such
stickers into a post-effective amendment filed at least once every three
months, with the information contained in such amendment provided
simultaneously to the existing Limited Partners. Lastly, the Partnership
will provide the Limited Partners the Financial Statements required by Form
10-K for the first full fiscal year of operations of the Partnership.
(g) Filing of Reports. The Partnership will file with the
Commissioner of Corporations of the State of California and any other
appropriate federal or state regulatory agency requiring the same a copy of
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each report made pursuant to subdivisions (a), (b), (c) and (d) of this
Section 4.02, concurrently with their transmittal to the Limited Partners,
if the filing is required by any such state.
4.03 Tax Returns and Records. The General Partners, at Partnership
expense, shall cause income tax returns for the Partnership to be prepared and
timely filed with the appropriate authorities. The General Partners, at
Partnership expense, shall cause to be prepared and timely filed, with
appropriate federal and state regulatory and administrative bodies, all reports
required to be filed with such entities under then current applicable laws,
rules and regulations. Such reports shall be prepared on the accounting or
reporting basis required by such regulatory bodies. Any Limited Partner shall be
provided with a copy of any such report upon request without expense to him or
her. The General Partners, at Partnership expense, shall maintain for at least 4
years a record of the information obtained to determine that a Limited Partner
meets the Partnership's suitability standards and a representation of the
Limited Partner that the Limited Partner is investing for the Limited Partner's
own account.
4.04 Fiscal Year. The fiscal year of the Partnership shall begin with the
first day of January and end on the thirty-first day of December in each year,
provided, however, that the General Partners in their sole discretion may,
subject to approval by the Internal Revenue Service and the applicable state
taxing authorities, at any time without approval of the Limited Partners change
the Partnership's fiscal year to a period to be determined by the General
Partners.
4.05 Bank Accounts, Funds and Assets. The funds of the Partnership shall
be deposited in such bank or banks as the General Partners shall deem
appropriate. Subject to the provisions of Article XII, such funds shall be
withdrawn only by the General Partners or their duly authorized agents. Sponsors
shall have a fiduciary responsibility for the safekeeping and use of all funds
of the Partnership, whether or not in their immediate possession or control, and
they shall not employ or permit another to employ such funds or assets in any
manner except for the exclusive benefit of the Partnership. Sponsors shall not
commingle or permit the commingling of the funds of the Partnership with the
funds of any other person or entity.
4.06 Adjustment of Tax Basis. Upon the transfer of an interest in the
Partnership, the Partnership may, at the sole discretion of the General
Partners, elect, pursuant to Section 754 of the Internal Revenue Code of 1954,
as amended, to adjust the basis of the Partnership property as allowed by
Section 734(b) and 743(b) thereof. The election, if made, will be filed with the
Partnership information income tax return for the first taxable year to which
the election applies.
4.07 Insurance. The Partnership shall at all times maintain public
liability insurance in amounts determined by the General Partners for the
protection of the Partnership and each of its members. In addition, the
Partnership shall carry appropriate Workmen's Compensation Insurance and such
other insurance with respect to the real property owned by it as shall be
customary for similar property, similarly located, from time to time (for
purposes hereof losses catastrophic in nature, e.g., war, earthquakes and
floods, shall not be deemed customary insurance coverages and shall not be
required). No sponsor or affiliate of a sponsor shall receive an insurance
brokerage fee or commission or write any insurance policy covering the
Partnership or any of the property of the Partnership. The Partnership shall not
pay for any insurance covering liability of a General Partner or its affiliates,
agents or employees for actions or omissions to act for which indemnification is
not permitted hereunder. The Partnership may purchase and pay for such types of
insurance, including extended coverage liability and casualty and workmen's
compensation, as would be customary for any person owning comparable property
and engaged in a similar business and may name the General Partners and their
affiliates as additional insured parties thereunder, provided that such addition
does not add to the cost of premiums payable by the Partnership.
4.08 Appraisals.
(a) An appraisal by an independent qualified appraiser shall be obtained
for each investment property. Such qualification may be demonstrated by
membership in a nationally recognized appraisal society such as Member Appraisal
Institute ("M.A.I."), Society of Real Estate Appraisers ("S.R.E.A.") or their
equivalent, but is not limited thereto. The appraisal shall be maintained in the
records of the Partnership for at least five years and shall be available for
inspection and duplication by any Limited Partner.
(b) All persons retained by the Partnership to provide the Partnership
reports of their opinions of appraised values of investment properties being
considered by the Partnership for acquisition or otherwise shall be members in
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good standing of a recognized professional appraisal organization and shall
certify to the Partnership as follows: (1) that he or she has no present or
contemplated future interest in the property being appraised; (2) that he or she
has no personal interest or bias with respect to the subject matter of or the
parties involved in the appraisal; and (3) that his or her employment and
compensation for rendering an opinion and report are not contingent upon the
value so determined, or on any other condition other than the delivery of the
report or opinion for a predetermined fee.
