<PAGE>
Exhibit (c)(1)(C)
SELF-CONTAINED
REAL ESTATE APPRAISAL REPORT
289 Space - North Glen Village
Manufactured Housing Community
18200 U.S. 31 North
Westfield, Hamilton County, Indiana 46074
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6160 South Syracuse Way
Greenwood Village, Colorado 80111
AS OF
May 12, 2000
PREPARED BY
WHITCOMB REAL ESTATE
<PAGE>
-Whitcomb-
Real Estate
May 28, 2000
Steve Waite
Windsor Corporation
6160 South Syracuse Way
Greenwood Village, Colorado 80111
RE: 289 Space - North Glen Village
Manufactured Housing Community
18200 U.S. 31 North
Westfield, Hamilton County, Indiana 46074
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 May 12, 2000, based on an exposure period of six months, to be:
- SIX MILLION ONE HUNDRED THOUSAND DOLLARS -
($6,100,000)
Our value estimate applies to the land as physically constituted and to the
improvements actually in existence. Our value estimate reflects prevailing
trends in the local real estate market. We have made a careful inspection,
study, and analysis of the property, and have considered all factors which, in
our opinion, would tend to influence the market value of the subject.
North Glen Village is a fully developed 289-space Manufactured Housing
Community, a 4,048 square-foot office/clubhouse, swimming and wading pool and a
playground. The community is located at the southwest corner of U.S. Highway 31
North and Blackburn Avenue in Westfield, Hamilton County, Indiana. The current
lot rent is $238.00 per month for both singlewide and doublewide units. The
average lot rent is also $238.00 and the rent was last increased by $11.00 in
June 1999. Management bills the residents on a monthly basis for utilities. Our
analysis has included no income attributable to the rental of homes since the
homes are considered personal property.
<PAGE>
Mr. Steve White
November 20, 1998
Page 2
According to a rent roll dated April 21, 2000, 286 spaces were physically
occupied, indicating a 99.0% physical occupancy rate. There are no community
owned homes and one employee occupied home. This results in economic occupancy
of 98.6%. As of the date of inspection, the manager reported that 286 spaces
were physically occupied, indicating a 99.0% physical occupancy rate. She also
stated that there is one employee occupied home. This results in economic
occupancy of 98.6%.
Our analysis has accounted for a management fee, adequate to ensure
professional management of the property. We have also forecast maintenance
expenditures to maintain the property in adequate repair in order to retain
residents and achieve rental increases. Our analysis and opinions are contingent
on adequate management and maintenance expenditures.
This conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the "Uniform
Standards of Professional Appraisal Practice" (USPAP) as published by the
Appraisal Standard Board of the Appraisal Foundation, the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 (FIRREA) and Collateral Mortgage
Company's Appraisal Guidelines. The intended user of the report is Collateral
Mortgage Company.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
We appreciate this opportunity to be of service to you and would like to
thank you for the help and information you provided. If you have any questions,
please feel free to contact us.
Very truly yours,
WHITCOMB REAL ESTATE
/s/ John H. Whitcomb JAG
John H. Whitcomb, MAI, CCIM
/s/ Keith D. McFarland JAG
Keith D. McFarland, ASA
Indiana General Certified Appraiser #CG69201433
<PAGE>
4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Title Page
Transmittal
Table Of Contents...................................................... 4
INTRODUCTORY SECTION
Photographs Of Subject................................................. 6
Summary Of Facts And Conclusions....................................... 8
Scope Of The Assignment................................................ 9
Purpose And Intended Use Of The Report................................. 11
Appraisal Definitions.................................................. 11
Property Rights Appraised.............................................. 12
Effective Date Of Value................................................ 12
Date Of Inspection..................................................... 12
DESCRIPTIVE SECTION
Area Description....................................................... 14
Neighborhood Description............................................... 18
Manufactured Housing Community Market Overview......................... 21
Land And Site Improvements............................................. 29
Improvement Description................................................ 32
Ownership And Property History......................................... 33
Occupancy.............................................................. 33
Zoning And Other Land Use Controls..................................... 33
Assessment And Taxes................................................... 34
Marketability And Exposure Period...................................... 35
VALUATION SECTION
Highest And Best Use................................................... 38
Valuation Process...................................................... 43
Income Capitalization Approach......................................... 44
Sales Comparison Approach.............................................. 61
Final Estimate Of Value................................................ 76
Certification.......................................................... 77
Assumptions And Limiting Conditions.................................... 78
ADDENDA
Legal Description
Profiles Of Appraisers
</TABLE>
<PAGE>
INTRODUCTORY SECTION
<PAGE>
6
PHOTOGRAPHS OF SUBJECT (Taken May 12, 2000)
[PHOTO]
View of Entry for North Glen
[PHOTO]
Typical Interior Street Scene in North Glen
<PAGE>
7
PHOTOGRAPHS OF SUBJECT (Taken May 12, 2000)
[PHOTO]
View of Office/Clubhouse
[PHOTO]
View of Swimming Pool Area
<PAGE>
8
SUMMARY OF FACTS AND CONCLUSIONS
--------------------------------
MSA and Census Tract: Indianapolis MSA- 3480: Census Tract 1104
---------------------
Property Appraised: 289 Space - North Glen Village
-------------------
Manufactured Housing Community
18200 U.S. Highway 31 North
Westfield, Hamilton County, Indiana 46074
Property Rights Appraised: Fee Simple Interest, subject to tenant leases
--------------------------
Land Area: Gross land area - 38.19 acres more or less; net
---------- land area - 35.97 acres
Improvements: 289 manufactured housing spaces, a 4,048 square-
------------- foot office/clubhouse, swimming and wading pool
and a playground.
Owner: North Glen Park Limited, ROC Properties, Inc.
------
Zoning: GB-PD, General Business Planned Development
------- District
Highest and Best Use: As Vacant: Hold for future development as
--------------------- predicated by market demand.
As Improved: Current use (Manufactured Housing
Community)
Value Indications: Income Approach $6,100,000
------------------ Sales Comparison Approach $6,400,000
Final Estimate of Value: $6,100,000
------------------------
Date of Appraisal: May 12, 2000
------------------
Date of Inspection: May 12, 2000
-------------------
<PAGE>
9
SCOPE OF THE ASSIGNMENT
-----------------------
This assignment encompasses providing an "as is" market value of the fee
simple property rights, subject to tenant leases. The subject consists of a 289-
space manufactured housing community that is situated on 35.97 net acres of
land. The on-site manager is Joyce Horner. The community is located at the
southwest corner of U.S. Highway 31 North and Blackburn Avenue in Westfield,
Hamilton County, Indiana. The date of the valuation is May 12, 2000, consistent
with the date of inspection.
The first step in the analysis is to develop a concise statement or
definition of the appraisal assignment. This sets the limits of the analysis and
eliminates any ambiguity about the nature of the assignment. This is
accomplished by: 1) identifying the real estate being analyzed, 2) stating the
effective date of value, 3) stating the purpose and use (function) of the
analysis, 4) defining market value, 5) defining and identifying the property
rights to be valued, and 6) stating the assumptions and limiting conditions
applicable to the conclusions.
After defining and accepting the assignment, the preliminary analysis,
which was previously formulated in order to determine the character and extent
of the proposed assignment, is reviewed and refined. The preliminary analysis
also determines the amount of work that will be required to gather the necessary
data. This analysis and work plan are dependent upon the character of the
assignment and the type of property being analyzed. The next step is to make a
physical inspection of the subject, which was accomplished on May 12, 2000, and
its environs, including the gathering of general and specific data.
General data consists of information on the principles, forces and factors
that affect marketability and property value. This information includes regional
and neighborhood trends, as well as social, economic, governmental and
environmental forces that could or may have an effect on the subject's
marketability and value. This general data contributes significantly to the
understanding of the marketplace. Area data for Hamilton County and the
subject's immediate neighborhood was obtained from a number of published sources
that are appropriately cited in the report. Based on the data produced through
the research of the general area and neighborhood the initial searches for
market data were extended back to May 1997. As there was adequate data from
which to evaluate the subject property, during that time period, the search was
not further extended or otherwise modified.
Specific data relates to the property being appraised, including a detailed
description of both the parcel comprising the subject site and the subject's
existing site improvements, based upon the physical inspection of the premises
and the neighborhood, together with various documents and drawings obtained from
the owner, management and public services; as well as current and recent changes
in ownership of the subject, occupancy, zoning and land use regulations
affecting the subject, and assessment and real estate tax information applicable
to the subject, obtained from the appropriate governmental agencies. The
gathering of specific
<PAGE>
Scope of the Assignment 10
data also relates, as may be applicable, to the comparable land sales, improved
sales and rentals selected. The majority of the market transactions were
originally researched through public records and subscription services, which
were then visually inspected and verified with a principle of the transaction, a
broker or agent involved in the transaction and through public records.
In addition to the physical data, locational and income and expense
information for the subject and, as available, for the comparable sales and
rentals was utilized. Also considered are financing arrangements and/or unusual
motivations of either buyer or seller that could or did affect selling prices or
rentals.
An integral part of the valuation process for the property is the
determination of the highest and best use of the subject site: 1) as if vacant,
and 2) as currently improved. The latter analysis is useful in identifying
comparable properties, and determining whether the existing improvements should
be retained, renovated or demolished. The land value estimate, as if vacant, is
required when the land's contribution to total property value is sought, or when
improvements are valued separately, as in the Cost Approach.
After determining the subject site's highest and best use and gathering the
necessary data, we integrate the information drawn from the market research and
analysis of data and consider the application of the three valuation approaches-
the Income Capitalization Approach, the Sales Comparison Approach and the Cost
Approach - in order to derive a well-supported value estimate of the fee simple
interest. Although the three approaches are interrelated, the property type and
use will determine which approach or approaches are most appropriate. Upon
completion of the applicable approaches, we reconcile the value conclusions
derived in order to provide a final value estimate.
<PAGE>
11
PURPOSE AND INTENDED USE OF THE REPORT
--------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of May 12, 2000.
The information, opinions, and conclusions contained in this report have
been prepared as a basis for mortgage financing.
APPRAISAL DEFINITIONS
---------------------
Market Value, as defined by the Office of the Comptroller of the Currency
is:
The most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and passing of title from
seller to buyer under conditions whereby:
- buyer and seller are typically motivated;
- both parties are well informed or well advised and acting in what
they consider their own best interests;
- a reasonable time is allowed for exposure in the open market;
- payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
- the price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.
Fee Simple Interest is defined as the absolute ownership unencumbered by
any other interest or estate subject only to the four powers of
government./1/
________________________
/1/The Dictionary of Real Estate Appraisal, Third Edition, Appraisal
Institute, 1993.
<PAGE>
12
PROPERTY RIGHTS APPRAISED
-------------------------
The real estate interest appraised is that of ownership in fee simple
interest, subject to existing tenant leases, and the property is appraised as if
free and clear of mortgages, liens, servitudes and encumbrances, except those
noted in the body of this appraisal.
EFFECTIVE DATE OF VALUE
-----------------------
The effective date of our value is May 12, 2000, consistent with our date
of inspection.
DATE OF INSPECTION
------------------
Keith D. McFarland, ASA, inspected the property on May 12, 2000.
<PAGE>
DESCRIPTIVE SECTION
<PAGE>
14
AREA DESCRIPTION
----------------
Introduction
------------
The economic vitality of the surrounding area and the immediate
neighborhood encompassing the subject property is an important consideration in
estimating demand and future cash flow potential of a particular property. The
area description focuses on the social, economic, governmental and environmental
forces that effect real estate.
The first step in estimating the highest and best use of the subject
property is an examination of the social, economic, governmental and
environmental forces affecting property values in the Nashville area. In the
following discussion, we have attempted to present sufficient data to inform
readers unfamiliar with the Hamilton County area and its environs.
Location
--------
The community of Westfield is located approximately eight miles north of
the city limits of Indianapolis, the state capitol, within the western portion
of Hamilton County. The city of Noblesville is situated approximately six miles
east of Westfield and serves as the county seat of Hamilton County. This area
lies in the central portion of the state and regional highway access is good
with four interstates, I-65, I-70, I-69 and I-74, accessible from I-465 which
forms a loop around the central urban core. This area is a part of the
Indianapolis MSA which also encompasses, Marion, Boone, Hancock, Hendricks,
Johnson, Morgan and Shelby Counties, and is situated approximately 185 miles
southeast of Chicago, Illinois, 110 miles northwest of Cincinnati, Ohio and 100
miles northwest of Louisville, Kentucky. The subject lies approximately 20
miles north of the Central Business District of Indianapolis at northwestern
edge of Westfield.
