EXHIBIT (C)(1)
[LOGO/LETTERHEAD]
October 8, 2001
Retirement Inns III, LLC
c/o ARV Assisted Living, Inc.
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626
Attention: Mr. Abdo Khoury
Re: Villa Las Posas
24 Las Posas Road
Camarillo, California 93010
SLVS File no. 01-10-82
Mr. Khoury:
In accordance with your request, we have conducted the required investigation,
gathered the necessary data and made certain analyses that have enabled us to
form an opinion of the market value of the above captioned senior housing
property. This full narrative appraisal report has been prepared to be in
compliance with the requirements of the Uniform Standards of Professional
Appraisal Practice. This is a complete, self contained narrative appraisal
report.
The value stated herein is based on our understanding of the site and
improvement descriptions as represented to us by the client and/or the client's
representatives and professional consultants as well as other available sources.
It is your responsibility to read this report and inform the appraiser of any
errors of omissions you are aware of prior to utilizing it.
MARKET VALUE AS IS @ 8/31/01
Based on an inspection of the property and the investigation and analysis
undertaken, we have formed the opinion, subject to the assumptions and limiting
conditions set forth in this report, that as of August 31, 2001, the market
value of the fee simple total going concern interest of the subject as is, is
FOURTEEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS
($14,250,000)
Mr. Abdo Khoury
October 8, 2001
Page 2
The appraisal report that follows sets forth the identification of the property
and limiting conditions, pertinent facts about the areas and the subject
property, comparable data, result of our investigation and analyses and the
reasoning leading to the conclusions set forth. Please feel free to call me at
(415) 788-4295 should you have any questions.
Respectfully submitted,
SENIOR LIVING VALUATION SERVICES, INC.
Michael G. Boehm, MAI, CRE
President
VILLAS LAS POSAS
DISCOUNTED CASH FLOW VALUATION
Projected Net Discount Factor --
Period Income 13.5% (2) Discounted Value
---------------------------------------------------------------------------------------------------------
MARKET VALUE AS IS @ 9/1/01
1 -- (10/01 -- 9/02) $ 1,634,006 0.8811 $ 1,439,653
2 -- (10/02 -- 9/03) $ 1,684,487 0.7763 $ 1,307,603
3 -- (10/03 -- 9/04) $ 1,736,512 0.6839 $ 1,187,655
4 -- (10/04 -- 9/05) $ 1,790,128 0.6026 $ 1,078,700
5 -- (10/05 -- 9/06) $ 1,845,382 0.5309 $ 979,731
6 -- (10/06 -- 9/07) $ 1,904,271/.12
Capitalized Value @ 10/06 $15,551,546 (1) 0.5309 $ 8,256,467
------------
Total Discounted Value @ 9/1/01 $ 14,249,810
============
Called $ 14,250,000
============
Per Unit $ 115,854
NOTES:
(1) Capitalized value of reversion less 2% sales transaction charge.
(2) 11.5% overall capitalization rate plus 3% cash flow growth rate less 100
basis points = 13.5% discount rate.
VILLAS LAS POSAS
PRO FORMA INCOME & EXPENSE
Period 1 Period 2 Period 3
(10/01-9/02) (10/02-9/03) (10/03-9/04)
------------ ------------ ------------
Average Net Occupancy 93.0% 93.0% 93.0%
Revenues-
79 Studio ACLF Units @ $2,358/Mo. (avg.) $ 2,268,915 $ 2,336,982 $ 2,407,092
44 1BR ACLF Units @ $2,932/Mo. (avg.) 1,571,317 1,618,457 1,667,011
60 AL Surcharges @ $731/Mo. (avg.) 534,215 550,241 566,748
----------- ----------- ------------
Gross Potential Rent Income $ 4,374,447 $ 4,505,680 $ 4,640,851
Plus: Double Occupancy Fees $ 18,000 $ 18,540 $ 19,096
Plus: Other Income $ 43,744 $ 45,057 $ 46,409
----------- ----------- ------------
Gross Potential Income $4,436,191 $ 4,569,277 $ 4,706,356
Less: Vacancy & Collection Losses $ (310,533) $ (319,849) $ (329,445)
----------- ----------- ------------
Effective Gross Income $4,125,658 $ 4,249,428 $ 4,376,911
Expenses- % EGI
Real Estate Taxes -- $ 146,113 $ 149,035 $ 152,016
Insurance 2.0% 82,513 84,989 87,538
Management 5.0% 206,283 212,471 218,846
Administration 8.0% 330,053 339,954 350,153
Activities 1.5% 61,885 63,741 65,654
Marketing 2.5% 103,141 106,236 109,423
Plant Operations 10.0% 412,566 424,943 437,691
Housekeeping 3.0% 123,770 127,483 131,307
Dietary $12.50/PRD 521,904 537,562 553,688
Assisted Living $22.00/PRD 448,074 461,516 475,362
Replacement Reserves $450/Unit 55,350 57,011 58,721
----------- ----------- ------------
Total Expenses $2,491,652 $ 2,564,940 $ 2,640,398
(60.4)% (60.4)% (60.3)%
Projected Net Income Before Debt Service $ 1,634,006 $ 1,684,487 $ 1,736,512
=========== =========== ============
Period 4 Period 5 Period 6
(10/04-9/05) (10/05-9/06) (10/06-9/07)
------------ ------------ -----------
Average Net Occupancy 93.0% 93.0% 93.0%
Revenues-
79 Studio ACLF Units @ $2,358/Mo. (avg.) $ 2,479,304 $ 2,553,684 $2,630,294
44 1BR ACLF Units @ $2,932/Mo. (avg.) 1,717,021 1,768,532 1,821,588
60 AL Surcharges @ $731/Mo. (avg.) 583,751 601,263 619,301
----------- ----------- ----------
Gross Potential Rent Income $ 4,780,076 $ 4,923,479 $5,071,183
Plus: Double Occupancy Fees $ 19,669 $ 20,259 $ 20,867
Plus: Other Income $ 47,801 $ 49,235 $ 50,712
----------- ----------- ----------
Gross Potential Income $ 4,847,546 $ 4,992,973 $5,142,762
Less: Vacancy & Collection Losses $ (339,328) $ (349,508) $ (359,993)
----------- ----------- -----------
Effective Gross Income $ 4,508,218 $ 4,643,465 $4,782,768
Expenses- % EGI
Real Estate Taxes -- $ 155,056 $ 158,157 $ 159,375
Insurance 2.0% 90,164 92,869 95,655
Management 5.0% 225,411 232,173 239,138
Administration 8.0% 360,657 371,477 382,621
Activities 1.5% 67,623 69,652 71,742
Marketing 2.5% 112,705 116,087 119,569
Plant Operations 10.0% 450,822 464,346 478,277
Housekeeping 3.0% 135,247 139,304 143,483
Dietary $12.50/PRD 570,299 587,408 605,030
Assisted Living $22.00/PRD 489,623 504,311 519,441
Replacement Reserves $450/Unit 60,482 62,297 64,166
----------- ----------- ----------
Total Expenses $ 2,718,090 $ 2,798,082 $2,878,498
(60.3)% (60.3)% (60.2)%
Projected Net Income Before Debt Service $ 1,790,128 $ 1,845,382 $1,904,271
=========== =========== ==========