(c) The sum of the purchase price of the Partnership's properties plus the
acquisition fees paid shall not exceed the appraised value of the properties.
4.09 Tax Matters Partner.
JOHN A. COSEO, JR. is selected and has the right, power and authorization
to represent the Partnership and each Limited Partner as the tax matters partner
in connection with all examinations of the Partnership affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs connected
therewith. Each Limited Partner agrees to cooperate with JOHN A. COSEO, JR. and
to do or refrain from doing any and all things reasonably required by JOHN A.
COSEO, JR. to conduct such proceedings.
V.
ASSIGNABILITY OF LIMITED PARTNERS' INTERESTS
5.01 Limited Partners' Interest. Each of the Limited Partners, except as
provided in this Article V, shall not sell, transfer, encumber or otherwise
dispose by operation of law or otherwise of the whole or any part of his or her
interest in the Partnership except by written instrument satisfactory in form to
the General Partners, accompanied by such assurance of the genuineness and
effectiveness of each such signature and the obtaining of any federal and/or
state government approval, if any, as may be reasonably required by the General
Partners.
No less than a minimum of 25 Units (10 for certain fiduciaries) may be
transferred.
No assignment shall be valid or effective unless in compliance with the
conditions herein contained.
5.02 Further Restriction on Transfers. No Partner shall make any
assignment of all or any part of his or her interest in the Partnership if said
transfer or assignment would, in the opinion of counsel, when considered with
all other transfers during the same applicable twelve (12) month period, cause a
termination of the Partnership for federal or any applicable state income tax
purposes, or would, in the opinion of counsel, cause the partnership to be
deemed a "publicly traded partnership" under section 7704 of the Internal
Revenue Code.
5.03 Substituted Partners. No assignee of the whole or any portion of a
Limited Partner's interest in the Partnership shall have the right to become a
substituted Limited Partner in place of his or her assignor, unless (i) such
assignor shall designate such intention in the instrument of assignment; (ii)
the assignment instrument shall be in form and substance satisfactory to the
General Partners; (iii) the assignor and assignee named therein shall execute
and acknowledge such other instrument or instruments as the General Partners may
deem necessary or desirable to effectuate such admission, including but not
limited to a power of attorney with provisions more fully described in this
Agreement; (iv) the assignee shall accept adopt and approve in writing of all of
the terms and provisions of this Agreement, as the same may have been amended;
and (v) the written consent of the General Partners to the substitution (which
consent shall be given unless in the written opinion of the Partnership's tax
counsel such consent should be withheld to preserve the tax status of the
Partnership) if the substituted Limited Partner is not the transferring Limited
Partner's spouse, ancestor, lineal descendent or trust for the benefit of such
person(s).
5.04 Additional Restrictions. Any unauthorized assignment or transfer
shall be void ab initio. All documents and records evidencing a Limited
Partnership interest, whether issued originally or subsequently, owned by
California residents shall bear and be subject to legend conditions as follows:
(a) "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFOR, WITHOUT
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THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS FOR THE STATE
OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
(b) "Any unauthorized assignment of transfer shall be void ab
initio."
(c) "Assignees of this security may become substituted Limited
Partners only with the consent of the General Partners."
5.05 Withdrawal of Limited Partner. Except as provided in Article VI, no
Limited Partner shall be entitled to withdraw or retire from the Partnership.
5.06 Death of Limited Partner. The death of a Limited Partner shall not
terminate the Partnership. Upon the death of a Limited Partner, the personal
representative of the deceased Limited Partner shall have all the rights of the
Limited Partner in the Partnership to the extent of the deceased Limited
Partner's interest therein, subject to the terms and conditions of this
Agreement, and the estate of the deceased Limited Partner shall be liable for
all of his or her liabilities as a Limited Partner, as well as the execution of
all documents required to effect, subject to the terms of Section 5.03, the
appropriate substitution of the decedent's estate or beneficiary as a Limited
Partner hereunder.
5.07 Recognition of Substituted and Assignee Limited Partners. The
Certificate of Limited Partnership of the Partnership shall be amended and
recorded pursuant to Section 1.01 in any jurisdiction where it may be required
at least once each calendar quarter to recognize the admission of substituted
Limited Partners. Assignees of Limited Partners shall be recognized as such not
later than the first of the calendar month following the General Partners'
receipt of notice of such assignment.
VI.
REPURCHASE OF UNITS
The Partnership, in its sole discretion, may repurchase Units, after the
offering of its Units has closed, at a negotiated price, if such repurchase does
not impair the capital or operations of the Partnership. The Partnership may not
reserve or apply more than an aggregate of .5% of the gross proceeds of its
offering of Units toward any such repurchases.
VII.
RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY OTHER THAN CASH
No right is given to a Limited Partner to demand and receive property other
than cash in return for his or her contribution.
VIII.