Westfield-Hamilton County is a consolidated city-county government system.
The Indianapolis MSA is the largest MSA in the state and serves as a center for
academic, political, research and technological activities.
Population
----------
As of 1998, the Nashville MSA contained a total population of 1,560,401,
and represents a 13.03 percent increase from 1990. Hamilton County is the
second largest county within the MSA with a estimated 1997 population of
154,785. This represents a 42.08 percent increase in total population since
1990. The Indianapolis MSA encompasses 3,089 square miles and has exhibited a
significant amount of population 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>
Area Description 15
<TABLE>
<CAPTION>
=========================================================================
REGIONAL POPULATION TRENDS
1980 to 1990
Compound Annual
1980 1990 1998 Growth Rate
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Westfield 2,783 3,304 5,341 5.48%
Hamilton County 82,027 108,936 154,785 3.98%
Indianapolis MSA 1,305,911 1,380,491 1,560,401 1.37%
State of Indiana 5,490,214 5,544,159 5,899,195 0.69%
=========================================================================
</TABLE>
It is estimated that the population levels of the Hamilton County and other
locations in the surrounding MSA area will continue to increase in coming years.
The 1996 effective buying income for the MSA was estimated to be $37,379.
Economic Base and Employment
----------------------------
The Indianapolis MSA has a relatively diversified economic base and primary
employment sectors include services (24.1%), wholesale and retail trade (25.1%),
manufacturing (15.3%) and government (13.7%). Employment growth trends for the
MSA reflect the recession of the early 1990's and a full recovery. The
unemployment rate has continued to decline as the total labor force has
increased. This factor indicates job growth has outpaced the growth in the
labor force. However, from the 1987-1996 period, manufacturing related jobs
continued to decrease and is similar to the national experience. This declining
trend has been offset by gains in other types of employment. From 1994 to 1997,
the total labor force within the MSA increased by 4.04 percent. Much of this
growth has been in the service and government sectors. Major employers include
Eli Lilly and Co. (7,500 employed), Allison Transmission (4,200), Allison
Engine (4,000) and Bank One Indianapolis (3,810).
The labor force for the MSA numbered approximately 833,850 in 1999 and
represents a 14.6 percent increase since 1990. Therefore, the total amount job
growth is outpacing population growth for the surrounding area. The 1999
estimated unemployment rate for the MSA stood at 2.4% and is similar to the 1998
average rate. The 1999 unemployment rate for Hamilton County was 1.3% and is
slightly lower than the level exhibited for the MSA. In addition, these figures
are below both state and national unemployment levels.
<PAGE>
Area Description 16
Transportation
--------------
Hamilton County and the Indianapolis MSA enjoy an excellent transportation
network that allows convenient access to primary cities. A total of five
interstate highways and six U.S. Highways converge on the city. Primary
transportation routes include Interstates 70, 65, 69, and 74. Interstate 70
extends southwest to St. Louis, Missouri and east to Columbus, Ohio. Interstate
65 extends northwest to LaFayette and southeast to Louisville, Kentucky.
Interstate 69 extends northeast to Fort Wayne. Interstate 74 extends northwest
to Danville, Illinois and southeast to Cincinnati, Ohio. Interstate 465, is an
"outer loop" multi-lane freeway that encircles the city of Indianapolis and
allows for convenient access to all primary transportation routes. Commercial
air service is available from the Indianapolis International Airport. Over 65+
trucking companies with several maintaining terminals within the surrounding
area provide common carrier freight service. Railroad service is provided by
CSX Railroad and Conrail, which serve the area. Overall, transportation
facilities within the Hamilton County area are sufficient to serve the needs of
both businesses and residents.
Summary
-------
In summary, the Hamilton County area looks favorable with most economic
sectors experiencing strong growth from both relocations and expansions. With a
diversified economy and the seat of state government, a large measure of
stability is ensured relative to many other metropolitan areas. Although future
rates of growth are not likely to match those of the early and mid 1990's, the
overall prognosis of factors pertinent to the long-term real estate investment
decision appears positive.
<PAGE>
Area Description 17
[AREA MAP APPEARS HERE]
<PAGE>
18
NEIGHBORHOOD DESCRIPTION
------------------------
A neighborhood is defined as a portion of a larger community, or an entire
community, containing a homogeneous group of inhabitants, buildings, or business
enterprises.
Location
--------
The subject is located at the southwest corner of U.S. Highway 31 and
Blackburn Avenue, within the township limits of Westfield. The community of
Westfield is a bedroom community that is located approximately eight miles north
of the city limits of Indianapolis and is situated in the central portion of
Hamilton County. Surrounding communities include Jolietville to the west,
Kokomo to the north, Noblesville (the county seat) to the east, and the city of
Carmel to the south. The subject is situated within a mixed-use commercial,
residential and agricultural area that has exhibited a significant amount of new
development during recent years. The neighborhood boundaries are generally
described as E. 196/th/ Street to the north, Branch Road to the east, 161/st/
Street to the south and Mill Road to the west. U.S. Highway 31 extends
north/south and serves as a primary commercial thoroughfare for Hamilton and
Marion Counties. This highway extends north to the city of Kokomo and south
through Carmel. This thoroughfare also allows for convenient access to
Interstate 465 approximately ten miles south of the subject property.
Neighborhood Characteristics
----------------------------
The subject is situated in a mixed-use commercial, residential and
agricultural area that has exhibited new commercial and residential development
during recent years. The immediate area to the south along U.S. Highway 31
North is primarily built-up with vacant tracts of agricultural land being
located to the north and west.
Land uses surrounding the subject consist of a newer and older commercial
and retail buildings, light industrial buildings, schools and new office
buildings located along U.S. Highway 31 North with vacant farmland and a new
single family subdivision to the north and west of the subject property.
Surrounding developments include a lumberyard, freestanding and strip retail
buildings, new schools, fast food restaurants, a car dealership and service
stations. Located further south are other new retail developments including
community shopping centers and large single-tenant retail buildings. A vacated
rail line extends along the western boundary of the site. New commercial and
residential development was noted within subject's market area and is
anticipated to continue. The existing use of the subject is compatible with
surrounding land uses.
<PAGE>
Neighborhood Description 19
Access
------
The subject property is accessible from I-465 via U.S. Highway 31 North
located approximately 10 miles to the south. Interstate 465 is a primary
traffic artery that serves the Indianapolis metropolitan area. The subject is
located just north of State Route 32, a primary commercial route that extends
east/west. Access to the subject is provided by U.S. Highway 31 North, a
divided four-lane asphalt paved street that extends north-south. Overall,
access to the subject property is considered good.
Housing
-------
While the subject competes with all forms of housing to a certain degree,
the closest competition is other manufactured housing communities. There are no
large manufactured housing communities located within the immediate vicinity of
the subject property; however, there are three large manufactured housing
communities located further east within Noblesville and one located to the west
in Lebanon. The properties located to the east include Suburban Estates (141
spaces), Westbrook Village (348 spaces) and Hamilton Estates (44 spaces).
Located to the west is the Hoosier Estates Mobile Home Park (270 spaces). A
survey of surrounding parks revealed increases in rental rates during the past
year with high occupancy levels also being noted. These properties are
discussed further in the Manufactured Community Market Overview section of this
report.
Concurrency
-----------
Land uses for the subject's market area are controlled by the Westfield
Planning and Zoning Commission which implements and monitors local comprehensive
and growth management plans. The existing use of the subject is a legal
nonconforming use with local zoning regulations.
Summary and Conclusion
----------------------
The real estate market in the Indianapolis MSA is strong. The suburban
office, industrial and retail real estate sectors reported 1999 vacancy levels
below 10 percent. The growth demands on the county are very evident in light of
past trends and the projections are for further population increases. The
desirability of this area is evident and is anticipated to continue to increase
as the local economy is forecasted to continue to expand in coming years. The
subject property is situated in an area that has exhibited new commercial and
residential development during recent years. The overall demand for
manufactured housing space is evident within this market and is anticipated to
continue. Based on these factors, real estate values are anticipated to
increase barring any near term economic reversals.
<PAGE>
Neighborhood Description 20
[NEIGHBORHOOD MAP APPEARS HERE]
<PAGE>
21
MANUFACTURED HOUSING COMMUNITY MARKET OVERVIEW
----------------------------------------------
The manufactured housing industry in the state of Indiana has matured over
the past twenty years, as a direct result of the advancements in manufactured
housing construction techniques and the continued ability of producers and
dealers to make manufactured housing a relatively inexpensive housing
alternative. Over this period the industry has progressed from it's original
"trailer park" image, to the "mobile home park" and, finally, to its present
status as "a manufactured housing community." This most recent status is only
appropriate, as most manufactured homes are typically moved only once during
their economic lifetime; from the manufacturer or dealer's lot to the homesite.
According to the 1998 U.S. Housing Market Map, Indiana ranked 12/th/ among
states in the number of homes shipped in 1998. As shown on the following table,
manufactured home shipments in Indiana have varied annually since 1996.
Manufactured
Home Shipments
================================================
Year Shipments
------------------------------------------------
1996 9,465
------------------------------------------------
1997 8,913
------------------------------------------------
1998 9,388
================================================
Source: Indiana Manufactured Housing Association
There is a wide range of rental rates in the marketplace. Generally
speaking, lot rent ranges between $165.00 per month to $238.00 per month. Rates
varied within some of the communities as lots for multi-section homes and larger
lots leased for higher than standard amounts. In addition higher rents were
charged at communities that provided utilities to the tenants. Typically,
water, sewer and trash collection service is included in the rental rate.
<PAGE>
Manufactured Housing Community Market Overview 22
The subject rental rates are $238.00 per lot, per month for both singlewide
and doublewide units. The subject rents are above the range of rent levels
found in nearby communities. This is attributed to both the superior location
and amenities offered at the subject in comparison to other communities within
this market area. The last rent increase was in June 1999. Currently
management bills the residents on a monthly basis for utilities in addition to
rent.
Because occupancies are currently strong, there are no incentives offered
for the move-in of homes into a community. As shipments continue to increase
and existing vacancy is absorbed, the market should tighten and permit rent
increases.
The subject is a 289-space, all age manufactured housing community.
According to a rent roll dated April 21, 2000, 286 spaces were physically
occupied, indicating a 99.0% physical occupancy rate. There are no community
owned homes and one employee occupied home. This results in economic occupancy
of 98.6%. As of the date of inspection, the manager reported that 286 spaces
were physically occupied, indicating a 99.0% physical occupancy rate. She also
stated that there is one employee occupied home. This results in economic
occupancy of 98.6%. The tenant mix within surrounding area is dominated by
residents with no large universities or military installations located in the
Westfield area. The communities that are most competitive with the subject have
been detailed on the following pages. These four communities are fully
developed and are currently ranging from 97.9% to 100.0% occupied.
Summary
-------
The manufactured housing market is sophisticated in the state of Indiana.
Shipments have increased over the last three years. Manufactured housing
provides a lower cost-housing alternative to site built homes and a sense of
community to residents. A survey of the subject's market area revealed that
several of the competing manufactured housing communities are currently
reflecting occupancy levels of 97.9% to 100.0% with property mangers reporting
that new homes being are sold with few spaces being available for lease. In
addition, it was also reported that there is local opposition regarding the
development of any new manufactured housing communities within Hamilton County.
Therefore, it is unlikely that overbuilt market conditions will occur within the
near future. The overall demand for manufactured housing sites within this
market area is high. Increasing rents and occupancies should continue to occur
as the local and national economy improves.
<PAGE>
Manufactured Housing Community Market Overview 23
Suburban Estates
3288 Cicero Road
Noblesville, Hamilton County, Indiana
[PHOTO APPEARS HERE]
Location: East side of Cicero Road, north of 221/st/ Street.
Number of Spaces: 141
Property Description: All age manufactured housing community built in
1968 and 1969.
Monthly Rental Rates: $205.00
Occupancy: 97.9%
Services Included in Rates: Water, sewer and trash collection.
