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PORTFOLIO APPRAISAL REPORT
CORPORATE PROPERTY ASSOCIATES 1
CORPORATE PROPERTY ASSOCIATES 2
CORPORATE PROPERTY ASSOCIATES 3
CORPORATE PROPERTY ASSOCIATES 4
CORPORATE PROPERTY ASSOCIATES 5
CORPORATE PROPERTY ASSOCIATES 6
CORPORATE PROPERTY ASSOCIATES 7
CORPORATE PROPERTY ASSOCIATES 8
CORPORATE PROPERTY ASSOCIATES 9
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TABLE OF CONTENTS
PAGE
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Letter of Transmittal................................................................. 1
Identification of Subject Portfolios.................................................. 4
Property Ownership and History........................................................ 4
Purpose of Appraisal.................................................................. 4
Function of Appraisal................................................................. 4
Scope of Appraisal.................................................................... 4
Date of Valuation..................................................................... 6
Value Definition...................................................................... 6
Valuation Methodology................................................................. 7
Site Inspections and Data Gathering................................................. 8
Lease Review........................................................................ 9
Market Rental Rates................................................................. 9
Highest and Best Use................................................................ 9
Operational Projections............................................................. 10
Reversion........................................................................... ...
Selection of Discount Rates......................................................... 11
Portfolio Value Conclusions........................................................... 13
Portfolio Summaries................................................................... 14
Assumptions and Limiting Conditions................................................... 32
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May 15, 1997
W. P. Carey & Co., Inc.
620 Park Avenue, 4th Floor
New York, NY 10020
Gentlemen:
You have engaged Robert A. Stanger & Co., Inc. ("Stanger") to estimate the
value of the real property portfolios (the "Portfolios") owned by Corporate
Property Associates 1, Corporate Property Associates 2, Corporate Property
Associates 3, Corporate Property Associates 4, Corporate Property Associates 5,
Corporate Property Associates 6, Corporate Property Associates 7, Corporate
Property Associates 8 and Corporate Property Associates 9, (hereinafter the
"Partnerships"). Such appraisal reflects the estimated market value of the
leased fee interests or, where appropriate, fee simple interests in the
portfolios of real property owned by the Partnerships (the "Portfolio
Valuations") as of March 31, 1997.
This report is prepared in accordance with an agreement between Robert A.
Stanger & Co., Inc. and W. P. Carey & Co., Inc. ("Carey") and the Partnership,
dated April 7, 1997. Pursuant to the agreement, Stanger has been engaged to
perform the appraisal on a limited scope basis using a summary report format in
conformity with the departure provisions of the Uniform Standards of
Professional Appraisal Practice of the Appraisal Institute, relying solely upon
the Income Approach to value. As such, the report differs from a self-contained
appraisal report in that (i) the data is limited to the summary data and
conclusions presented, and (ii) the cost and market approaches were excluded and
the conclusions were based upon the income approach. Due to the type of the real
estate owned by the Partnerships and the nature of the lease terms, the
engagement calls for these assets to be valued utilizing a discounted cash flow
analysis, subject to existing leases and debt in place. We have therefore valued
the net cash flows related to triple net leases with reversion to underlying
real estate value only after the primary lease term and any renewal options
deemed favorable to the tenant have been exhausted.
Our valuation has been based in part upon information supplied to us by
Carey and the Partnerships including but not limited to: lease abstracts;
renewal and purchase option status; information relating to the creditworthiness
of tenants; schedules of current lease rates, income, expenses, cash flow and
related financial information; property descriptive information, physical
condition of improvements and acquisition appraisals; information relating to
mortgage encumbrances; and, where appropriate, proposed sales terms, sales
agreements and supporting documentation. We have also visited the offices of
Carey and the Partnerships in New York, New York and have interviewed relevant
management personnel. We have relied upon such information and have assumed that
the information provided by Carey and the Partnerships is accurate and complete.
We have not attempted to independently verify such information.
We are advised by Carey and the Partnerships that the purpose of the
appraisals is to estimate the value of the leased fee interests or, where
appropriate, fee simple interests in the Portfolios under market conditions as
of the appraisal date and subject to existing leases and debt in place, and that
the Portfolio Valuations will be used in connection with a proposed merger of
Partnerships in exchange for shares of a newly formed limited liability company
(the "LLC") and assumption of existing indebtedness (the "Transaction"). Stanger
understands that the Portfolio Valuations may be reviewed and utilized in
connection with the Transaction and Stanger agrees to the use of the Portfolio
Valuations for this purpose subject to the terms and conditions of the
agreements related thereto.