TERMINATION OF A GENERAL PARTNER
8.01 Ceasing to be a General Partner. A person ceases to be a General
Partner of this Partnership upon the happening of any of the following events
("Terminating Events"):
(a) The General Partner withdraws from this Partnership.
(b) The General Partner is removed as a General Partner.
(c) Unless otherwise provided in the partnership agreement, an order
for relief against the General Partner is entered under Chapter 7 of the
federal bankruptcy law, or the General Partner (1) makes a general
assignment for the benefit of creditors, (2) files a voluntary petition
under the federal bankruptcy law, (3) files a petition or answer seeking
for that partner any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law, or regulation, (4) files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against
that partner in any proceeding of this nature, or (5) seeks, consents to,
or acquiesces in the appointment of a
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trustee, receiver, or liquidator of the General Partner or of all or any
substantial part of that partner's properties.
(d) Sixty days after the commencement of any proceeding against the
General Partner seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law, or regulation, if the proceeding has not been dismissed, or if within
60 days after the appointment without that partner's consent or
acquiescence of a trustee, receiver, or liquidator of the General Partner
or of all or any substantial part of that partner's properties, the
appointment is not vacated or stayed, or within 60 days after the
expiration of any such stay, the appointment is not vacated.
(e) In the case of a General Partner who is an individual, either of
the following:
(1) The death of that partner.
(2) The entry by a court of competent jurisdiction of an order
adjudicating the partner incompetent to manage the General Partner's
person or estate.
(f) In the case of a General Partner who is acting as a General
Partner by virtue of being a trustee of a trust, the termination of the
trust (but not merely the substitution of a new trustee, in which case the
new trustee automatically becomes the new General Partner).
(g) In the case of a General Partner that is a separate partnership,
the dissolution of the separate partnership.
(h) In the case of a General Partner that is a corporation, the filing
of a certificate of dissolution, or its equivalent, for the corporation.
(i) In the case of a General Partner that is an estate, the
distribution by the fiduciary of the estate's entire interest in the
limited partnership.
Notwithstanding the provisions of subsections (a) and (h) above, without
the concurrence of a majority of the outstanding limited partnership interests,
a General Partner may not withdraw or retire as a General Partner or dissolve
itself or the Partnership.
8.02 Continuation of Business of Remaining General Partner. If one
General Partner ceases to be a General Partner pursuant to the provisions of
Section 8.01, the remaining General Partner shall continue the business of the
Partnership.
8.03 Removal of a General Partner. The Limited Partners holding a
majority in interest of the Units may remove any or all of the General Partners.
Written notice of such determination setting forth the effective date of such
removal shall be served upon the General Partner or General Partners so removed
and, as of the effective date, shall terminate all of such persons' rights and
powers as a General Partner.
8.04 Dissolution of Partnership and Continuance of Partnership Business.
After the occurrence of a terminating event with respect to the last remaining
General Partner, as described in Section 8.01, the Limited Partners shall meet
within ninety (90) days of the terminating event and either:
(a) Elect one or more new General Partners to continue the
Partnership business, in which event, upon the filing of a new Certificate
of Limited Partnership to reflect the new General Partner, this Partnership
shall continue in business; or
(b) Elect to terminate and liquidate the Partnership under the
provisions of Article IX hereof.
8.05 Payment to Terminated General Partner. Upon the occurrence of a
terminating event, if such terminating event relates to a General Partner who is
the last remaining original General Partner and if the business of the
Partnership is continued, as aforesaid, the Terminated General Partner shall be
entitled to receive from the Partnership the then present fair market value of
his allocated interest in Net Profits, Net Losses, Distributions of Cash
Available for Distribution, surplus Funds upon liquidation, determined by
agreement of the Terminated General Partner and the Partnership, or, if they
cannot agree, by arbitration in accordance with the then current rules
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of the American Arbitration Association. The expense of such arbitration shall
be borne equally by the Partnership and the General Partners. For this purpose,
the fair market value of the interest of the Terminated General Partner shall be
deemed to be the amount the Terminated General Partner would receive upon
dissolution and termination of the Partnership under Section 9.02, assuming (a)
such dissolution or termination occurred on the date of the dissolving event
specified above, and (b) the assets of the Partnership were sold for their then
fair market value without compulsion of the Partnership to sell such assets. The
Partnership forthwith shall execute and deliver to the Terminated General
Partner a promissory note of the Partnership, payable to the order of the
Terminated General Partner, which promissory note shall include the following
provisions: (i) be in a principal amount equal to the present fair market value
of the interest so determined; (ii) bearing interest at a rate per annum which
is the lesser of two percent over the prime rate of the Bank of America, NT&SA
or ten percent per annum, principal and all unpaid accrued interest payable in
equal annual installments with the remaining unpaid principal balance and unpaid
accrued interest on the promissory note to be due and payable five years from
the date of such terminating event, and (iii) such other provisions as would be
usual and customary in a commercial promissory note, including the right of the
holder upon default to accelerate otherwise unmatured installments and to
recover costs of collection including reasonable attorney's fees.