Amenities: No amenities
Verification/Date: Frank Powers, Community Manager on May 12, 2000.
Comments: Suburban Estates is an older community that is
much inferior in quality and amenities to the
subject property.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Tenant Mix Overall
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inferior Inferior Inferior Inferior Inferior Similar Inferior
---------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Manufactured Housing Community Market Overview 24
Westbrook Village
17301 River Avenue
Noblesville, Hamilton County, Indiana
[PHOTO APPEARS HERE]
Location: West side of River Avenue, south of State Route 38
Number of Spaces: 348
Property Description: All age manufactured housing community built in
1970's.
Monthly Rental Rates: $190.00
Occupancy: 98.3%
Services Included in Rates: Water, sewer and trash collection.
Amenities: No amenities.
Verification/Date: Charles Spartz, Community Manager on May 12, 2000.
Comments: The rents at this community are planned to be
increased by $10.00 in June 2000.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Tenant Mix Overall
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inferior Inferior Inferior Similar Inferior Similar Inferior
---------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Manufactured Housing Community Market Overview 25
Hamilton Estates
7424 E. 146/th/ Street
Noblesville, Hamilton County, Indiana
[PHOTO APPEARS HERE]
Location: North side of E. 146/th/ Street, west of River
Road.
Number of Spaces: 44
Property Description: All age manufactured housing community built in
1965.
Monthly Rental Rates: $215.00 to $230.00
Occupancy: 100.0%
Services Included in Rates: Water, sewer and trash collection.
Amenities: No amenities.
Verification/Date: Larry Weeks, Community Manager on May 12, 2000.
Comments: This community is located in a rural area and is
inferior in location, quality and condition to the
subject property.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Tenant Mix Overall
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inferior Inferior Inferior Similar Inferior Similar Inferior
---------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Manufactured Housing Community Market Overview 26
Hoosier Estates
1415 Yates Drive
Lebanon, Boone County, Indiana
[PHOTO APPEARS HERE]
Location: West side of Yates Drive, east of Interstate 65
Number of Spaces: 270
Property Description: All age manufactured housing community built in
1971 and 1972.
Monthly Rental Rates: $165.00
Occupancy: 100.0%
Services Included in Rates: Trash collection.
Amenities: Clubhouse and basketball court.
Verification/Date: Karen Sines, Community Manager on May 12, 2000.
Comments: This property has a planned expansion of 20
spaces. This property is inferior in quality and
amenities.
<TABLE>
<CAPTION>
Location Access Visibility Condition Amenities Tenant Mix Overall
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inferior Inferior Inferior Similar Similar Similar Inferior
---------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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 Suburban Estates 141/ $205.00 Water, sewer and trash No amenities.
---------------- 97.9% collection.
3288 Cicero Road
Noblesville, Hamilton County, Indiana
----------------------------------------------------------------------------------------------------------------------------------
2 Westbrook Village 348/ $190.00 Water, sewer and trash No amenities.
----------------- 98.3% collection.
17301 River Avenue
Noblesville, Hamilton County, Indiana
----------------------------------------------------------------------------------------------------------------------------------
3 Hamilton Estates 44/ $215.00 Water, sewer and trash No amenities.
---------------- 100.0% to collection.
7424 E. 146th Street $230.00
Noblesville, Hamilton County, Indiana
----------------------------------------------------------------------------------------------------------------------------------
4 Hoosier Estates 270/ $165.00 Trash collection. Clubhouse and basketball
--------------- 100.0% court.
1415 Yates Drive
Lebanon, Boone County, Indiana
----------------------------------------------------------------------------------------------------------------------------------
Subj.
North Glen Village 289/ $238.00 Trash collection. Office/clubhouse, swimming
------------------ 98.6% pool, playground.
18200 U.S. 31 North
Westfield, Hamilton County, Indiana
==================================================================================================================================
</TABLE>
<PAGE>
Manufactured Housing Community Market Overview 28
[RENT COMPARABLE LOCATION MAP APPEARS HERE]
<PAGE>
29
LAND AND SITE IMPROVEMENTS
--------------------------
The site is an irregularly shaped parcel of land containing a gross land
area of 38.19 acres and a net land area of 35.97 areas (based on public
records). The tract is generally level with a gentle slope to the east and is at
the surrounding street grade. A vacated rail line extends along the western
boundary of the site. 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
the following:
Sanitary Sewer: City of Westfield
--------------
Storm Sewer: City of Westfield
-----------
Water: City of Westfield
-----
Telephone: GTE
---------
Electric: Cinergy
--------
Gas: Westfield Gas
---
Ingress to and egress from the subject community is via U.S. Highway 31
North. Access is rated good. Roadways that are laid-out to maximize the natural
features of the terrain access the individual lots in the community. Roadway
improvements include:
Street-bed: U.S. Highway 31 North is an asphalt paved, divided
----------
four-lane thoroughfare. The streets in the community
are concrete-paved roadways and are 15 to 25-foot wide
right-of-ways.
Curb: U.S. Highway 31 North does not have curbs or gutters;
---- however, concrete curbs exist within the subject
property.
Sidewalk: There are no sidewalks along U.S. Highway 31 North.
--------
There are none in the community.
Streetlights: U.S. Highway 31 North has no overhead streetlights in
------------
this vicinity. There are also some pole-mounted lights
throughout the community.
<PAGE>
Land and Site Improvements 30
Landscaping: Grass and other planted areas are found throughout the
-----------
site. Some lots have trees.
Arrangements between the subject ownership and municipal and/or public
utility authorities for the connection of telephone and electricity are presumed
to exist, although neither a plan specifically identifying the location of all
underground lines nor contracts providing for their installation were provided
to us.
Encumbrances
------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded or otherwise known liens,
defects in title or adverse easements. Additionally, there are no rent controls
in effect in Hamilton County.
Easements
---------
Standard utility easements for electricity and telephone are assumed to
exist. No other easements were identified to us.
Encroachments
-------------
There were no obvious encroachments observed during the inspection of the
subject and neighboring properties.
Environmental
-------------
There were no obvious areas of contamination on or about the subject site.
We are not qualified in environmental hazards and recommend an audit be
performed.
Functional Utility
------------------
The site, which is irregular in shape and contains a net land area of
approximately 35.97 acres, is large enough to accommodate building improvements
and roadways as well as the green areas. The site is considered functional for
various residential development scenarios. The total developed land area
containing 289 total units equates to an overall density of approximately 8.07
units per acre, which is higher than current development standards which tend
toward larger lot sizes, wider streets and more green areas. The site is
considered functional for use as a manufactured housing community.
<PAGE>
Land and Site Improvements 31
[SITE PLAN APPEARS HERE]
<PAGE>
32
IMPROVEMENT DESCRIPTION
-----------------------
The subject is improved with 289 manufactured home community pads, arranged
along streets configured to maximize the available lot spaces. All of the lots
vary in size. The community contains fifty doublewide home-sites with the
remaining lots being singlewide home sites.
The subject property is improved with a 4,048 square-foot office/clubhouse
with an outdoor swimming and wading pool and a playground. We have not estimated
a separate value for this amenities, or equipment, as they are standard items
found at most manufactured housing communities. Construction of the
office/clubhouse includes concrete flooring, wood framing and joists and face
brick exterior walls with a asphalt shingle roof cover. Interior finishes
include carpet and vinyl tile flooring, wood stud/pained drywall partitions, and
textured drywall ceilings. The interior is divided into private offices,
kitchen/meeting area and men's and women's restrooms. These amenities are
typical, adequate and functional in use.
The community streets are concrete paved and 15 to 25 feet wide. The
streets were observed to be in good overall condition. On site lighting is
provided via pole mounted fixtures installed throughout the park.
Age and Condition
-----------------
The community and site improvements were built in 1975, 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 average. The effective age of the community is
estimated to be fifteen years. The remaining economic life is estimated at 30
years.
<PAGE>
33
OWNERSHIP AND PROPERTY HISTORY
------------------------------
The ownership of the subject property, as recorded in the Official Records
of Hamilton County in Quitclaim Deed Document Number 9126781, is in the name of
North Glen Park Limited, Roc Properties, Inc. The Deed was recorded in October
1991, and no consideration was indicated. No other sales were noted during the
past three years.
OCCUPANCY
---------
The property is occupied by a fully developed 289-space manufactured home
community. Our inspection confirmed that the physical occupancy was 99.0%. There
are three vacant lots and one employee occupied space. The economic occupancy is
approximately 98.6%. According to the property manager, the occupancy of the
property has been above 95% during the past three years.
Our analysis does not incorporate any value attributable to any community
owned homes as these units are considered personal property, not a portion of
the real estate. Likewise, we have incorporated no income attributable to the
sale of homes in our analysis.
Rental rates at the community are $238.00 per month. The last rent increase
occurred in June 1999. Management bills tenants separately for utilities and
pays for trash collection.
ZONING AND OTHER LAND USE CONTROLS
----------------------------------
The property is zoned as a GB-PD, General Business Planned Development
District under the Westfield zoning ordinance. It is our opinion that the
existing use of the subject property is a legal nonconforming use with the
zoning code.
Flood Hazard
------------
Hamilton County is a participant in the Federal Emergency Management Agency
(FEMA) flood map system. The subject site is not located in a designated Flood
Hazard Area according to Flood Map Community Numbers 180083, Panels 0007C and
0011C, dated March 11, 1983.
<PAGE>
Zoning and Other Land Use Controls 34
Concurrency
-----------
The subject is a legal nonconforming use with the approved comprehensive
plan filed by the city of Westfield and concurrency is not an issue.
Environmental
-------------
We observed no obvious areas of contamination on or about the site. This
analysis assumes that no hazardous substances or waste currently exist at the
site and no consideration was given to the potential liabilities and cleanup
costs associated with the presence of these materials. In addition, we have no
qualifications in environmental hazards and recommend an environmental audit be
performed.
ASSESSMENT AND TAXES
--------------------
The subject property is identified in the Hamilton County records under
Parcel Number 09-05-36-00-00-006.000. The assessed value of the subject totals
$294,900. Based on a 1999 tax rate of $11.3044 per $100.00 of assessed value
less $2,855.08 in homestead and property tax credits plus $179.50 in drainage
taxes, the 1999 taxes payable in 2000 are $30,661.10.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Indiana, residential and commercial
properties are assessed at 33 and 1/3% of the market value. The taxable
assessment for the subject remained the same for 1998 and 1999. The assessed
value indicates a market value for the subject of $885,586. According to the Tax
Collector's Office, all taxes are current. Properties are reassessed annually
and equitability of assessments is a basis for appeal. In comparison to our
market value opinion contained herein, the subject's assessed value appears low.
It is our opinion that the subject property is under assessed. This not uncommon
for manufactured housing communities since large parts of the value can be
attributed to the entrepreneurial skill in acquiring the land and filling the
community.
Historically, the tax rates have varied slightly since 1997. The table on
the following page illustrates the tax liability for the subject property since
1997.
<PAGE>
Assessment and Taxes 35
<TABLE>
<CAPTION>
=================================================
Year Total Taxes
-------------------------------------------------
<S> <C>
1999 $30,661.10
-------------------------------------------------
1998 $31,010.10
-------------------------------------------------
1997 $29,221.64
=================================================
</TABLE>
Historically the taxes have varied, but we would expect some increase in
future years as the demand for governmental service increases. We have projected
the stabilized taxes at $31,010, applying the 1999 tax rate of $11.3044 less
credits plus drainage taxes to an assessment of $1,020 per space, or $294,900.
MARKETABILITY AND EXPOSURE PERIOD
---------------------------------
The subject property as discussed in the Neighborhood Analysis and
Manufactured Housing Community Market Overview sections of this report is
competitive and marketable with other properties in the marketplace.
There are typically four classes of purchasers attracted to this type of
development. The first are the tenants/residents of the community, purchasing on
a cooperative or condominium basis to reduce rental rates. The second class of
purchaser would be the single owner/operator who purchases a community as an
income and investment vehicle. Third would be the "traditional" manufactured
housing community owner/developer who views the community as a safe, long-term
investment. Finally, there is the institutional investor or syndicate (REIT)
which owns several large manufactured housing communities on a
statewide/nationwide basis.