For these purposes, this summary appraisal report was prepared stating our
opinion as to the market value of the Portfolios as of March 31, 1997. This
report may be summarized and referenced in the proxy statement for the
Partnerships relating to the Transaction, subject to prior review by Stanger.
However, the attached summary appraisal report should be reviewed in its
entirety and is subject to the assumptions and limiting
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conditions contained herein. Background information and analysis upon which
value conclusions are based has been retained in our files.
Our review was undertaken solely for the purpose of providing an opinion of
value, and we make no representation as to the adequacy of such review for any
other purpose. Our opinion is expressed with respect to the total value of each
of the real estate portfolios, assuming existing financing and lease contracts,
in which the Partnerships have an interest and not with respect to limited
partners' allocations. Stanger has no present or contemplated future interest in
the properties, the Partnerships, the proposed LLC or Carey.
The appraisal is only an estimate of the aggregate market value of the
leased fee interests or, where appropriate, fee simple interests in the
Portfolios as of the date of valuation and should not be relied upon as being
the equivalent of the price that would necessarily be received in the event of a
sale or other disposition of the properties in the Portfolios. Changes in
corporate financing rates generally, changes in individual tenant
creditworthiness, changes in tenant motivation with respect to the exercise of
renewal or purchase options, or changes in real estate property markets may
result in higher or lower values of real property. The use of other valuation
methodologies might produce a higher or lower value. However, in our opinion,
the use of the discounted cash flow methodology and, where appropriate, the
income capitalization method, is appropriate and reasonable. Our opinion is
subject to the assumptions and limiting conditions set forth herein. We have
used methods and assumptions deemed appropriate in our professional judgment;
however, future events may demonstrate that the assumptions were incorrect or
that other, different methods or assumptions may have been more appropriate.
This abbreviated valuation report provides our value conclusion with
respect to the Portfolios, definitions of value, and discussions of the
valuation methodology employed, assumptions, and limiting conditions.
Sincerely,
/s/ ROBERT A. STANGER & CO., INC.
--------------------------------------
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
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IDENTIFICATION OF SUBJECT PORTFOLIOS
The subjects of this appraisal are the real property portfolios (the
"Portfolios") in which Corporate Property Associates, Corporate Property
Associates 1, Corporate Property Associates 2, Corporate Property Associates 3,
Corporate Property Associates 4, Corporate Property Associates 5, Corporate
Property Associates 6, Corporate Property Associates 7, Corporate Property
Associates 8 and Corporate Property Associates 9 (the "Partnerships") own leased
fee or fee simple interests. The Portfolios include office, industrial/warehouse
facilities, retail and hotel properties. A listing of the properties in each
Portfolio is provided in the "Portfolio Summaries" section of this report.
PROPERTY OWNERSHIP AND HISTORY
During the past three years, the properties have been owned continuously by
the Partnerships, with the exception of the Furon property located at 1395
Danner Drive, Aurora, Ohio, which we have been advised will be acquired during
the second quarter of 1997 by Corporate Property Associates 8 and Corporate
Property Associates 9 through an exchange for two other properties currently
owned and leased to the Furon Company by Corporate Property Associates 8 and 9.
PURPOSE OF APPRAISAL
The purpose of this appraisal is to estimate the market value of the leased
fee or, where appropriate, fee simple interests in the real property Portfolios
subject, as appropriate, to existing leases and debt in place under market
conditions as of March 31, 1997.
FUNCTION OF APPRAISAL
The function of this appraisal is to provide a current estimate of market
value of the Portfolios for use solely by the Partnerships in connection with
the proposed merger of the Partnerships in exchange for shares of a newly formed
limited liability company and the assumption of existing indebtedness. No
representation is made as to the adequacy of this appraisal for any other
purpose.
SCOPE OF APPRAISAL
The Portfolio Valuations have been prepared on a limited scope basis using
a summary report format in conformity with the departure provisions of the
Uniform Standards of Professional Appraisal Practice of the Appraisal Institute,
in accordance with agreements between Robert A. Stanger & Co., Inc. and Carey
and the Partnerships, dated April 7, 1997. Pursuant to the agreements, Stanger
has relied solely upon the income approach to value and did not employ the
"cost" or "sales comparison" approaches (as described below).
