EXHIBIT (C)(2)
[LOGO/LETTERHEAD]
October 8, 2001
ARV Chandler Villas, LP
c/o ARV Assisted Living, Inc.
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626
Attention: Mr. Abdo Khoury
Re: Chandler Villas
101 South Yucca Street
Chandler, Arizona 85224
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
FIVE MILLION SEVEN HUNDRED TWENTY FIVE THOUSAND DOLLARS
($5,725,000)
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
CHANDLER VILLAS
DISCOUNTED CASH FLOW VALUATION
Projected Net Discount Factor --
Period Income 14.0%(2) Discounted Value
-------------------------------------------------------------------------------------------------------
MARKET VALUE AS IS @ 8/31/01
1 -- (10/01 -- 9/02) $ 694,483 0.8772 $ 609,196
2 -- (10/02 -- 9/03) $ 712,316 0.7695 $ 548,104
3 -- (10/03 -- 9/04) $ 733,686 0.6750 $ 495,217
4 -- (10/04 -- 9/05) $ 755,697 0.5921 $ 477,433
5 -- (10/05 -- 9/06) $ 778,367 0.5194 $ 404,260
6 -- (10/06 -- 9/07) $ 801,718/.125
Capitalized Value @ 10/06 $ 6,221,335(1) 0.5194 $3,231,167
----------
Total Discounted Value @ 8/31/01 $5,735,377
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Called $5,725,000
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Per Unit $ 34,909
NOTES:
(1) Capitalized value of reversion less 3% sales transaction charge.
(2) 12.0% overall capitalization rate plus 3% cash flow growth rate less 100
basis points = 14.0% discount rate.
CHANDLER VILLAS
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 94.0% 94.0% 94.0%
Revenues-
129 1BR ACLF Units @ $1,342/Mo. (avg.) $ 2,108,577 $ 2,171,835 $ 2,236,990
35 2BR ACLF Units @ $1,701/Mo. (avg.) 725,136 746,890 769,297
35 AL Surcharges @ $593/Mo. (avg.) 249,060 256,532 264,228
----------- ----------- -----------
Gross Potential Rent Income $ 3,082,774 $ 3,175,257 $ 3,270,514
Plus: Double Occupancy Fees $ 51,120 $ 52,654 $ 54,233
Plus: Other Income $ 30,828 $ 31,753 $ 32,705
----------- ----------- ------------
Gross Potential Income $ 3,164,721 $ 3,259,663 $ 3,357,453
Less: Vacancy & Collection Losses $ (186,816) $ (195,580) $ (201,447)
----------- ----------- -----------
Effective Gross Income $ 2,977,905 $ 3,064,083 $ 3,156,006
Expenses- % EGI
Real Estate Taxes - $ 64,740 $ 66,682 $ 66,683
Insurance 2.0% 59,558 61,345 63,185
Management 5.0% 148,895 153,204 157,800
Administration 10.0% 297,791 306,724 315,926
Activities 2.0% 59,558 61,345 63,185
Marketing 3.0% 89,337 92,017 94,778
Plant Operations 12.5% 372,238 383,405 394,907
Housekeeping 3.0% 89,337 92,017 94,778
Dietary $12.50/PRD 703,355 724,456 746,189
Assisted Living $25.00/PRD 300,213 309,219 318,495
Replacement Reserves $600/Unit 98,400 101,352 104,393
----------- ----------- -----------
Total Expenses $ 2,283,422 $ 2,351,767 $ 2,422,320
(76.7)% (76.8)% (76.8)%
Projected Net Income Before Debt Service $ 694,483 $ 712,316 $ 733,686
=========== =========== ===========
Period 4 Period 5 Period 6
(10/04-9/05) (10/05-9/06) (10/06-9/07)
------------ ----------- -----------
Average Net Occupancy 94.0% 94.0% 94.0%
Revenues-
129 1BR ACLF Units @ $1,342/Mo. (avg.) $ 2,304,099 $ 2,373,222 $ 2,444,419
35 2BR ACLF Units @ $1,701/Mo. (avg.) 792,376 816,147 840,632
35 AL Surcharges @ $593/Mo. (avg.) 272,155 280,319 288,729
------------ ----------- -----------
Gross Potential Rent Income $ 3,368,630 $ 3,469,689 $ 3,573,779
Plus: Double Occupancy Fees $ 55,860 $ 57,536 $ 59,262
Plus: Other Income $ 33,686 $ 34,697 $ 35,738
------------ ----------- -----------
Gross Potential Income $ 3,458,176 $ 3,561,922 $ 3,668,779
Less: Vacancy & Collection Losses $ (207,491) $ (213,715) $ (220,127)
----------- ----------- -----------
Effective Gross Income $ 3,250,686 $ 3,348,206 $ 3,448,653
Expenses- % EGI
Real Estate Taxes - $ 70,743 $ 72,865 $ 75,051
Insurance 2.0% 65,081 67,033 69,044
Management 5.0% 162,534 167,410 172,433
Administration 10.0% 325,404 335,166 345,221
Activities 2.0% 65,081 67,033 69,044
Marketing 3.0% 97,621 100,550 103,566
Plant Operations 12.5% 406,755 418,957 431,526
Housekeeping 3.0% 97,621 100,550 103,566
Dietary $12.50/PRD 768,575 791,632 815,381
Assisted Living $25.00/PRD 328,050 337,892 348,029
Replacement Reserves $600/Unit 107,524 110,750 114,073
----------- ----------- -----------
Total Expenses $ 2,494,989 $ 2,569,839 $ 2,646,934
(76.8)% (76.8)% (76.8)%
Projected Net Income Before Debt Service $ 755,697 $ 778,367 $ 801,718
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