Due to the stability of manufactured housing community investments, the
REIT investors have been a major player in the marketplace. In 1994, REIT
investors bid down capitalization rates for new, large communities. However,
after the initial splash, REIT investments have slackened as property owners
have placed premium prices on their properties. Resident groups have also
increased demand for manufactured housing community investments. According to
our banking sources, resident groups are able to borrow money at debt coverage
ratios as low as 1.0 to 1. The banks view resident group loans as good quality
with minimum risk. Typical payback periods range between five and eight years.
All age communities, like the subject, typically are not candidates for resident
purchase.
<PAGE>
Marketability and Exposure Period 36
Discussions with large institutional manufactured housing community
investor representatives and local area realtors, indicated that "properly
priced", stable, well kept manufactured housing communities should "be under
contract" within a six to eight month period in today's market. However, our
research has also revealed that very few communities are "listed" for sale and
that for the most part brokers solicit owners for buyers.
Our discussions further indicated that institutional investors required a
minimum of 200 spaces, and pricing would reflect an 8.50% to 9.50% overall
capitalization rate requirement for senior communities. All age communities
typically reflect higher capitalization rates due to a less stable occupancy
base. Pricing is established by processing gross income, reduced by a 3% to 5%
vacancy and credit loss factor with expenses of 35% of effective gross income.
An additional capital charge of 3% to 5%, based on overall condition, is
deducted to arrive at a net operating income (NOI). This criteria is generally
the most restrictive pricing, as other investors will tend to accept lower
expense ratios (30%), no capital charges and a lower overall rate.
Interest rates are low and financial institutions are again willing to lend
money for existing real estate projects with good occupancies. The presence of
life insurance companies and conduit programs have made the financing of
manufactured housing communities a very competitive business. The insurance
companies and conduit programs will lend on a non-recourse basis, with terms
ranging from 10 to 20 years.
On the basis of the preceding analysis, in our opinion, the exposure period
for the subject would be within the range indicated by the industry
participants, and we estimate an exposure period of six months.
<PAGE>
VALUATION SECTION
<PAGE>
38
HIGHEST AND BEST USE
--------------------
Highest and Best Use may be defined as:
"The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible and which results in the highest value."/2/
The highest and best use of a specific parcel of land does not depend on
subjective analysis by the property owner, the developer, or the appraiser;
rather, the competitive forces within the market where the property is located
shape highest and best use. Therefore, the analysis and interpretation of
highest and best use is an economic study of market forces focused on the
subject property.
Market forces also shape market value. The general data that is collected
and analyzed to estimate property value is also used to formulate an opinion of
the property's highest and best use as of the effective date of the appraisal.
In all valuation assignments, value estimates are based on use. The highest and
best use of a property to be appraised provides the foundation for a thorough
investigation of the competitive positions of buyers and sellers in the
marketplace. Consequently, highest and best use can be described as the
foundation on which market value rests. Without interaction in the marketplace,
highest and best use would not exist and market value estimations would be
impossible.
When potential buyers contemplate purchasing real estate for personal use
or occupancy, their principal motivations are perceived benefits of enhanced
enjoyment, prestige, and privacy. Purchasers of investment property are
frequently motivated by the promise of net income or capital accumulation and
certain tax advantages. These investors are more directly concerned with
feasibility, an indication that a project has a reasonable likelihood of
satisfying their specific objectives. These objectives may include assured
occupancy, establishing operating costs at a reasonable and acceptable level,
and potential property appreciation.
_______________
/2/ The Appraisal Institute, The Appraisal of Real Estate, 10th Edition
----------------------------
Chicago: The Appraisal Institute, 1992, page 275.
<PAGE>
Highest and Best Use 39
Analysis of the highest and best use of: 1) the land as though vacant, and
2) the property as improved, is essential in the valuation process. Through
highest and best use analysis, we attempt to interpret the market forces that
influence the subject property and identify the use on which the final value
estimate will be based. This determination is based on the analysis and
interpretation of prevailing market conditions, the trends affecting the buyers
and sellers in the marketplace, and the existing use of the subject property.
Analyzing the highest and best use of the land as though vacant serves two
functions. First, it helps identify comparable properties that should have
highest and best uses of the land as though vacant, similar to that of the
subject property. The second reason is to identify the use that would produce
maximum income to the land after property income is allocated to the
improvements. In the Cost Approach and some income capitalization techniques, a
separate value estimate of the land is required. Estimating the land's highest
and best use as though vacant becomes the necessary part of deriving a land
value estimate.
There are also reasons to analyze the highest and best use of the property
as improved. The first is to help identify comparable properties that should
have the same or similar highest and best uses as the improved subject property.
The second is to decide whether the improvements should be demolished, renovated
or retained in their present condition. They should be retained as long as they
have some marketable value and the return from the property exceeds the return
that would be realized by a new use, after deducting the costs of demolishing
the old building and constructing a new one. Identification of the existing
property's most profitable use is crucial to this determination.
The highest and best use of both the land as though vacant and the property
as improved must meet four criteria. The highest and best use must be:
1. Legally Permissible
2. Physically Possible
3. Financially Feasible
4. Maximally Productive
These criteria are usually considered sequentially; a use may be
financially feasible, but this is irrelevant if it is physically impossible or
legally prohibited. Only when there is a reasonable possibility that one of the
prior, unacceptable conditions can be changed is it appropriate to proceed with
the analysis. If, for example, current zoning does not permit a potential
highest and best use, but there is a possibility that the zoning can be changed,
the proposed use can be considered on that basis.
<PAGE>
Highest and Best Use 40
Legally Permissible
-------------------
The use must be legal. The use must be probable, not speculative or
conjectural. There must be a profitable demand for such a use and it must return
to the land the highest net return for the longest period of time.
Legal restrictions, as they apply to the subject property, are of two
types, i.e., private restrictions (deed restrictions, easements, etc.) and
public restrictions (zoning, building codes, environmental regulations and
historic district controls, etc.). These latter restrictions must be
investigated, to the best of our ability, because they may preclude many
potential highest and best uses. No information regarding private restrictions
affecting the subject was uncovered in our research or provided by the client.
It is assumed that only common restriction, i.e., utility easements, etc. are
in-place which would not be of any significant consequence to the development of
the site.
If the highest and best use of the site or property is not allowed under
current zoning, but there is a reasonable probability that a change in zoning
could be obtained due to shifting economic and social patterns, these conditions
can be considered determining highest and best use. However, we must fully
disclose all pertinent factors relating to a possible zoning change, including
that the change will not be granted. We must also be sensitive to potential
public reaction to proposed development projects since adverse reactions from
local residents and the general public have stopped many real estate
developments. The existing and/or projected use should be harmonious with the
nature and condition of existing neighborhood development.
The existing use of the subject property is a legal nonconforming use with
the zoning code for Westfield. Therefore, the subject meets the legally
permissible criteria of this analysis as a legal nonconforming use.
Physically Possible
-------------------
The second constraint imposed on the possible use of the property is that
dictated by the physical aspects of the site itself. Size, shape and terrain of
the parcel of land affect the uses to which it can be developed. The utility of
the parcel may depend on its frontage and depth. Also considered are the
capacity and availability of public utilities. When a site's topography or
subsoil conditions make development restrictive or costly, its potential use is
adversely affected. In general, the larger the site, the greater the potential
for achieving economies of scale or flexibility in development.
<PAGE>
Highest and Best Use 41
The highest and best use of a property as improved also depends on physical
considerations such as size, design and condition. The condition of the
property and its ability to continue in its current use may be relevant. If the
property should be converted to another use, the cost of conversion must be
analyzed in light of the returns to be generated by the new use. Obviously, the
costs of conversion depend on the property's existing physical condition.
The subject site is irregular in shape and contains a total net land area
of 35.97 acres. The tract is generally level with a gentle slope to the east and
is at surrounding street grade. The size and shape of the site does not
restrict maximum flexibility and development.
Financially Feasible
--------------------
After determining which uses are physically possible and legally
permissible, we have eliminated many uses from consideration. Then the uses
that meet the first two criteria are analyzed further to determine which are
likely to produce an income, or return, equal to or greater than the amount
needed to satisfy operating expenses, financial obligations and capital
amortization. All uses that are expected to produce a positive return are
regarded as financially feasible.
To determine financial feasibility, we then estimate the future gross
income that can be expected from each logical highest and best use. Vacancy and
collection losses and operating expenses are then subtracted from each gross
income to obtain the likely net operating income (NOI) from each use. A rate of
return on the invested capital can then be calculated for each use. If the net
revenue capable of being generated is enough to satisfy the required rate of
return on investment and provide a return on the land, the use is financially
feasible within some price limit.
Maximally Productive
--------------------
Of the financially feasible uses, the use that produces the highest price,
or value, consistent with the rate of return warranted by the market for that
use is the highest and best use. To determine the highest and best use of land
as though vacant, the same rate of return is often used to capitalize income
streams from different uses into their respective values. This procedure is
appropriate if all competing uses have similar risk characteristics. If not,
differing rates of return would be required. The use that produces the highest
value is the highest and best use.
To test the highest and best use of land as though vacant or a property as
improved, an appraiser analyzes all logical, feasible alternatives. The market
usually limits the number of property uses to a few logical choices. Each
alternative use must first meet the tests of
<PAGE>
Highest and Best Use 42
physical possibility and legal permissibility. The uses that meet the first two
tests are then analyzed to ascertain how many financially feasible alternatives
must be considered.
An appraiser must exercise caution in performing market analysis to support
an estimate of highest and best use. Although a given site may be particularly
well suited for a specific use, there may be a number of other sites that are
also well suited, and some may be better suited. Therefore, the appraiser must
test the highest and best conclusion to ensure that existing and potential
competition from other sites has been fully recognized.
Highest and Best Use - Vacant Land
----------------------------------
In determining the highest and best use of the site as vacant, the most
restrictive constraint is the legal use of the site. In the Zoning section of
this appraisal, it was noted that manufactured housing community development of
the property is a legal nonconforming use of the site.
We have also noted that there are a number of competitive manufactured
housing communities in the subject's market area. Due to the non-availability
of space for immediate manufactured housing community development fees and a
lack of financing for speculative projects, it is unlikely that there will be an
abundance of speculative manufactured housing community development in the
foreseeable future.
Current trends in the manufactured housing sales would facilitate the
development of a manufactured housing community. In our opinion, the highest
and best use of the site, as if vacant and available for development, would be
to hold the property for future sale as the market trends might predicate, or
develop the land for low-to-moderate priced housing.
Highest and Best Use - As Improved
----------------------------------
The site is currently improved with a 289-space all age manufactured
housing community. The use of the site is a legal non-conforming use under the
current zoning code. The improvements are well situated on the site which enjoys
access from U.S. Highway 31. The use of the site is physically possible. The
demand for manufactured housing in this area is evident, as exhibited by
competing properties. As evidenced in the Income Capitalization Approach, the
property is capable of providing an acceptable return to an owner, demonstrating
the financial feasibility of the subject property.
The property, as currently improved, is physically possible, legally
permissible, financially feasible and maximally productive. Therefore, in our
opinion, the highest and best use of the property as improved is its current use
as a 289-space all age manufactured housing community.
<PAGE>
43
VALUATION PROCESS
-----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject property, we have considered the
positive and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Direct Sales Comparison Approach produces an estimate of value through a
comparison of similar properties, which have been transferred in the local
market.
In the analysis of a stabilized manufactured housing community, investors
are primarily concerned with cash flow to service any debt and the equity
positions. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of homes by offering
low space rental rates, an investor would not be willing to compensate a seller
for any more than the income to be received. A potential investor would be
primarily interested in the cash flow and equity return. Due to the
subjectivity of depreciation estimates and the lack of comparable land sales, we
have omitted the cost approach.
A number of positive and negative factors were believed to affect the
overall value of the subject property. On the positive side, the following were
considered.
1. The community is established and enjoys convenient access to primary
traffic arteries.
2. The community has maintained a high level of occupancy during recent
years.
Partially offsetting the positive influences are negative factors among
which the following were considered the most pertinent:
1. Subject is an older community that is in average condition.
With the above factors in mind, the Income Capitalization and Sales
Comparison Approaches will now be discussed in detail on the following pages.
<PAGE>
44
INCOME CAPITALIZATION APPROACH
------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is of course an initial goal.