In estimating the value of a property, appraisers typically consider three
approaches to value: the cost approach, the market data or sales comparison
approach, and the income approach. The value estimate by the cost approach
incorporates separate estimates of the value of the unimproved site under its
highest and best use and the value of the improvements less observed accrued
depreciation resulting from physical wear and tear and functional and/or
economic obsolescence. The market data or sales comparison approach involves a
comparative analysis of the subject property with other similar properties that
have sold recently or that are currently offered for sale in the market. The
income approach involves an economic analysis of the property based on its
potential to provide future net annual income. With respect to leased properties
and the valuation of leased fee interests, a discounted cash flow analysis
("DCF") is commonly utilized. The DCF method ascribes a present value to the
future cash flows associated with operating the property and the ultimate
reversion value of the property, based upon a discount rate commensurate with
the risks inherent in ownership of the property and with rates of return offered
by alternative investment opportunities.
Pursuant to the terms of our engagement, the Portfolio Valuations were
performed solely using the income approach. Since a primary buyer group for
properties of the type appraised herein is investors, the
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income approach was deemed an appropriate valuation methodology. Further, given
the primary criteria used by buyers of properties of the type appraised herein
and the existence of generally long-term net leases on the properties, the cost
approach was considered less reliable than the income approach. The sales
comparison approach was also considered less reliable than the income approach
given the primary criteria used by buyers of properties of the type appraised
herein, the existence of generally long-term net leases on the properties, and
the relative lack of sufficient reliable data from recent transactions involving
properties comparable to the subject properties. Consequently, given these
factors, the income approach was considered a reasonable approach to valuation
for the subject Portfolio.
In addition, unless otherwise noted in this report, the leased fee
interests have been valued utilizing a discounted cash flow analysis applied to
equity cash flows after debt service based on existing financing, which
financing has been represented by the owner as being assumable. We have
therefore valued net cash flows related to the lease without reversion to
underlying real estate value until the primary lease term and any renewal or
purchase options deemed favorable to the tenant have been exhausted. Fee simple
property interests were valued utilizing either the income capitalization and/or
the discounted cash flow method. Changes in corporate financing rates generally,
in individual tenant creditworthiness, in tenant motivation with respect to the
exercise of renewal options, or in real estate property markets may result in
higher or lower values of real property. The use of other valuation
methodologies might produce a higher or lower value. Our opinion is subject to
the assumptions and limiting conditions set forth herein.
Departures -- Uniform Standards of Professional Practice -- With respect to
limited appraisals, the departure provisions of the Uniform Standards of
Professional Appraisal Practice permit departures from the specific guidelines
of Standard 1. In this report the following departures were taken:
Standard Rule 1-4 (a) The cost and market approaches are excluded, and the
conclusions are based solely on the income approach (see
Valuation Methodology).
DATE OF VALUATION
The date of valuation for the Portfolios is March 31, 1997.
VALUE DEFINITION
Market value, as defined by the Appraisal Institute, is the most probable
price as of a specified date, in cash, in terms equivalent to cash, or in other
precisely revealed terms, for which the specified property rights should sell
after reasonable exposure in a competitive market under all conditions requisite
to a fair sale, with the buyer and seller each acting prudently, knowledgeably
and for self-interest, and assuming that neither is under undue duress. As used
in this report, market value is based on a sale of the subject property rights
for cash and the assumption of existing third-party indebtedness encumbering the
properties.
Implicit in this definition is the consummation of a sale as of a specified
date and the passing of title from seller to buyer under conditions whereby:
(a) buyer and seller are typically motivated;
(b) both parties are well informed or well advised, and each acts in a
manner he considers in his own best interest;
(c) a reasonable time is allowed for exposure in the open market;
(d) payment is made in terms of cash in U.S. dollars or the
substantial equivalent thereof, and the assumption of existing
indebtedness;
(e) the price represents the normal consideration for the property
sold unaffected by special sales concessions granted by anyone
associated with the sale.