Notwithstanding the foregoing, where the termination is voluntary, the method of
payment will be by a non-interest bearing unsecured promissory note with
principal payable, if at all, from distributions which the Terminated General
Partner otherwise would have received under the partnership agreement had the
General Partner not terminated.
8.06 Termination of Executory Contracts. Upon removal of a General Partner,
all executory contracts between the Partnership and the terminating General
Partner or any affiliate thereof (unless such affiliate is also an affiliate of
a continuing General Partner) may be terminated by the Partnership effective
upon written notice to the party so terminated. The terminating General Partner
or any affiliate (unless such affiliate is also an affiliate of a continuing
General Partner) thereof may also terminate and cancel any such executory
contract effective upon sixty (60) days' prior written notice of such
termination and cancellation given to the new General Partner, if any, or to the
Partnership.
IX.
DISTRIBUTION ON TERMINATION
9.01 Events of Dissolution. The Partnership shall be terminated and
dissolved, prior to the end of its term, in accordance with any other provision
of this Agreement, or upon the happening of any of the following events:
(a) The Limited Partners holding a majority of all the Units of the
Partnership determine, by written consent or approving vote, that the
Partnership should be dissolved; or
(b) The Partnership is adjudicated insolvent or bankrupt.
9.02 Gain and Loss on Dissolution and Order of Distribution.
(a) In the event of the dissolution or termination of the Partnership,
unless the remaining Partners elect to continue the business of the Partnership
as provided in this Agreement, the General Partners or the liquidator of the
Partnership shall proceed with the winding up of the affairs and the liquidation
of the Partnership. The General Partners, who shall be the liquidators of the
Partnership, shall cause to be prepared a statement setting forth the assets and
liabilities of the Partnership as of the date of dissolution, and such statement
shall be furnished to all of the Partners (General and Limited). The assets of
the Partnership, which the General Partners determine should be liquidated, then
shall be liquidated as promptly as possible, but in an orderly and businesslike
manner so as not to involve undue sacrifice.
(b) The aggregate net profit and net loss realized by the Partnership upon
the sale or other disposition of its assets shall be credited or charged to the
accounts of the General Partners and Limited Partners in accordance with the
provisions of Section 3.07 hereof after providing for the debts and liabilities
of the Partnership.
(c) The proceeds of such liquidation shall be applied and distributed in
the order of priority and in the same manner as provided in Section 3.07 hereof
after providing for the debts and liabilities of the Partnership.
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(d) All distributions under Section 9.02(c) shall be made in money arising
from the sale of assets of the Partnership.
9.03 Eminent Domain. A taking of all or substantially all of the
Partnership's property and assets in condemnation or by eminent domain shall be
treated in all respects as a sale of the Partnership's property and assets upon
the dissolution and liquidation of the Partnership, pursuant to this Article IX.
In such event any portion of the property and assets of the Partnership not so
taken shall be sold and/or distributed, together with the condemnation award, in
the manner provided for in this Article IX.
9.04 Period of Liquidation. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Partnership, so as to enable the
General Partners or the liquidator to minimize the normal losses attendant upon
liquidation.
X.
CERTIFICATES AND OTHER DOCUMENTS
10.01 General Partners Attorneys for Limited Partners. Each Limited
Partner, by becoming a Limited Partner, hereby constitutes and appoints each of
the General Partners and his successors the true and lawful attorneys of, and in
the name, place and stead of said Limited Partner, from time to time:
(a) To make all agreements amending this Agreement, as now or
hereafter amended, that may be appropriate to reflect solely:
(i) A change of the name or the location of the principal
place of business of the Partnership;
(ii) The disposal by a Limited Partner of his or her
interest in the Partnership, in any manner permitted by this Agreement
and any return of the capital contribution of a Limited Partner (or
any part thereof), if any, provided for by this Agreement;
(iii) A person becoming a Limited Partner of the Partnership
as permitted by this Agreement;
(iv) A change in any provision of this Agreement or the
exercise by any person of any right or rights thereunder not requiring
the consent of said Limited Partner; and
(v) The exercise by any person of any right or rights
under this Agreement requiring the consent or approval of a majority
or a specified percentage of the Limited Partners and the required
consent or approval has been given.
(b) To make such certificates, instruments and documents, including
Fictitious Business Name Statements, as may be required by, or may be
appropriate under, the laws of any state or other jurisdiction in which the
Partnership is doing or intends to do business in connection with the use
of the name of the Partnership by the Partnership; and
(c) To make such certificates, instruments and documents, including
amendments to this Agreement and the Certificate of Limited Partnership, as
said Limited Partner may be required or as may be appropriate for said
Limited Partner to make, by the laws of any state or other jurisdiction
solely to reflect:
(i) A change of address of said Limited Partner;
(ii) Any changes in or amendments to this Agreement, or
pertaining to the Partnership, of any kind referred to in paragraph
(a) of this subsection; and
(iii) Any other changes in or amendments to this Agreement
but only if and when said Limited Partner has agreed to such other
changes or amendments by signing, either personally or by duly
appointed attorney, an agreement amending this Agreement.