Tempered by capital gains considerations and the potential for recapture of book
depreciation accruals, a seller is often forced to consider a negotiated price
that may include such concessions as interim or permanent financing. Dictated
by market forces, the rate, term, and amount of financing may be favorable,
neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms. Within the goal of price minimization purchasers seek:
1. Cash flow relative to capital investment measured either on a pre-income
tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
property, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property.
<PAGE>
Income Capitalization Approach 45
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the property. The estimate of
net operating income is derived through the process of estimating the total
potential gross income (PGI), from lot rentals, less any vacancy and credit
loss, added to the estimate of income from other sources, producing an effective
gross income (EGI) estimate. All expenses associated with the operation of the
property are then deducted to yield a stabilized net operating income (NOI)
estimate.
In our estimate of the stabilized net operating income, we have considered
the subject's current rent and expense levels and historical trends, together
with current rent and expense levels at manufactured housing communities similar
to the subject. The subject's historical income and expenses for 1997, 1998 and
1999 have been presented, in the table on the following page. The expenses for
the subject were compiled separately but consolidated for analysis purposes.
Although the expenses do not appear unreasonable, we have also relied on
market comparables. Current income and expense information on three comparable
manufactured housing communities has also been presented in this section.
The data on the tables has been arrayed to display the "percent of total
income" and "dollar per space" figures, consistent with industry reporting
practices. We have combined some of the owners expense categories for purposes
of comparison.
Our analysis of each component of income, vacancy and credit loss and
expenses follows these tables, and has been summarized in the Stabilized
Operating Statement found on Page 56.
<PAGE>
Income Capitalization Approach 46
<TABLE>
<CAPTION>
=========================================================================================================================
North Glen - Historical Income and Expenses
Pct. of $ Per Pct. of $ Per Pct. of $ Per
1997 Income Space 1998 Income Space 1999 Income Space
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $ 732,194 86.01% $ 2,533.54 $ 765,462 85.97% $ 2,648.66 $ 791,192 84.26% $ 2,737.69
Miscellaneous/Other 119,140 13.99% 412.25 124,873 14.03% 432.09 147,757 15.74% 511.27
------------------------------------------------------------------------------------------------
Total Income $ 851,334 00.00% $ 2,945.79 $ 890,335 100.00% $ 3,080.74 $ 938,949 100.00% $ 3,248.96
Expenses:
Insurance $ 7,604 0.89% $ 26.31 $ 4,412 0.50% $ 15.27 $ 4,652 0.50% $ 16.10
Office/Administrative 34,989 4.11% 121.07 28,470 3.20% 98.51 35,063 3.73% 121.33
Maintenance & Repairs 21,279 2.50% 73.63 13,424 1.51% 46.45 15,945 1.70% 55.17
Management Expense 42,382 4.98% 146.65 44,437 4.99% 153.76 46,849 4.99% 162.11
Wages & Benefits 46,375 5.45% 160.47 56,242 6.32% 194.61 57,232 6.10% 198.03
Property Taxes 33,959 3.99% 117.51 35,174 3.95% 121.71 32,605 3.47% 112.82
Utilities 138,452 16.26% 479.07 143,375 16.10% 496.11 156,261 16.64% 540.70
Miscellaneous 16,609 1.95% 57.47 3,826 0.43% 13.24 2,708 0.29% 9.37
------------------------------------------------------------------------------------------------
Total Expenses $ 341,649 40.13% $ 1,182.18 $ 329,360 36.99% $ 1,139.65 $ 351,315 37.42% $ 1,215.62
Net Operating Income $ 509,685 59.87% $ 1,763.62 $ 560,975 63.01% $ 1,941.09 $ 587,634 62.58% $ 2,033.34
=========================================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 47
Income Analysis
---------------
The general practice in the local market is to charge a base lot rent on a
monthly basis. As previously discussed in the Manufactured Housing Community
Market Overview section of this report, this rate, at the subject, is $238.00
per month for both singlewide and doublewide units. Based upon the most recent
Rent Roll and Revenue Summary, the total gross scheduled rent is $68,782 per
month or $238.00 per month per unit.
The base lot rate generally includes trash collection. Base lot rents
typically generate between 90% and 99% of the total income in a manufactured
housing community. At the subject trash collection is included in the monthly
lot rent with the utilities being paid by the tenant (utilities are paid as
additional rent). As shown by our survey, the subject's lot rents are above the
market range and is considered reasonable given the superior location, amenities
and the services provided. Based on the market range, we are of the opinion
that the subject has a reasonable rent structure.
Potential Gross Income
----------------------
As any potential purchaser would incorporate a forecast of potential gross
income at the existing rent levels, our analysis has also accounted for this.
In our forecast of total rental income, we have forecast an average rent of
$238.00 per month for all 289 sites. The total potential gross income from lot
rentals is $825,384.
Vacancy and Credit Loss
-----------------------
Vacancy and credit loss is typically a very small percentage in an
established community, due primarily to the high cost of relocating homes. The
current occupancy at the subject property is 98.6%. All age communities
typically have a more transient occupancy than do senior communities. We have
estimated stabilized vacancy and credit loss at 3% to account for both physical
and economic vacancy, and credit loss.
Total vacancy and credit loss has been estimated to be $24,762. The
effective gross income from rentals is estimated to be $800,622.
Miscellaneous Income
--------------------
Miscellaneous income at the subject is generated from sources such as
utilities reimbursements, storage fees, late fees, application fees, and bad
check charges. Historically, the subject generated $412.25 per space in 1997,
$432.09 per space in 1998 and $511.27 per space in 1999. We have estimated
miscellaneous income at $475.00 per space or $137,275 annually.
<PAGE>
Income Capitalization Approach 48
Effective Gross Income
----------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated income losses due to any tenant changes, added to any additional
income from miscellaneous sources. Our estimate of the stabilized effective
gross income of $937,897 is detailed below:
====================================================================
North Glen Manufactured Housing Community
Effective Gross Income
====================================================================
Income:
Monthly Monthly
Spaces Rent Total Annualized
--------------------------------------------------------------------
289 $238.00 68,782 825,384
--------------------------------------------------------------------
Gross Potential Rental $68,782 $825,384
Income
Less:
Vacancy & Credit Loss 3.0% (24,762)
--------
Effective Gross Income From Rentals $800,622
Plus:
Miscellaneous Income $475.00 137,275
--------
Effective Gross Income $937,897
====================================================================
<PAGE>
Income Capitalization Approach 49
Operating Expense Analysis
--------------------------
The following discussion addresses each of the line item expenses for the
property. We have presented 1997, 1998 and the 1999 expense amounts, together
with the comparable expense data, followed by our stabilized estimate of the
expense.
The comparable expense information has been obtained from a number of
reliable sources and we have presented it in a summary form, on the following
page, to maintain confidentiality. The expense comparables range in size from
109 to 144 spaces. These communities have operations similar to the subject.
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
Manufactured Housing Community Operations
Pct. of $ Per Pct. of $ Per Pct. of $ Per
Spaces 126 Income Space 109 Income Space 144 Income Space
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rents $213,370 88.23% $1,693.41 $339,528 100.00% $3,114.94 $366,892 97.98% $2,547.86
Miscellaneous/Other 28,460 11.77% 225.87 0 0.00% 0.00 7,557 2.02% 52.48
--------------------------------------------------------------------------------------------------
Total Income $241,830 100.00% $1,919.29 $339,528 100.00% $3,114.94 $374,449 100.00% $2,600.34
Expenses:
Insurance $ 3,131 1.29% $ 24.85 $ 2,740 0.81% $ 25.14 $ 4,116 1.10% $ $28.58
Office/Administration 2,155 0.89% 17.10 5,783 1.70% 53.06 2,310 0.62% 16.04
Maintenance & Repairs 3,899 1.61% 30.94 4,100 1.21% 37.61 10,040 2.68% 69.72
Management Expense 6,000 2.48% 47.62 16,400 4.83% 150.46 8,400 2.24% 58.33
Wages & Benefits 13,200 5.46% 104.76 10,000 2.95% 91.74 17,040 4.55% 118.33
Property Taxes 17,179 7.10% 136.34 38,058 11.21% 349.16 36,397 9.72% 252.76
Utilities 25,633 10.60% 203.44 27,920 8.22% 256.15 57,479 15.35% 399.16
Total Expenses $ 71,197 29.44% $ 565.06 $105,001 30.93% $ 963.31 $135,782 36.26% $ 942.93
Net Operating Income $170,633 70.56% $1,354.23 $234,527 69.07% $2,151.62 $238,667 63.74% $1,657.41
==========================================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 51
Insurance
---------
Insurance charges are typically property specific based on the location and
the amenity package. Historically, these charges have varied annually, ranging
from approximately $15.27 per space in 1998 to $26.43 per space in 1997. The
comparable expense data indicated a range from $24.85 to $28.58 per space. We
have placed emphasis on the historical amounts. We have used $16.00 per space in
our estimate of this expense. This is equal to $4,624 annually and represents
approximately 0.49% of the estimated effective gross income.
<TABLE>
<CAPTION>
==========================================================================================
1997 1998 1999 Comp Comp Comp Stabilized
1 2 3 Estimate
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $7,604 $4,412 $4,652 $3,131 $2,740 $4,116 $4,624
------------------------------------------------------------------------------------------
% EGI 0.89% 0.50% 0.50% 1.29% 0.81% 1.10% 0.49%
------------------------------------------------------------------------------------------
$/Space $26.31 $15.27 $16.10 $24.85 $25.14 $28.58 $16.00
==========================================================================================
</TABLE>
Office
------
This expense category is also project specific due to varying
classifications of expense categories. We have attempted to include like items
in this category for both the subject and the expense comparables. For the
subject, this category includes office expense, supplies, licenses, dues,
subscriptions, postage, auto, travel, advertising and telephone. Historically,
this expense has ranged from $98.51 per space in 1998 to $121.33 per space in
1999. The expense comparables indicated a much lower range for this category
from $16.04 to $53.06 per space. Primary consideration was given to the
historical expense levels. We have estimated the administrative/office expense
at $100.00 per space or $28,900 per year. This estimate is equal the equivalent
of 3.08% of the effective gross income estimate.
<TABLE>
<CAPTION>
==========================================================================================
1997 1998 1999 Comp Comp Comp Stabilized
1 2 3 Estimate
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
Total $34,989 $28,470 $35,063 $2,155 $5,783 $2,310 $28,900
------------------------------------------------------------------------------------------
% EGI 4.11% 3.20% 3.73% 0.89% 1.70% 0.62% 3.08%
------------------------------------------------------------------------------------------
$/Space $121.07 $ 98.51 $121.33 $17.10 $53.06 $16.04 $100.00
==========================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 52
Maintenance and Repairs
-----------------------
These expenses are project specific based on the age and condition of the
property. Many properties expense capital items rather than capitalizing them,
which results in abnormal spikes in the expense amounts in certain years.
Historically, maintenance and repair expenses have ranged from $46.45 per
space in 1998 to $73.63 in 1997. We observed the community to be in overall
average condition. However, as the community continues to age additional
maintenance efforts will be necessary. The expense comparables indicate a wide
range of expense in this category from $30.94 per space to $69.72 per space.
Our stabilized estimate of this expense is $55.00 per space or $15,895 annually,
based on both the historical and comparable expense data. This estimate is
equal to approximately 1.69% percent of the estimated effective gross income.
<TABLE>
<CAPTION>
==========================================================================================
1997 1998 1999 Comp Comp Comp Stabilized
1 2 3 Estimate
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
Total $21,279 $13,424 $15,945 $3,899 $4,100 $10,040 $15,895
------------------------------------------------------------------------------------------
% EGI 2.50% 1.51% 1.70% 1.61% 1.21% 2.68% 1.69%
------------------------------------------------------------------------------------------
$/Space $ 73.63 $ 46.45 $ 55.17 $30.94 $37.61 $ 69.72 $ 55.00
==========================================================================================
</TABLE>
Management Fee
--------------
Management fees at the expense comparables ranged from 2.24% to 4.83% of
effective gross income. The overall market range for management fees was found
to range from approximately 3.0% to 5.0% of effective gross income.
We have estimated a fee of 5.0% of effective gross income, considered
adequate for the management of a property of this size, in this location.
Applying this percentage to the effective gross income estimate produces an
annual amount of $46,895 or $162.27 per space per year.