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The property rights appraised in this report are leased fee interests and,
where appropriate, fee simple interests. Leased fee interest is defined as an
ownership interest held by a landlord with the right to use and occupancy
conveyed by lease to others, and usually consists of the right to receive rent
and the right to repossession at the termination of the lease. Fee simple
interest is defined as absolute ownership unencumbered by any other interest or
estate, subject only to the limitations of eminent domain, escheat, police
power, and taxation.
The appraisal includes the value of land, land improvements such as paving,
fencing, on-site sewer and water lines, the buildings and, with respect to the
hotel properties only, furniture fixtures and equipment necessary to achieve the
operating results which formed the basis of the valuation as of March 31, 1997.
Except for the hotel furniture, fixtures and equipment, as noted above, the
appraisal does not include supplies, materials on hand, inventories, furniture,
equipment or other personal property, company records, or current or intangible
assets that may exist; it pertains only to items considered as real estate.
VALUATION METHODOLOGY
Pursuant to the terms of this engagement, Stanger has estimated the
aggregate value of the Partnerships' leased fee or, where appropriate, fee
simple interests in the Portfolios based solely on the income approach to
valuation. (Appraisers typically consider three approaches in valuing real
property: the cost approach, the income approach, and the sales comparison, or
market data, approach. The type and age of a property, the nature of the leases,
market conditions and the quantity and quality of data affect the applicability
of each approach in a specific appraisal situation.)
The income approach is based on the assumption that the value of a property
or portfolio of properties can be represented by the present worth of future
cash flows. In these Portfolio Valuations, a discounted cash flow ("DCF")
analysis is used to determine the value of the leased fee interests in the
portfolios of properties based upon the lease and financing that encumber each
property, reflecting representations by the owner that such financing is
assumable. Fee simple property interests are valued utilizing either the income
capitalization and/or the discounted cash flow method. The indicated value by
the income approach represents the amount an investor might reasonably be
expected to pay for the expectation of receiving the net cash flow after debt
service from each Portfolio's properties during the subject lease terms and the
proceeds from the ultimate sale of each Portfolio's properties after repayment
of remaining mortgage debt.
Unless otherwise noted herein, in applying the DCF analysis, we utilized
pro forma statements of operations for each of the properties prepared in
accordance with the leases and financing which currently encumber the
properties. The properties are assumed to be sold after the expiration of the
initial lease term and any renewal terms deemed favorable to the tenants (i.e.,
where the tenant has an option to renew at a rental rate materially below the
projected market rate rent at the time of the renewal option, it is assumed that
such option will be exercised).
The reversion value of the properties which can be realized upon sale is
calculated based on the current economic rental rate deemed reasonable for each
property, escalated at a rate indicative of current expectations in the
marketplace for the property. The market-rate net income of the properties at
the year of sale is then capitalized at an appropriate rate reflecting the age,
anticipated functional and economic obsolescence and competitive position of the
properties to determine the reversion value of the properties. Where properties
were deemed to have reached the limit of functional utility and useful life at
the time of lease expiration, the reversion was computed based on estimated land
value. Net proceeds to equity owners were determined by deducting estimated
costs of sale and principal and any accrued interest balances due on the
properties' mortgage debt in the projected year of sale based on each mortgage's
amortization schedule.
Finally, (i) the discounted present value of the equity cash flow stream
from operations (after debt service) and the discounted present value of net
proceeds from sale, and (ii) the outstanding debt balance as of March 31, 1997
for each property were summed to arrive at a total estimated value for each
Portfolio. The resulting Portfolio Values were then adjusted for any joint
venture interests in the properties based on information provided by Carey and
the Partnerships to arrive at the final Portfolio Values.
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The following describes more fully the steps involved in the valuation
methodology.
SITE INSPECTIONS AND DATA GATHERING
In conducting the Portfolio Valuations, representatives of Stanger
performed site inspections of the properties during 1995 and 1996 in the context
of a prior appraisal of the Portfolios. In the course of these site visits, the
physical facilities of each property were inspected, current market rental rates
for competing properties were obtained, information on the local market was
gathered, and where possible, the tenant's facilities manager was interviewed
concerning the property, its role in company operations, and other factors.
Information gathered during the site inspection was supplemented by a review of
published information concerning economic, demographic and real estate trends in
local, regional and national markets, and by information updates provided by
management and obtained through telephonic interviews of local market
information sources.