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Each of said agreements, certificates, instruments and documents shall be
in such form as said attorney and counsel for the Partnership shall deem
appropriate. The powers hereby conferred to make agreements, certificates,
instruments and documents shall be deemed to include the powers to sign,
execute, acknowledge, swear to, verify, deliver, file, record and publish the
same.
Each Limited Partner authorizes said attorney to take any further action
which said attorney shall consider necessary or convenient in connection with
any of the foregoing and hereby gives said attorney full power and authority to
do and perform each and every act and thing whatsoever requisite and necessary
to be done in and about the foregoing as fully as said Limited Partner might or
could do if personally present, and hereby ratifies and confirms all that said
attorney shall lawfully do or cause to be done by virtue hereof.
The powers hereby conferred shall continue from the date said Limited
Partner becomes a Limited Partner in the Partnership until said Limited Partner
shall cease to be such a Limited Partner and, being coupled with an interest,
shall be irrevocable.
10.02 Making, Filing, Etc. of Certificates, Etc. The General Partners
agree, when authorized pursuant to Section 10.01, or otherwise, to make, file or
record with the appropriate public authority and (if required) publish the
Certificate, any amendments thereof, and such other certificates, instruments
and documents as may be required or appropriate in connection with the business
and affairs of the Partnership.
XI.
NOTICES
All notices (except notices required under Section XIV hereof), requests
and other communications provided for herein shall be in writing and, unless
otherwise specified, shall be forwarded by first class mail, directed to the
parties at the addresses set forth in the Subscription Agreement and Signature
Pages attached hereto or to such other addresses as any party may from time to
time designate in writing, and given in accordance with the provisions of this
Article XI. Notices or communications given, as set forth herein, shall be
conclusively deemed to have been received by the party to whom addressed three
business days after the same are deposited in the United States mail.
XII.
CONVEYANCES, CONTRACTS AND DOCUMENTS
Any deed, bill of sale, mortgage, deed of trust, lease, contract of sale,
or other commitment purporting to convey or encumber the interest of the
Partnership in all or in any portion of any real or personal property at any
time held in its name, and any other contract, check, draft, document,
communication or notice to which the Partnership is a party, may be signed by
any one of the General Partners acting alone or on behalf of the Partnership.
XIII.
DISPUTES AND ARBITRATION
(This Article omitted at the request of state securities commissions.)
XIV.
MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS
(a) Meetings of partners may be held at any place within or without this
state as may be fixed by the General Partners. If no other place is so fixed,
partners' meetings shall be held at the principal executive office of the
Partnership.
(b) A meeting of the partners may be called by any of the General Partners
or by Limited Partners representing more than 10 percent of the interests of
Limited Partners for any matters on which the Limited Partners may vote.
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(c) (1) Whenever partners are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given, within ten days after
receipt of a request, not less than 15, nor more than 60, days before the date
of the meeting to each partner entitled to vote at the meeting. The notice shall
state the place, date, and hour of the meeting and the general nature of the
business to be transacted, and no other business may be transacted.
(2) Notice of a Partners' meeting or any report shall be given either
personally or by mail or other means of written communication, addressed to the
partner at the address of the partner appearing on the books of the Partnership
or given by the partner to the Partnership for the purpose of notice, or, if no
address appears or is given, at the place where the principal executive office
of the partnership is located or by publication at least once in a newspaper of
general circulation in the county in which the principal executive office is
located. The notice or report shall be deemed to have been given at the time
when delivered personally or deposited in the mail or sent by other means of
written communication. An affidavit of mailing of any notice or report in
accordance with the provisions of this article, executed by a General Partner,
shall be prima facie evidence of the giving of the notice or report. Included
with the notice shall be a detailed statement of the action proposed, including
a verbatim statement of the wording of any resolution proposed for adoption by
the limited partners and of any proposed amendment to the partnership agreement.
If any notice or report addressed to the partner at the address of the
partner appearing on the books of the Partnership is returned to the Partnership
by the United States Postal Service marked to indicate that the United States
Postal Service is unable to deliver the notice or report to the partner at the
address, all future notices or reports shall be deemed to have been duly given
without further mailing if they are available for the partner at the principal
executive office of the Partnership for a period of one year from the date of
the giving of the notice or report to all other partners.
(3) Upon written request to the General Partners by any person entitled to
call a meeting of partners, the General Partners shall, within ten days after
receipt of a request, cause written notice to be given in person or by certified
mail to the partners entitled to vote that a meeting will be held at a time
requested by the person calling the meeting, not less than 15, nor more than 60,
days after the receipt of the request. If the notice is not given within 20 days
after receipt of the request, the person entitled to call the meeting may give
the notice or, upon the application of such person, the superior court of the
county in which the principal executive office of the Partnership is located, or
if the principal executive office is not in this state, the county in which the
Partnership's address in this state is located, shall summarily order the giving
of the notice, after notice to the Partnership giving it an opportunity to be
heard. The procedure provided in subdivision (c) of Section 305 of the
California Corporations Code shall apply to the application. The court may issue
any order as may be appropriate, including, without limitation, an order
designating the time and place of the meeting, the record date for determination
of partners entitled to vote, and the form of notice.