<PAGE>
Income Capitalization Approach 53
Wages and Benefits
------------------
This expense includes all of the costs associated with the on-site staff.
These costs including payroll, payroll and unemployment taxes and any health
insurance benefit package. Historically this expense has ranged from $160.47 in
1997 to $198.03 per space in 1999.
The expense comparables indicate a wide range of expense in this category
from $91.74 per space to $118.33 per space. Our estimate of this expense has
been based primarily on the historical expense levels. Our estimate of $200.00
per space, is equal to $57,800 annually or 6.16% of the estimated effective
gross income.
<TABLE>
<CAPTION>
===============================================================================================================
1997 1998 1999 Comp Comp Comp Stabilized
1 2 3 Estimate
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $46,375 $56,242 $57,232 $13,200 $10,000 $17,040 $57,800
---------------------------------------------------------------------------------------------------------------
% EGI 5.45% 6.32% 6.10% 5.46% 2.95% 4.55% 6.16%
---------------------------------------------------------------------------------------------------------------
$/Space $160.47 $194.61 $198.03 $104.76 $ 91.74 $118.33 $200.00
===============================================================================================================
</TABLE>
Property Taxes
--------------
This category of expense represents the annual real estate tax liability of
the property. This category is project specific due to location and taxing
authority. We have not used the expense comparables for the estimate this
expense.
In our analysis we have relied on the analysis as presented and discussed
in the Assessment and Taxes section of this report. Our analysis indicated a tax
liability of $30,661. This estimate is equal to $106.09 per space or 3.27% of
the effective gross income estimate.
<PAGE>
Income Capitalization Approach 54
Utilities
---------
This category of expense is also project specific, due to the number and
type of services that are included in the rent. In this case, this line item has
historically included the costs of providing water, sewer and trash pick-up for
the homesites and water, sewer, electric and trash collection for the common
areas of the community. This expense has ranged from $479.07 per space in 1997
to $540.70 per space in 1999. The expense comparables indicated this expense to
range from $203.44 to $399.16 per space. We have estimated this expense at
$555.00 per space per year. This is equal to $160,395, or approximately 17.10%
of the estimated effective gross income estimate. Our estimate gives
consideration to the recent increase in water costs at the subject property.
<TABLE>
<CAPTION>
===============================================================================================================
1997 1998 1999 Comp Comp Comp Stabilized
1 2 3 Estimate
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $138,452 $143,375 $156,261 $25,633 $27,920 $57,479 $ 160,395
---------------------------------------------------------------------------------------------------------------
% EGI 16.26% 16.10% 16.64% 10.60% 8.22% 15.35% 17.10%
---------------------------------------------------------------------------------------------------------------
$/Space $ 479.07 $ 496.11 $ 540.70 $203.44 $256.15 $399.16 $ 555.00
===============================================================================================================
</TABLE>
Miscellaneous Expense
---------------------
This expense has ranged from $9.37 per space in 1999 to $57.47 per space in
1997. We have estimated this expense at $10.00 per space per year. This is equal
to $2,890, or approximately 0.31% of the estimated effective gross income.
Reserves
--------
Property owners do not typically account for reserves for capital
replacement. This category represents the inclusion of set-asides for major
recurring or capital type expenditures experienced periodically by any property.
This item is typically accounted for either on a dollar per space ($20.00 to
$30.00) or a percentage (0.5% to 2.0%) of effective gross income. We have used
$25.00 per space per year, believed adequate to cover future capital costs. This
equates to $7,225 annually, equal to approximately 0.77% of the effective gross
income estimate.
<PAGE>
Income Capitalization Approach 55
Expense Summary
---------------
To summarize, we have estimated the stabilized total operating expenses for
the subject to be $355,285. This estimate is equal to 37.88% of the effective
gross income estimate or $1,229.36 per space annually.
Expense Summary
<TABLE>
<CAPTION>
===============================================================================================================
1997 1998 1999 Comp Comp Comp Stabilized
1 2 3 Estimate
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $ 341,649 $ 329,360 $ 351,315 $ 71,197 $105,001 $135,782 $ 355,285
---------------------------------------------------------------------------------------------------------------
% EGI 40.13% 36.99% 37.42% 29.44% 30.93% 36.26% 37.88%
---------------------------------------------------------------------------------------------------------------
$/Space $1,182.18 $1,139.65 $1,215.62 $ 565.06 $ 963.31 $ 942.93 $1,229.36
===============================================================================================================
</TABLE>
As shown on the preceding table, expenses ranged from 36.99% of the
Effective Gross Income in 1998 to 40.13% in 1997. The expense comparables, as
summarized above, indicated a range from 29.44% (Comparable Number 1) and 36.26%
(Comparable Number 3).
Our estimate of total expenses is equal to 37.88% of the effective gross
income estimate. It should be noted that the historical expenses did not
include a reserve for capital expenditures. Additionally, none of the expense
comparables reflect a reserve for capital expenditures, which has been included
in our estimate.
Our estimate of net operating income is $582,613. Our stabilized estimate of
income and expenses for the subject is presented on the following page.
<PAGE>
Income Capitalization Approach 56
<TABLE>
<CAPTION>
=====================================================================================================
North Glen
Stabilized Operating Statement
% of $ per
Amount EGI Space
=====================================================================================================
<S> <C> <C> <C> <C> <C>
Income
Monthly Monthly
Spaces Rent Total Annualized
-----------------------------------------------------------------------------------------------------
289 $ 238.00 68,782 825,384
-----------------------------------------------------------------------------------------------------
Gross Potential Rental Income $ 68,782 $ 825,384
Less:
Vacancy and Credit Loss 3% (24,762)
----------
Effective Gross Income From Rentals $ 800,622
Plus:
Miscellaneous Income $ 475.00 137,275
----------
Total Effective Gross Income $ 937,897 100.00% $3,245.32
Expenses
Insurance $ 4,624 0.49% $ 16.00
Office 28,900 3.08% 100.00
Maintenance & Repairs 15,895 1.69% 55.00
Management Expense 46,895 5.00% 162.27
Wages & Benefits 57,800 6.16% 200.00
Property Taxes 30,661 3.27% 106.09
Utilities 160,395 17.10% 555.00
Miscellaneous 2,890 0.31% 10.00
Reserves 7,225 0.77% 25.00
==================================
Total Expenses $ 355,285 37.88% $1,229.36
Net Operating Income $ 582,613 62.12% $2,015.96
=====================================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 57
Capitalization Discussion
-------------------------
Two alternative methods of valuation are employed in the Income Approach.
Direct capitalization is a method of converting net operating income into market
value, employing a "capitalization" rate based upon market perimeters. This
approach is particularly applicable to properties with a stable income stream,
or in cases where income, and consequently value, can be projected to increase
at a constant or stable rate.
An alternative valuation method is yield capitalization, which employs a
year-by-year projection of income and expenses, recognizing rent changes and the
cost of improvements as they occur. Yield capitalization, also known as
Discounted Cash Flow Analysis, is considered most appropriate in the valuation
of properties with uneven income streams. Since investors are unwilling to pay
for any upside from vacant units, fully developed manufactured housing
communities are typically valued by direct capitalization.
Direct Capitalization
---------------------
Direct capitalization of net operating income by an overall capitalization
rate extracted from the market provides an excellent indication of market value.
Purchasers of manufactured housing communities most often utilize this method.
This method is the most easily understood, closely related to the market, and
convincing if the overall rates abstracted from recent sales are from comparable
sale properties and accurate income data are available. Income data was
available from all of the comparable sale properties included in this report.
Market Data
-----------
The comparable sale data shown in the Sales Comparison section of this
report indicated an overall capitalization rate from 7.67% to 9.86% and averaged
8.86%. Our analysis of this data indicated a relatively wide range in overall
capitalization rates, which tend to be influenced by the size of the community
and its age and condition.
<TABLE>
<CAPTION>
Comparable Sales
==========================================================
Sale Sale Date Overall
Number Capitalization Rate
----------------------------------------------------------
<S> <C> <C>
1 12/99 9.86%
----------------------------------------------------------
2 10/99 7.67%
----------------------------------------------------------
3 08/97 8.78%
----------------------------------------------------------
4 05/97 9.13%
==========================================================
</TABLE>
<PAGE>
Income Capitalization Approach 58
As discussed in the Marketability and Exposure Period section of this
report, our sources indicated that institutional investors required 8.5% to 9.5%
overall capitalization rates for projects in the 200 space range and were the
most restrictive in pricing due to stringent criteria. We also found that REIT
investors were bidding rates down even further. Our information revealed that
manufactured housing community cooperatives and associations would more likely
accept slightly lower overall rates, while the small investor would require a
slightly higher rate.
The comparable sale data represents recent sales of all age communities in
Indiana. Sale Comparables Number Two and Three are superior in amenities and
condition to the subject property and would indicate a higher overall rate.
However, these sales are similar in terms of location. Sale Comparables Number
One and Four are inferior in location and amenities. Sale Comparable 4 is
similar in condition while Sale Comparable Number One is inferior in terms of
condition to the subject property.
Based on the comparison of the sale data to the subject and considering the
current investor and interest rate environment, the overall rate for the subject
would likely be in the 9.0% to 10.0% range. Considering the subject is located
in an older manufacturing housing community and reflects additional risk in
terms of investment, we have concluded a rate of 9.5%.
Debt Coverage Ratio Method
--------------------------
As an alternative to market-derived overall capitalization rates, we have
developed an overall rate through the Debt Coverage Ratio analysis. The
parameters for this calculation are summarized below.
The Debt Coverage Ratio Method of income capitalization essentially
measures the risk involved in mortgage lending. Its usefulness to mortgage
underwriting takes the form of establishing a degree of safety with a given set
of loan terms.
Mortgage underwriting typically focuses on positive debt coverage, (net
operating income/annual mortgage debt service or NOI/ADS), rather than market
value, as a negative cash flow after debt service may indicate a probability
that a mortgage loan could be in jeopardy. Accordingly, if the greatest portion
of the property's value is debt capital, as established by the loan-to-value
ratio, annual debt coverage in underwriting is a major consideration. The debt
coverage ratio method is therefore market based and direct.
By multiplying this risk factor by the projected mortgage payment
requirement an estimate of the required overall rate to satisfy the lender's
minimum risk requirements can be derived.
<PAGE>
Income Capitalization Approach 59
The formula for this procedure is: M x f x DCR = R, where;
M = Loan to Value Ratio
f = Mortgage Constant
DCR = Debt Coverage Ratio
R = Overall Rate
To establish the criteria for the development of the Debt Coverage Ratio
Method, we have conducted a recent survey of lenders; the results are summarized
below:
========================================================================
Contact Gene Fogarty Mike McCoy
------------------------------------------------------------------------
Bank NationsBank Community Bank
------------------------------------------------------------------------
Type Of Lender Conventional Conventional
------------------------------------------------------------------------
Nominal Mortgage Interest Rate Floor of 7.25% to Floor of 7.25% to
8.0% 8.0%
------------------------------------------------------------------------
Amortization Period 15 - 20 Years 15 - 25 Years
------------------------------------------------------------------------
Loan Term 3 - 7 Years 5 - 10 Years
------------------------------------------------------------------------
Debt Coverage Ratio 1.20 - 1.25 1.20 - 1.25
------------------------------------------------------------------------
Loan To Value Ratio 75% 75%
========================================================================
According to US Financial Data, April 7, 2000, 5-year treasury yields were
6.20%. Our survey of lenders indicated an annual interest rate up to 200 basis
points over the 5-year treasury yields, or 8.20%.
A mortgage loan would be available at 75% of the market value, based on a
20-year amortization schedule. Based on these criteria the indicated annual
interest rate constant is 10.1872%. Additionally, our survey indicated that a
minimum debt coverage ratio (DCR) of 1.25 to 1.00 would likely be required for a
property similar to the subject. An overall capitalization rate, based on these
assumptions, has been developed as shown below.
<TABLE>
<CAPTION>
==============================================================================================
M F DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0.75 0.101872 1.25 0.095505
----------------------------------------------------------------------------------------------
Rounded 9.5%
==============================================================================================
</TABLE>
<PAGE>
Income Capitalization Approach 60
The debt coverage ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufacturing housing
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The presence of institutional investors in the market and the dearth of
quality real estate investments have bid down rates on manufactured housing
communities. Investors have become more creative in their acquisition strategies
in order to compete. Therefore, actual transactions in the marketplace better
demonstrate investor perceptions of yields on manufactured housing community
investments.