In conducting the appraisals, Stanger also interviewed and relied upon
Carey management personnel to obtain information relating to the condition of
each property, including any deferred maintenance, capital budgets, known
environmental conditions, status of on-going or newly planned property
additions, reconfigurations, improvements, and other factors affecting the
physical condition of the property improvements.
Stanger also interviewed Carey's management and acquisitions personnel
regarding competitive conditions in net lease property markets, tenant credit
trends affecting the properties, certain lease and financing factors, and
historical and anticipated lease revenues and expenses. Stanger also reviewed
historical operating statements for each of the properties in the subject
Portfolios.
In addition, Stanger reviewed the acquisition criteria and projection
parameters used by real estate investors. Such reviews included a search of real
estate data sources and publications concerning real estate buyer's criteria,
interviews with sources deemed appropriate in certain local markets (including
local appraisers and real estate brokers) to confirm acquisition criteria used,
and direct telephonic interviews with major national investors, owners and
managers of net lease property portfolios and financing sources for net lease
transactions in the marketplace, to investigate the interaction of such factors
as required equity rates of return, initial equity yield requirements, tenant
credit profile, type of property, and the terms of available financing.
Stanger also compiled data on actual transactions involving net leased
properties, from which acquisition criteria and parameters were extracted.
Information on actual property transactions was obtained during the site
inspections and from direct telephonic interviews of local appraisers and real
estate brokers, and major national investors, owners and managers of net leased
properties, and from other publicly available sources. In addition, Stanger
reviewed data provided by Carey on actual acquisitions and sales involving Carey
and affiliated entities.
LEASE REVIEW
Lease abstracts were provided by Carey and the Partnerships and were relied
upon in the preparation of operational projections for each property (as
discussed below). Stanger reviewed such lease abstracts and interviewed Carey
management personnel to ascertain any renegotiated terms and modifications and
the status of various options and other factors. Provisions considered and
incorporated into the operational projections included current lease rate,
escalation factors, percentage rent provisions, renewal options and terms, and
purchase options and terms.
MARKET RENTAL RATES
Representatives of Stanger collected available data on rental rates at
competing properties in each local or regional market. Data collected at the
time of the site inspection was updated with published data and direct
telephonic contacts with local brokers and leasing agents.
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HIGHEST AND BEST USE
Highest and best use is defined as:
The reasonable probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum profitability.
In conformity with the provisions of its engagement, Stanger evaluated each
site's highest and best use as currently improved. Based upon the review of each
of the sites, the highest and best use of each of the properties remains as
currently improved, unless otherwise noted herein.
OPERATIONAL PROJECTIONS
Based on the lease and market rent analysis, rental revenue projections
were developed for each property in each of the Portfolios based on the terms of
existing leases (or, in the case of property not subject to long-term net
leases, based on analysis of market rents and historical rents achieved at the
property). Where lease terms included percentage rent provisions, available
sales data were reviewed for each property and sales levels were projected based
on escalation factors deemed appropriate in light of the current level of sales,
area trends and parameters utilized by buyers of similar properties. Percentage
rents were then calculated based on the resulting sales levels and contract
provisions relating to sales breakpoints and percentage rent participations.
Lease renewals were analyzed based on escalated current market rental
rates. The annual market rent escalation rates utilized were based on local
market conditions in the area of each property, inflation rates, the projected
holding period of the property and rental rate growth parameters applied by
investors in similar type properties. Where projected market rental rates at the
time of a renewal option materially exceeded the contractual lease renewal rate,
the renewal option was assumed to be exercised.
Where appropriate, vacancy and collection losses were factored into the
analysis. A property management fee deemed appropriate for retaining a
professional real estate organization to manage the specific type of property
was included in the projections. In the case of net leased properties, the fee
utilized was 1% of rental revenues. Expenses relating solely to partnership
investor reporting and accounting were excluded.
Debt service payments were deducted from net operating income for each
property consistent with the terms of the existing financing. For properties
where existing debt matures during the lease term, the refinancing capability of
the property was reviewed based upon lending criteria utilized by financing
sources, including loan-to-value ratios and debt service coverage requirements.
For properties meeting such lending criteria, debt balances at maturity of the
existing mortgage were considered refinanced at interest rates and amortization
schedules deemed appropriate for the property. Finally, where a capital expense
reserve, deferred maintenance or extraordinary capital expenditures were
required for an individual property, the cash flows and value were adjusted
accordingly.