(d) When a partners' meeting is adjourned to another time or place, unless
the Partnership Agreement otherwise requires and, except as provided in this
subdivision, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the Partnership may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than 45
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each partner of
record entitled to vote at the meeting.
(e) The transactions of any meeting of partners, however called and
noticed, and wherever held, are as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not present in person or by proxy, signs a written waiver of notice or
a consent to the holding of the meeting or an approval of the minutes thereof.
All waivers, consents, and approvals shall be filed with the Partnership records
or made a part of the minutes of the meeting. Attendance of a person at a
meeting shall constitute a waiver of notice of the meeting, except when the
person objects, at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by this chapter to be included in the notice
but not so included, if the objection is expressly made at the meeting. Neither
the business to be transacted at nor the purpose of any meeting of partners need
be specified in any written waiver of notice, unless otherwise provided in the
partnership agreement, except as provided in subdivision (f).
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(f) Any partner approval at a meeting, other than unanimous approval by
those entitled to vote, pursuant to paragraph (5) of subdivision (b) of Section
15632 of the California Corporations Code shall be valid only if the general
nature of the proposal so approved was stated in the notice of meeting or in any
written waiver of notice.
(g) (1) A majority in interest of the Limited Partners represented in
person or by proxy shall constitute a quorum at a meeting of partners.
(2) The partners present at a duly called or held meeting at which a quorum
is present may continue to transact business until adjournment notwithstanding
the withdrawal of enough partners to leave less than a quorum, if any action
taken (other than adjournment) is approved by the requisite percentage of
interests of Limited Partners specified in California Revised Limited
Partnership Act or in the Partnership Agreement.
(3) In the absence of a quorum, any meeting of partners may be adjourned
from time to time by the vote of a majority of the interests represented either
in person or by proxy, but no other business may be transacted, except as
provided in paragraph (2).
(h) Unless otherwise provided in the Partnership Agreement, any action
which may be taken at any meeting of the partners may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
partners having not less than the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which all entitled to
vote thereon were present and voted. In the event the Limited Partners are
requested to consent on a matter without a meeting, each partner shall be given
notice of the matter to be voted upon in the same manner as described in
subdivision (c). In the event any General Partner, or Limited Partners
representing more than 10 percent of the interests of the Limited Partners,
request a meeting for the purpose of discussing or voting on the matter, the
notice of a meeting shall be given in accordance with subdivision (c) and no
action shall be taken until the meeting is held. Unless delayed in accordance
with the provisions of the preceding sentence, any action taken without a
meeting will be effective 15 days after the required minimum number of voters
have signed the consent, however, the action will be effective immediately if
all General Partners and Limited Partners representing at least 90 percent of
the interests of the Limited Partners have signed the consent.
(i) The use of proxies in connection with this section will be governed in
the same manner as in the case of corporations formed under the General
Corporation Law of California. The Partnership will provide for proxies or
written consents which specify a choice between approval and disapproval of each
matter to be acted upon at the meeting.
(j) In order that the Partnership may determine the partners of record
entitled to notices of any meeting or to vote, or entitled to receive any
distribution or to exercise any rights in respect of any other lawful action,
the General Partners, or Limited Partners representing more than 10 percent of
the interests of Limited Partners, may fix, in advance, a record date, which is
not more than 60 or less than 15 days prior to the date of the meeting and not
more than 60 days prior to any other action. If no record date is fixed:
(1) The record date for determining partners entitled to notice of
or to vote at a meeting of partners shall be at the close of business
on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(2) The record date for determining partners entitled to give
consent to Partnership action in writing without a meeting shall be the
day on which the first written consent is given.
(3) The record date for determining partners for any other purpose
shall be at the close of business on the day on which the general
partners adopt it, or the 60th day prior to the date of the other
action whichever is later.
(4) The determination of partners of record entitled to notice of or
to vote at a meeting of partners shall apply to any adjournment of the
meeting unless the general partners, or the limited partners who called
the meeting, fix a new record date for the adjourned meeting, but the
general partners, or the limited partners who called the meeting, shall
fix a new record date if the meeting is adjourned for more than 45 days
from the date set for the original meeting.
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XV.
CAPTIONS -- PRONOUNS
Any titles or captions of articles or paragraphs contained in this
Agreement are for convenience only and shall not be deemed part of the context
of this Agreement. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the
identification of the person or person, firm or firms, corporation or
corporations may require.
XVI.