The rates typically reflect a narrow range and are considered mutually
supportive. Therefore, we have estimated an overall capitalization rate of 9.5%.
We have used this rate in the direct capitalization method to capitalize the net
income of $582,613. The value conclusion of the subject's 289 developed lots via
the direct capitalization method is as follows:
Net Operating Overall Capitalization Market Value
Income Rate
$582,613 divided by 0.095 $6,132,768
Rounded to $6,100,000
<PAGE>
61
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 be consistent with the analysis of the sales data.
For a conveyance to qualify as a "market transaction", four factors must be
present:
1. The conveyance must be "arm's length"; that is, it must be between two
non-related parties.
2. Neither the buyer nor the seller should have been under compulsion to
act.
3. The property should be available to the class of purchasers best able
to utilize the facility.
4. The price must be expressed in the equivalent of cash, adjusted for any
special financing, concessions, or terms.
For any class of real estate, the market area for comparative data must
reflect the area prospective purchasers would consider. Comparability is also a
function of the physical character of the asset to be appraised. Classes of real
estate in which physical specifications are standardized, or in which scale is
small, and/or in which the commodity has achieved uniform market recognition
require that the sales data considered closely resemble the subject. As
specifications become more complex, as scale increases, and as market
recognition declines, the physical similarity of the sales data and the subject
tends to decline. To judge the degree of comparability that exists between the
sales selected for analysis and the subject, several guidelines were applied.
1. Each sale is in the same market as the subject. To the extent that a
market is a meeting place for buyers and sellers of real estate of a
given type, the boundaries of the market are set by the participants in
merchandising and absorbing competitive properties and are economic not
purely physical or geographic.
<PAGE>
Sales Comparison Approach 62
2. Physical characteristics of the subject and comparables are similar.
3. The functional adequacy of each sale property and the subject are
competitive in terms of the ability of each to support similar
functions.
To draw a conclusion from the analysis of the sales data, a unit of
comparison has been selected. The calculation of a unit of comparison provides a
common denominator by which market sales can be related to each other and the
subject. The commonly accepted unit of comparison in the valuation of a
manufactured housing community is the sale price per space, a unit of comparison
which emphasizes the contribution of the improvements, and the contribution of
the land is merged into the unit selling price.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For features that are dissimilar, adjustments have
been made leading to an indication of the price at which the subject could be
expected to sell. In considering adjustments, relevant factors were considered
including:
1. Nature of surrounding development.
2. Relative size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
6. Amenities and occupancy.
Based on our investigation, the following sales are the most significant
transactions for direct comparison with the subject. Our search focused on fully
developed manufactured housing communities with stabilized operations. Our
investigation focused primarily on recent market sales throughout the Indiana
area. The sales used in our analysis occurred between May 1997, and December
1999, and are the most recent sales to occur within this market area. The
properties ranged in size between 208 and 447 spaces. The sale prices, on a per
space basis, ranged from $14,541 to $19,338. The Effective Gross Income
Multipliers (EGIM) ranged from 7.14 to 8.87. The indicated overall rates, as
previously mentioned, ranged from 7.67% to 9.86%.
The following pages detail each of the sales, following which we have
presented a summary of the pertinent data.
<PAGE>
Sales Comparison Approach 63
Income Data
-----------
Annual Occupancy: 70.0% (132 of 188 spaces)
Average Lot Rent: $250.00
Effective Gross Income: $498,711 (buyer's projection after renovation and
expansion)
Expenses: $147,616 (29.6% of the effective gross income)
Net Income: $351,095
Sale Data
---------
Sale Price: $3,350,000
Cash Equivalent Price: $3,560,800
Grantor: Mack Storage.
Grantee: Indianapolis-SSK LLC.
Financing Terms: Cash to seller; sale price adjusted by $210,800
for renovation and expansion cost and sale was
analyzed based on 208 lots.
Sales History
(Past 3 Years): None noted
Market Exposure: Unknown
Verification Source: Public records, representative of buyer
Date: March 2000
Comparison Data
---------------
Sale Price/Space: $17,119 (based on 208 lots)
Effective Gross Income
Multiplier (EGIM): 7.14
Overall Capitalization
Rate (OAR): 9.86%
Comments This property is now known as Arborwood Pointe.
<PAGE>
Sales Comparison Approach 64
Sale Comparable Number Two
Henry Lake Estates
2895 Henry Lakes Boulevard
Taylorsville, Bartholomew County, Indiana
[PHOTO APPEARS HERE]
Sale Date: October 1999
Property Description
--------------------
Size/Type: 287 space all age manufactured housing community
Utilities: Public utilities.
Land Description: Generally level, irregularly shaped, 87.9-acre
parcel of land with adequate access; includes
excess land that is approved for 120 additional
homesites. Improved with asphalt-paved streets and
streetlights.
Improvements/Amenities: Office/gym/clubhouse, basketball court, two ponds
and a playground.
Year Built/Condition: 1993 to 1996/Average
<PAGE>
Sales Comparison Approach 65
Income Data
-----------
Annual Occupancy: 82.6% (237 of 287 spaces)
Average Lot Rent: $170.00
Effective Gross Income: $625,757 (based on 95.0% stabilized occupancy)
Expenses: $200,242 (32.0% of the effective gross income)
Net Income: $425,485
Sale Data
---------
Sale Price: $5,550,000
Cash Equivalent Price: $5,550,000
Grantor: Doneda D. Henry d/b/a Henry Lake Estates
Grantee: Continental Acquisition Corporation
Financing Terms: Cash to Seller
Sales History
(Past 3 Years): None noted
Market Exposure: Unknown
Verification Source: Public records, sales contract
Date: March 2000
Comparison Data
---------------
Sale Price/Space: $19,338
Effective Gross Income
Multiplier (EGIM): 8.87
Overall Capitalization
Rate (OAR): 7.67%
Comments This comparable is superior in quality and
amenities. The sale included a rent guarantee of
occupied sites over a three-year period.
<PAGE>
66
Sales Comparison Approach
Sale Comparable Number Three
Heritage Heights
8100 U.S. Highway 31
Taylorsville, Bartholomew County, Indiana
[Picture Appears Here]
Sale Date: August 1997
PROPERTY DESCRIPTION
--------------------
Size/Type: 447-space all age manufactured home community
Utilities: All Public
Land Description: Gently sloping, irregularly shaped 102.17-acre parcel
of land with adequate access. Improved with asphalt-
paved streets and streetlights.
Improvements/Amenities: Basketball court, RV storage, baseball fields,
playgrounds and walking trails
Year Built/Condition: 1970's and 1998/Average
<PAGE>
67
Sales Comparison Approach
INCOME DATA
-----------
Annual Occupancy: 99.0% (443 of 447 spaces)
Average Lot Rent: $ 150.00
Effective Gross Income: $ 814,000
Expenses: $ 243,587 (30.0% of the effective gross
income)
Net Income: $ 570,413
SALE DATA
---------
Sale Price: $6,500,000
Cash Equivalent Price: $6,500,000
Grantor: M & M Manufacturing Communities, Inc.
Grantee: Heritage Heights L.L.C. (Continental
Communities)
Financing Terms: Cash to seller; buyer paid additional
$144,000 for master lease of 40 vacant sites
(not a part of 447 sites purchased).
Sales History
(Past 3 Years): None noted
Market Exposure: N/A
Verification Source: Ed Jorske, Continental Communities, and
public records
Date: August 1999
COMPARISON DATA
---------------
Sale Price/Space: $ 14,541
Effective Gross Income
Multiplier (EGIM): 7.99
Overall Capitalization
Rate (OAR): 8.78%
Comments: This comparable is located adjacent to Sale
Comparable 2.
<PAGE>
68
Sales Comparison Approach
Sale Comparable Number Four
Hollywood Estates Mobile Home Park
2400 Mounds Road
Anderson, Madison County, Indiana
[Picture Appears Here]
Sale Date: May 1997
PROPERTY DESCRIPTION
--------------------
Size/Type: 242-space all age manufactured home community
Utilities: All Public
Land Description: Gently sloping, irregularly shaped 35.3-acre
parcel of land with adequate access. Improved with
asphalt-paved streets and streetlights.
Improvements/Amenities: Community building, swimming pool
Year Built/Condition: 1972 and 1990/Average
<PAGE>
69
Sales Comparison Approach
INCOME DATA
-----------
Annual Occupancy: 98.8% (239 of 242 spaces)
Average Lot Rent: $ 175.00; Increased after sale
Effective Gross Income: $ 482,790
Expenses: $ 144,837 (30.0% of the effective gross income)
Net Income: $ 337,953
SALE DATA
---------
Sale Price: $3,700,000
Cash Equivalent Price: $3,700,000
Grantor: Robert and Sandra Walbridge
Grantee: Manufactured Housing Communities Limited
Financing Terms: Cash to seller
Sales History
(Past 3 Years): None noted
Market Exposure: N/A
Verification Source: Property Manager, David Matthews, Appraiser
Date: March 1999
COMPARISON DATA
---------------
Sale Price/Space: $ 15,289
Effective Gross Income
Multiplier (EGIM): 7.66
Overall Capitalization
Rate (OAR): 9.13%
Comments: At the time of sale, rents were below market and
spaces have since been separately metered for
utilities.
<PAGE>
70
COMPARABLE SALES SUMMARY
<TABLE>
<CAPTION>
====================================================================================================================================
No. Name/Location Sale Price/ Number Of Spaces Price/ Average E.G.I.M./ O.A.R
Sale Date Space Lot Rent Expense
Ratio
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Broad Acre $3,560,800 208 $17,119 $ 250.00 7.14/ 9.86%
10408 East County Road 100 North December 1999 29.6%
Hendricks County, Indiana
-----------------------------------------------------------------------------------------------------------------------------------
2 Henry Lake Estates $5,550,000 287 $19,338 $ 170.00 8.87/ 7.67%
2895 Henry Lakes Boulevard October 1999 32.0%
Taylorsville, Bartholomew County,
Indiana
-----------------------------------------------------------------------------------------------------------------------------------
3 Heritage Heights $6,500,000 447 $14,541 $ 150.00 7.99/ 8.78%
8100 U.S. Highway 31 August 1997 30.0%
Taylorsville, Bartholomew County,
Indiana
-----------------------------------------------------------------------------------------------------------------------------------
4 Hollywood Estates $3,700,000 242 $15,289 $ 175.00 7.66/ 9.13%
24000 Mounds Road May 1997 30.0%
Anderson, Madison County, Indiana
===================================================================================================================================
</TABLE>
<PAGE>
71
Sales Comparison Approach
[Comparable Sale Location Map Appears Here]
<PAGE>
72
Sales Comparison Approach
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. The properties that have
been compared to the subject have been discussed below:
Sale Comparable Number One is Broad Acre Mobile Home Park in Hendricks
County, Indiana. At the time of sale, the all age community contained 188
spaces and sold in December 1999 for $3,350,000, or $17,819 per space. The
buyer purchased the property with a planned renovation and expansion of 20
additional spaces for a total cost of $210,800. Therefore, this sale was
analyzed based on an adjusted price of $3,560,800 and indicates a unit price of
$17,119 per space. Based on an effective gross income of $498,711, the EGIM was
7.14. The overall rate was 9.86%. The average lot rent at the time of sale was
approximately $250.00. The expenses represented approximately 29.6% of the
effective gross income. The community was 70.0% occupied at the time of sale.
Sale Comparable Number Two is the Henry Lake Estates Mobile Home Park
located in Taylorsville, Indiana. This 287-space all age community sold for
$5,550,000 in October 1999. The sale price equates to a price per space of
$19,338. Based on an effective gross income of $625,757, the EGIM was 8.87.
The expenses represented 32.0% of the effective gross income and the indicated
overall capitalization rate was 7.67%, based on a net operating income of
$425,485. This community was 82.6% occupied at the time of sale and contained
rent guarantee over a three-year period.
Sale Comparable Number Three is the Heritage Heights Mobile Home Park
located adjacent to Sale Comparable Two in Taylorsville, Indiana. This 447-
space all age community sold for $6,500,000 in August 1997. The price equates
to a sale price per space of $14,541. Based on an effective gross income of
$814,000, the EGIM was 7.99. The expenses represented 30.0% of the effective
gross income and the indicated overall capitalization rate was 8.78%, based on a
net operating income of $570,413. This community was 99% occupied at the time
of sale.