REVERSION
In the course of performing the appraisals, Stanger reviewed available
sales transactions of similar investment properties as well as market data
relating to overall capitalization rates for similar properties in the general
location of the subject properties. As described above, acquisition criteria
used by buyers of similar properties were also reviewed. Based upon these
reviews and considering such factors as age, quality, anticipated functional and
economic obsolescence, competitive position of the property, the projected date
of sale, and buyers' acquisition criteria, appropriate terminal capitalization
rates were selected. Where properties were deemed to have reached the limit of
functional utility and useful life at the time of lease expiration, the
reversion was computed based on escalated land value.
Based upon current market rate rents, estimated escalation factors, and the
estimated vacancy rate and other property operating expenses incurred by the
owner, net operating income during the twelve months following the lease
expiration was estimated. The resulting net operating income estimate was
capitalized to
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determine residual value. The residual value was discounted, after deducting
appropriate sales expenses and mortgage balances, if any, outstanding at the
time of sale, to a present value. The discount rate employed was based on
current acquisition criteria and target rates of return among commercial
property investors.
Where any property lease included a purchase option for the lessee, the
purchase option price was compared to the projected value of the property based
on projected market rental rates (and where appropriate, contractual rent under
the lease agreement). Where the purchase option price was less than the
projected market value of the property or the purchase option provided a
significant financial benefit to the tenant relative to its remaining lease
obligation, the purchase option was deemed exercised; otherwise the purchase
option was deemed expired.
SELECTION OF DISCOUNT RATES
Distinct discount rates were then applied to the operating cash flow
projections and the reversion values.
- OPERATING CASH FLOW -- The selection of the appropriate discount rate for
determining the present value of future operating cash flow streams from
each net leased property was based primarily upon such factors as the
creditworthiness of the tenant, the length of the lease term, and the
general interest rate environment.
Specifically, Stanger conducted an analytical review of the financial
statements of the tenants/guarantors under the subject leases. In the
course of this review, Stanger analyzed the most recent available
financial statements of the tenants/guarantors, focusing primarily on the
balance sheet, profit and loss statement, cash flow statement and
management's discussion of capital resources and liquidity. Various
measures of financial strength were derived and reviewed to evaluate the
tenant's ability to fulfill the lease obligation. These factors
encompassed size, leverage, capital structure, profitability, cash flow,
debt service and fixed charges coverage and liquidity. Stanger also
investigated each tenant's/guarantor's corporate debt ratings, if any,
issued by Nationally Recognized Statistical Rating Organizations (for
example, Standard & Poors and/or Moody's), and financial strength ratings
assigned by Value Line.
Stanger also reviewed the interest rate environment as of the date of the
Portfolio Valuations, including long-term corporate bond yields. In
particular, data sources were screened to determine the yield-to-maturity
among corporate bonds based on various maturities and credit ratings.
This analysis was conducted to establish a base discount rate, determined
by the marketplace, to reflect the risk of holding corporate debt with
credit quality commensurate with the lease guarantor's creditworthiness
and a term approximately equal to the remaining lease term for each
property. Premiums deemed appropriate were then added to the base
discount rate to reflect the risks associated with real estate, leverage,
and, where appropriate, above-market lease rates or factors unique to the
individual lease or tenant. In particular, where contract rent exceeded
market rent, the base discount rate used to value the operating cash flow
stream was adjusted to reflect the creditworthiness of the tenant and the
risk associated in realizing such excess rent.
Where operating cash flows were comprised of base rent and percentage
rent components, distinct discount rates were applied to the base rent
and percentage rent reflective of the relative risk associated with each
cash flow stream.
- REVERSION VALUE -- To determine appropriate discount rates to apply to
the reversion value of the real estate upon final lease expiration, the
acquisition criteria and projection parameters in use in the marketplace
by real estate investors for various property types (e.g.
industrial/warehouse, retail, office, etc.) were reviewed (as described
above). Discount rates deemed appropriate were applied to the reversion
value of each property after adjusting for such factors as property age,
quality, anticipated functional and economic obsolescence, competitive
position, and any unique property-related factors.
The resulting discounted present value of operating cash flows and the
discounted present value of net sale proceeds were added to outstanding debt
balances as of March 31, 1997 for each property. The resulting values were
adjusted for any joint venture interests in the properties (based on information
provided by Carey) and were summed to arrive at a total estimated value for each
Portfolio.