BINDING EFFECT AND EXHIBITS
Except as otherwise herein provided, this Agreement shall be binding upon
and inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and all persons hereafter having or holding an
interest in this Partnership, whether as assignees, substituted Limited
Partners, or otherwise. All exhibits hereto are by this reference incorporated
herein.
XVII.
AMENDMENT OF THE AGREEMENT
Except as provided by this Article XVII, this Agreement may be modified or
amended only by a vote of a majority in interest of the Limited Partners;
provided, however, this Agreement may be amended from time to time by the
General Partners, without the consent of any of the Limited Partners, but only
if such amendment does not affect the rights of the limited partners, (i) to add
to the representations, duties or obligations of the General Partners or their
Affiliates or to surrender any right or power granted to the General Partners or
their Affiliates herein, for the benefit of the Limited Partners; (ii) to cure
any ambiguity, to correct or supplement any provision which may be inconsistent
with any other provision, or to make any other provisions with respect to
matters or questions arising under this Agreement which will not be inconsistent
with the provisions of this Agreement; (iii) to reflect reductions in the
capital contributions of the Limited Partners resulting from the return of
capital to the Limited Partners in accordance with the requirements of this
Agreement; (iv) to delete or add any provisions of this Agreement required to be
so deleted or added by the Staff of the Securities and Exchange Commission or by
a State "Blue Sky" Administrator or similar official, which addition or deletion
is deemed by the Administrator or official to be for the benefit or protection
of the Limited Partners; (v) to elect for the Partnership to be governed by any
successor California statute governing limited partnerships; (vi) to effect
changes to substantially comply with Internal Revenue Service Regulations
Section 1.704-1; and (vii) as otherwise provided for pursuant to this
Partnership Agreement. The General Partner shall notify the Limited Partners
within a reasonable time of the adoption of any amendment. Notwithstanding
anything to the contrary contained in this Agreement, this Agreement may not be
amended without the consent of all Partners to be adversely affected by the
amendment that:
a. Converts a Limited Partner into a general partner;
b. Modifies the limited liability of a Limited Partner;
c. Alters the interest of the General Partner or Limited Partners in net
income or net loss or distributions from the Partnership; or
d. Adversely affects the status of the Partnership as a partnership for
federal income tax purposes.
XVIII
ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreements between the
parties hereto respecting the within subject matter, and there are no
representations, agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject matter of this
Agreement which are not fully expressed herein. This Agreement shall be governed
by and construed in accordance with the laws of the State of California
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and, unless expressly or by necessary implication contravened by any provision
hereof, the provisions of the California Revised Limited Partnership Act shall
apply.
XIX.
TAX CONTROVERSIES
Should there be any controversy with the Internal Revenue Service or any
other taxing authority involving the Partnership or an individual Partner or
Partners, the outcome of which may adversely affect the Partnership, either
directly or indirectly, the Partnership may incur expenses it deems necessary
and advisable in the interest of the Partnership to oppose such proposed
deficiency, including, without being limited thereto, legal and accounting fees.
XX.
COUNTERPARTS AND EXECUTION
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original Agreement, and all of which shall constitute one
Agreement, by each of the parties hereto on the dates respectively indicated in
the signatures of said parties, notwithstanding that all of the parties are not
signatories to the original or to the same counterpart, to be effective as of
the day and year hereinabove set forth.
XXI.
INVESTMENT IN OTHER PROGRAMS OF SPONSOR
21.01 The provisions of this Article are effective notwithstanding anything
to the contrary in Sections 1.05 and 2.01.
21.02 Investments in limited partnership interests of another program shall
be prohibited; however, nothing herein shall preclude the investment in general
partnerships or ventures which own and operate a particular property provided
this partnership acquires a controlling interest in such other ventures or
general partnerships (except as permitted by subsection 21.03). In such event,
duplicate property management or other fees shall not be permitted.
21.03 This partnership shall be permitted to invest in joint venture
arrangements with another program formed by the sponsor if all the following
conditions are met.
(a) The two programs have substantially identical investment
objectives.
(b) There are no duplicate property management or other fees.
(c) The sponsor compensation should be substantially identical in
each program.
(d) The partnership must have a right of first refusal to buy if the
other program wishes to sell property held in the joint venture.
(e) The investment of each program is on substantially the same terms
and conditions.
(f) The prospectus must disclose the potential risk of impasse on
joint venture decisions since neither program controls and the potential
risk that while one program may buy the property from the other joint
venturer, in the event of a sale, it may not have the resources to do so.
XXII.
PROCEEDS FROM FINANCING PROPERTIES
22.1 After the Partnership has owned a property for two years or more, or
after January 1, 1995, the Partnership may borrow money and mortgage such
property subject to the following:
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(a) A mortgage may be a lien on one or more properties owned by the
Partnership.
(b) The holder of the note evidencing the borrowing may have recourse
only to the property(ies) secured by the mortgage for payment of the note;
no recourse may be had against any other property owned by the Partnership,
or against any General or Limited Partner personally.