Sale Comparable Number Four is the Hollywood Estates Mobile Home Park in
Anderson, Indiana. The 242-space all age community sold for $3,700,000 in May
1997. The cash equivalent price equates to a sale price per space of $15,289.
Based on an effective gross income of $482,790, the EGIM is 7.66. The indicated
overall capitalization rate was 9.13%, which would indicate a net operating
income of $337,953. The average lot rent at the time of sale was at a below
market rent of $135.00, and was increased after the sale. The park was 98.8%
occupied at the time of sale.
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 thirty-four
months, having traded under similar market conditions.
<PAGE>
73
Sales Comparison Approach
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the effective gross income multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 7.14 and 8.87. 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 consists of an all-age community that is situated in a mixed-
use commercial and residential area that has exhibited a significant amount of
new development during recent years. The property has historically exhibited a
high level of occupancy with rental increases also being noted. The expense
ratio of all of the comparables is lower than the subject's expense ratio. The
comparables range from 29.6% to 32.0% and the subject has a forecast expense
ratio of 37.88%. We have relied on Sales 1, 3 and 4 as the most similar to the
subject in terms of quality, condition and location. Based on these
considerations, we have concluded an EGIM slightly below the indicated range,
processing subject's Effective Gross Income of $937,897 with an EGIM of 7.0.
Thus, $937,897 x 7.0 = $6,565,279
Rounded $6,600,000
The value equates to $22,717 per space, higher than all of the comparables.
The subject's average rent ($238.00) is higher than all but one of the
comparables.
Price Per Space Analysis
------------------------
Adjustments, typically considered, are location, age and condition,
occupancy, etc., and are reflected in the income generating capabilities of a
community. A tenant is typically willing, absent other factors, to pay more
rent for a better located, newer community with a greater amenity package.
Rather than making a subjective percentage adjustment to the per space sales
prices, the Net Operating Income/Space (NOI/Space) reflects, in most cases, the
market perception of a property's position in the marketplace. Since investors
are mainly concerned with cash flow to service debt, the net operating income
generating capability of a particular community can be used for comparison
purposes. Typically, the higher the
<PAGE>
74
Sales Comparison Approach
NOI/Space for a community, the higher the per space sales price. The
subject has a NOI/Space of $2,016. The NOI/Space and per space sales prices for
the comparables are shown on the following table. We then compare the percentage
difference between each comparable's NOI/Space and the subject's NOI/Space. For
comparables with a higher NOI/Space, a downward adjustment to the per space
sales price is made. An upward adjustment is made for a comparable with a lower
NOI/Space.
NOI/Space and Per Space Sales Price
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
COMP 1 COMP 2 COMP 3 COMP 4 SUBJECT
<S> <C> <C> <C> <C> <C>
NOI/Space $ 1,688 $ 1,483 $ 1,276 $ 1,397 $2,016
Price/Space $17,119 $19,338 $14,541 $15,289 N/A
Percent
Adjustment 19.43% 35.98% 57.98% 44.36% N/A
Adjusted
Price/Space $20,446 $26,296 $22,972 $22,071 N/A
========================================================================================
</TABLE>
After adjustments, the indicated range is from $20,446 to $22,972 per
space. The subject is situated in a mixed-use commercial and residential area
and is similar in size to most of the comparables used in our analysis. It is
also at the upper end of the range in terms of average rental rate. However, it
is an older community that represents additional risk in terms of investment.
Therefore, we have considered the lower end of the range and concluded $21,500
per space.
Thus, 289 Spaces X $21,500/Space is: $ 6,213,500
Rounded $ 6,200,000
SUMMARY
-------
The two methods indicated a relatively narrow range and are considered
mutually supportive. Therefore, we have concluded a value of $6,400,000 via the
Sales Comparison Approach.
<PAGE>
75
FINAL ESTIMATE OF VALUE
-----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $6,100,000
Sales Comparison Approach $6,400,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales and listings of similar properties. In
the reconciliation, we reviewed each approach to value (a) to ascertain the
reliability of the data and (b) to weight the approach that best represented the
actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of substitution
and anticipation. This approach postulates that the value of a property derives
from the net income the property will produce during its economic life.
Investors in the market predicate their decisions on economic factors oriented
to the market and concern themselves with net income and its durability. The
income capitalization approach synthesizes the capitalized return to and of the
improvements and to the land. In the current instance, the availability of
sufficient reliable and supportable historical data for the subject, made the
income capitalization approach a reliable gage of the market value of the
subject property.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis
of this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the
valuation of the subject property, the sales comparison approach was considered
reliable.
The two approaches reflect a narrow range of values and are considered
mutually supportive. Since buyers are most concerned with cash flow to service
debt, we have placed primary emphasis on the income approach. Therefore, our
opinion of the market value of the subject property, based on a reasonable
exposure period of six months, as of May 12, 2000, was:
- SIX MILLION ONE HUNDRED THOUSAND DOLLARS -
($6,100,000)
<PAGE>
76
CERTIFICATION
-------------
I certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions and are my personal,
impartial and unbiased professional analyses, opinions, and
conclusions.
. I have no bias with respect to the property that is the subject of
this report, or to the parties involved with this assignment.
. My engagement in this assignment was not contingent upon developing or
reporting predetermined results.
. My compensation for completing this assignment is not contingent on
the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of the
appraisal.
. My analysis, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, the Code
of Professional Ethics, and the Standards of Professional Practice of
the Appraisal Institute and the American Society of Appraisers.
. The use of this report is subject to the requirements of the Appraisal
Institute and the American Society of Appraisers relating to review by
its duly authorized representatives.
. As of the date of this report, Keith D. McFarland, ASA has completed
the requirements under the continuing education program of the
American Society of Appraisers.
. Keith D. McFarland, ASA has made a personal inspection of the property
that is the subject of this report.
. No one provided significant professional assistance to the person
signing this report.
/s/ Keith D. McFarland JAG
----------------------------------
Keith D. McFarland, ASA
Indiana Certified General Real Estate Appraiser #CG69201433
<PAGE>
77
ASSUMPTIONS AND LIMITING CONDITIONS
-----------------------------------
The primary assumptions and limiting conditions pertaining to the
conclusion in this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function. The appraisal report may not be reproduced, in whole or
in part, and a third party may not utilize the findings of the report for any
purpose, without the written consent of Whitcomb Real Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes that may be attributed to such considerations.
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>
78
Assumptions and Limiting Conditions
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed in
connection with any matter that may be disclosed by a proper survey. If a
subsequent survey should reflect a differing land area and/or frontages, we
reserve the right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others and are not meant to be used as a reference in legal matters
of survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projections contained in
the appraisal assume both responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures that would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made available
to us, so statements regarding soil qualities, if made in the report, are not
conclusive but have been considered consistent with information available to us
and provided by others. In addition, unless stated otherwise in the appraisal,
the land and soil of the area under appraisement appears firm and solid, but the
appraisal does not warrant this condition.
The appraisal report covering the subject property is limited to surface rights
only, and does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers; therefore we are not qualified to judge the structural
and environmental integrity of the improvements, if any. Consequently,
<PAGE>
79
Assumption and Limiting Conditions
No warranty, representations or liability are assumed for the structural
soundness, quality, adequacy or capacities of said improvements and utility
services, including the construction materials, particularly the roof,
foundations, and equipment, including the HVAC systems, if applicable. Should
there be any question concerning same, it is strongly recommended that an
Engineering/Construction/Environmental inspection be obtained. The value
estimate stated in this appraisal, unless noted otherwise, is predicated on the
assumption that all improvements, equipment and building services, if any, are
structurally sound and suffer no concealed or latent defects or inadequacies
other than those noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas that are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
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.
<PAGE>
80
Assumptions and Limiting Conditions
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal tax or regulatory laws. Therefore, the actual results
achieved during the projected holding period and investor requirements relative
to anticipated annual returns and overall yields could vary from the projection.
Thus, variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether or not it is in conformity with the various
detailed requirements of the ADA. It is possible that a compliance survey of
the property together with a detailed analysis of the requirements of the ADA
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
<PAGE>
ADDENDA
<PAGE>
LEGAL DESCRIPTION
Part of the West Half of the Northeast Quarter of Section 36, Township 19 North,
Range 3 East, in Hamilton County, Indiana more particularly described as
follows:
Beginning at a point 392.62 feet North (392.60 feet measured) and 446.44 feet
West (446.55 feet measured) of the Southeast corner of the West half, Northeast
Quarter of Section 36, Township 19 North, Range 3 East, in Hamilton County,
Indiana, an iron pin in the centerline of U.S. 31, (at STA 745 + 98.2 more or
less); thence North 40 degrees 8 minutes 16 seconds West 340.90 feet to an iron
pin; thence South 87 degrees 35 minutes 36 seconds West 565.47 feet (565.91 feet
measured) to an iron pin on the East right-of-way line of the Monon R.R., which
is 34.05 feet from the centerline of the tract; along said right-of-way, North
02 degrees 40 minutes 35 seconds West 1993.98 feet to a point in the centerline
of Blackburn Avenue, which is 33.00 feet from the centerline of track; thence
North 88 degrees 02 minutes 15 seconds East 217.98 feet along the centerline of
Blackburn Avenue; and then, still following the centerline of Blackburn Avenue
South 40 degrees 59 minutes 15 seconds East 1291.24 feet to an iron pin which is
the corner of the Snyder Garage property; and, with the line of the Snyder
property, South 01 degrees 54 minutes 00 seconds East 601.53 feet (602.20 feet
measured) to an iron pin, South 62 degrees 12 minutes 30 seconds East 86.08 feet
(85.09 feet measured) to the centerline of U.S. Route 31 at STA 752 + 80.1 more
or less, then, with the centerline of U.S. 31, along an arc with length of
681.94 feet and with degree of curve equal to 1 degree the central angle of
which is 6 degrees 49 minutes 10 seconds and the chord of which bears South 24
degrees 25 minutes 30 seconds West 681.55 feet (680.97 feet measured) to the
place of beginning.
END OF LEGAL DESCRIPTION
EXHIBIT "A"
This Instrument Received 10.8 1991
Sharon K. Cheiry, Recorder
Hamilton County, Indiana
<PAGE>
PROFILES OF APPRAISERS
<PAGE>
PROFILE OF APPRAISER
KEITH McFARLAND, ASA
REAL ESTATE EXPERIENCE
----------------------
Consultant
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured housing communities, self storage
facilities, hotels, manufacturing plants, office buildings, retail
buildings and other types of commercial establishments as well as special
use facilities. January 1996 to present.
Appraisal Director
Marshall and Stevens, Inc.
St. Louis, MO
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1986 to Present.
PROFESSIONAL AFFILIATIONS
-------------------------
ASA, Senior Member American Society of Appraisers
State Certified General Real Estate Appraiser
Arkansas #CG1200N Michigan #1201004617
Colorado #CG80000045 Mississippi #GA-417
Illinois #153000628 Missouri #RA-001461
Indiana #CG69201433 Ohio #398743
Kansas #G-871 Tennessee #00051023
PARTIAL LIST OF CLIENTS AND PROPERTIES
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Allied Research Associates IBM Retirement Fund
AT&T Global Real Estate Krupp Asset Management Company
Boatmen's National Bank May Company
CalPERS Pacific Realty Corporation
Citicorp Real Estate Park Corporation
Continental Grain Company Ruff, Callahan & Hemmeter
Eastdil Realty Sears
First Tennessee Bank Wal-Mart Stores
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Profile of Appraiser 2
EDUCATIONAL BACKGROUND
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Southern Illinois University at Edwardsville, B.S.
The Appraisal Institute
American Society of Appraisers
<PAGE>
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St.Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
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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.
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Profile of Appraiser 2
PROFESSIONAL AFFILIATIONS
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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
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Manufactured Home Communities
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<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
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<TABLE>
<S> <C> <C> <C>
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
Self-Storage Facilities
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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
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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>
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Profile of Appraiser 4
Financial
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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
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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
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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
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Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
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TESTIMONY
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Mr. Whitcomb has presented expert testimony in United States Tax Court.