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PORTFOLIO VALUE CONCLUSIONS
Based upon the review as described above, it is our opinion that the market
value of the leased fee interests or, where appropriate, fee simple interests in
the Portfolios as encumbered by existing indebtedness and lease agreements as of
March 31, 1997 is as follows:
PORTFOLIO
VALUE
PARTNERSHIP NAME CONCLUSION
------------------------------------------------------------- ------------
Corporate Property Associates 1.............................. $ 33,390,000
Corporate Property Associates 2.............................. 40,680,000
Corporate Property Associates 3.............................. 52,750,000
Corporate Property Associates 4.............................. 49,880,000
Corporate Property Associates 5.............................. 54,640,000
Corporate Property Associates 6.............................. 104,300,000
Corporate Property Associates 7.............................. 70,300,000
Corporate Property Associates 8.............................. 136,670,000
Corporate Property Associates 9.............................. 139,890,000
------------
TOTAL.............................................. $682,500,000
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CORPORATE PROPERTY ASSOCIATES
PORTFOLIO SUMMARY
MARCH 31, 1997
PROPERTY
PROPERTY NAME ADDRESS TYPE
- -------------------------------------------- --------------------------- -----------------
Broomfield Tech............................. 3400 Industrial Lane Office/Warehouse
Broomfield, CO
Broomfield Tech............................. 3401 Industrial Lane Office/Warehouse
Broomfield, CO
Chief Auto Parts -- Stockton................ 1339 S. Sutter Street Retail
Stockton, CA
Southland -- Merced......................... 1414 R Street Retail
Merced, CA
Payless Shoes -- Rialto..................... 681 Foothill Road Retail
Rialto, CA
Payless Shoes -- Fontana.................... 9780 Sierra Avenue Retail
Fontana, CA
Chief Auto Parts -- Sacramento.............. 3121 Marysville Boulevard Retail
(Marysville) Sacramento, CA
Chief Auto Parts -- Sacramento.............. 1900 Broadway Retail
(Broadway) Sacramento, CA
Payless Shoes -- Cuyahoga Falls............. 1965 State Road Retail
Cuyahoga Falls, OH
Payless Shoes -- Talmadge................... 355 West Avenue Retail
Talmadge, OH
Payless Shoes -- Freemont................... 111 East State Street Retail
Freemont, OH
Payless Shoes -- Reynoldsburg............... 6736 East Main Street Retail
Reynoldsburg, OH
Payless Shoes -- Marion..................... 1240 Mt. Vernon Avenue Retail
Marion, OH
Payless Shoes -- Anderson................... 1816 E. 53rd Street Retail
Anderson, IN
Varo -- Walnut.............................. 2201-2203 Walnut Street Light Industrial
Garland, TX
Vacant Facility............................. 553 & 555 N. 5th Street Light Industrial
Garland, TX
The Gap..................................... 3434 Mineola Pike Distribution/
Erlanger, KY Warehouse
Unisource Worldwide......................... 1930 Spur Avenue Distribution/
Anchorage, AK Warehouse
Winn-Dixie.................................. 1211 Broadway West Retail
Louisville, KY
PreFinish Metals............................ 30610 East Broadway Industrial
Walbridge, OH
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CORPORATE PROPERTY ASSOCIATES 2
PORTFOLIO SUMMARY
MARCH 31, 1997
PROPERTY
PROPERTY NAME ADDRESS TYPE
- ---------------------------------------------------- ------------------------- --------------
Pre-Finish Metals................................... 30610 East Broadway Industrial
Walbridge, OH
Unisource Worldwide................................. 2600 S.W. Commerce Way Industrial
Commerce,CA
Arthur L. Jones..................................... 2729 Ring Road Retail
Greensboro, NC
Kinko's of Ohio..................................... 4032 Belden Village Ave. Retail
Canton, OH
Wexler.............................................. 9890 Lake Forrest Ave. Retail
New Orleans, LA
Color Tile.......................................... 4030 Belden Village Ave. Retail
Canton, OH
Maybelline/B&G...................................... 1401 Murphy Drive Distribution/
Maumelle, AR Warehouse