(c) All net financing proceeds received after January 1, 1995 may
either be distributed to the Limited and General Partners as provided in
this Agreement or be reinvested in manufactured home communities.
(d) The net financing proceeds should return substantially all of the
Limited Partner's invested capital.
(e) The financing may assist in the sale of all of the Partnership's
properties.
(f) In the General Partner's judgment, the financing should increase
the economic return to the Limited Partners, and should not substantially
increase the risk of investment in the property(ies).
(g) Neither the General Partners nor their affiliates shall provide or
make available any such financing.
(h) The mortgage maximum indebtedness shall not exceed 80% of the
aggregate fair market value as determined by the lender as of the date of
refinancing as to all properties which have been refinanced. For purposes
of this section "indebtedness" shall include the principal of any loan
together with any interest that may be deferred pursuant to the terms of
the loan agreement which exceeds 5% per annum of the principal balance of
such indebtedness (excluding contingent participations in income and/or
appreciation in the value of the Partnership's property) and shall exclude
any indebtedness incurred by the Partnership for necessary working capital.
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In witness whereof, the parties have signed this agreement on the dates
indicated below:
Original Limited Partner: PATRICIA ANN COSEO June 28, 1988
-----------------------------
Patricia Ann Coseo as amended to
June 8, 1995
Individual General Partner: JOHN A. COSEO, JR. June 28, 1988
-----------------------------
John A. Coseo, Jr. as amended to
June 8, 1995
Corporate General Partner: The Windsor Corporation
By JOHN A. COSEO, JR. June 28, 1988
----------------------------
John A. Coseo, Jr. as amended to
President June 8, 1995
27
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Exhibit 23.1
Consent of Appraiser
--------------------
This Firm prepared valuation appraisals during the period of August 1999 through
September 1999 for the following properties for Windsor Park Properties 6, A
California Limited Partnership ("Windsor 6"):
1. The manufactured home community located at 4444 East Benson Highway in
Tucson, Arizona known as Town & Country Estates.
2. The manufactured home community located at 501 E. 63/rd/ Street in Wichita,
Kansas known as Chisholm Creek.
3. The manufactured home community located at 8000 Sheldon Road in Tampa,
Florida known as Carefree Village.
4. The manufactured home community located at 2900 North State Road 7 in
Margate, Florida known as Rancho Margate.
5. The manufactured home community located at 50 Charlotte Drive in Winter
Haven, Florida known as Winter Haven.
6. The manufactured home community located at 8200 North Military Trail in
Palm Beach Gardens, Florida known as Garden Walk.
A description of such appraisals (the "Appraisals") is included in the Consent
Solicitation Statement of Windsor 6 to be filed on or about November 19, 1999
(the "Consent Solicitation Statement"), a copy of which Consent Solicitation
Statement has been supplied to and reviewed by this Firm.
This Firm hereby:
(i) consents to the inclusion of the Appraisals (with or without
exhibits) in the Consent Solicitation Statement and related Schedule 14A of
Windsor 6 (the "Schedule 14A") and related Transaction Statement on Schedule
13E-3 (the "Schedule 13E-3"), as an appendix or otherwise, in any form (whether
in paper or digital format, including any electronic media);
(ii) consents to Windsor 6's inclusion of descriptions of the Appraisals
and this Firm in the Consent Solicitation Statement, Schedule 14A and Schedule
13E-3;
(iii) consents to the naming of our Firm as an expert under the caption
"Experts" in such Consent Solicitation Statement, Schedule 14A and Schedule
13E-3 and the filing of this Consent as an Exhibit to the Schedule 14A and
Schedule 13E-3; and
(iv) consents to the photocopying and transmittal of copies of the
Appraisals, or excerpts thereof, to any or all limited partners of the
Partnership and such other parties as Windsor 6 deems appropriate.
Date: November 15, 1999 WHITCOMB REAL ESTATE
By: /s/ John Whitcomb
-----------------
Name: John Whitcomb
Title: Owner
<PAGE>
EXHIBIT 23.2
The General Partners of
Windsor Park Properties 6,
A California Limited Partnership
c/o The Windsor Corporation
6160 South Syracuse Way
Greenwood Village, Colorado 80111
We hereby consent to the use of our name and to the description of our opinion
letter, dated November 15, 1999, under the caption "Fairness Opinion" in, and to
the inclusion of such opinion letter as Appendix A to, the Consent Solicitation
Statement filed as part of the Proxy Statement on Schedule 14A of Windsor Park
Properties 6, A California Limited Partnership ("WPP 6"). In addition, we hereby
consent to the inclusion of our opinion letter as an exhibit to WPP 6's
Transaction Statement on Schedule 13E-3 and the incorporation by reference of
information relating to us into such Transaction Statement from WPP 6's Proxy
Statement.
LEGG MASON WOOD WALKER, INCORPORATED
By: /s/ Thomas E. Robinson
_______________________________
Thomas E. Robinson
Managing Director