EXCEL............................................... 5205 Mill Street Office/R&D
Reno, NV
AT&T................................................ 12976 Hollenberg Road Office/R&D
Bridgeton, MO
Western Union....................................... 13022 Hollenberg Road Office/R&D
Bridgeton, MO
Sports & Recreation................................. 308 West Route 38 Retail
Moorestown, NJ
Gibson Greetings -- Cincinnati...................... 2100 Section Road Industrial
Cincinnati, OH
Cleo................................................ 4025 Viscount Road Industrial
Memphis, TN
Gibson Greetings -- Berea........................... Walnut Meadow Lane Industrial
Berea,KY
11
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CORPORATE PROPERTY ASSOCIATES 3
PORTFOLIO SUMMARY
MARCH 31, 1997
PROPERTY
PROPERTY NAME ADDRESS TYPE
- ------------------------------------------------------- ---------------------- -----------
EXCEL.................................................. 5205 Mill Street Office/R&D
Reno, NV
AT&T................................................... 12976 Hollenberg Road Office/R&D
Bridgeton, MO
Western Union.......................................... 13022 Hollenberg Road Office/R&D
Bridgeton, MO
Sports & Recreation.................................... 308 West Route 38 Retail
Moorestown, NJ
Gibson Greetings -- Cincannati......................... 2100 Section Road Industrial
Cincinnati, OH
Cleo................................................... 4025 Viscount Road Industrial
Memphis, TN
Gibson Greetings -- Berea.............................. Walnut Meadow Lane Industrial
Berea, KY
Santee Dairies......................................... 231 East 23rd Street Dairy
Los Angeles, CA
12
15
CORPORATE PROPERTY ASSOCIATES 4
PORTFOLIO SUMMARY
MARCH 31, 1997
PROPERTY
PROPERTY NAME ADDRESS TYPE
- -------------------------------------------------- ------------------------- -----------------
Santee Dairies.................................... 231 East 23rd Street Dairy
Los Angeles, CA
Simplicity Manufacturing..........................
(2 buildings) 500 North Spring Street Industrial
Port Washington, WI
Brodart Company................................... 500 Arch Street & Industrial
(2 buildings) 1609 Memorial Avenue
Williamsport, PA
Petrocon Engineering.............................. 3115 Executive Boulevard Office
Beaumont, TX
Agency Management................................. 3001 East By-Pass Office/
College Station, TX Light Industrial
Family Dollar..................................... Airport & Distribution/
Cedar Springs Road Warehouse
Salisbury, NC
Winn-Dixie........................................ U.S. 411 & Retail
Courson Boulevard
Leeds, AL
13
16
CORPORATE PROPERTY ASSOCIATES 5
PORTFOLIO SUMMARY
MARCH 31, 1997
PROPERTY
PROPERTY NAME ADDRESS TYPE
- ------------------------------------- ------------------------- --------------------
Spreckles/Duff-Norton................ Hwy. 1 North Industrial
Forrest City, AR
Rochester Button -- Kenbridge........ 221 Main Street Industrial
Kenbridge, VA
Rochester Button -- So. Boston....... 1100 Noblin Avenue & Industrial
315 Edmund Street
South Boston, VA
Arley -- Columbia.................... 3130 Bluff Road Warehouse/
Columbia, SC Light Manufacturing
Arley -- Sumter...................... Shaw Street Industrial
Sumter, SC
Penn Virginia -- Duffield............ U.S. Hwy. 58 -- 421 West Office
Duffield, VA
Penn Virginia -- Broomall............ 600 Abbott Drive Office/Warehouse
Broomall, PA
Penn Virginia -- Cuyahoga Falls...... 601 Munroe Falls Ave. Industrial
Cuyahoga Falls, OH
Exide Electronics.................... 3201 Spring Forrest Road Office
Raleigh, NC
General Cinema....................... 43555 Ford Road Cinema
Canton, MI
Inno Tech............................ 154 Olive Street Industrial
Elyria, OH
Sunds Defibrator..................... 571 West End Avenue Industrial/
Woodhandling Carthage, NY Manufacturing
Gould (Spectramed)................... 1900 Williams Drive Office/R&D
Oxnard, CA
Holiday Inn -- Petoskey.............. U.S. Hwy. 131 South Hotel
Petoskey, MI
Holiday Inn -- Alpena................ 1000 U.S. 23 North Hotel
Alpena, MI
DeVlieg-Bullard -- McMinnville....... Morrison Street Industrial
McMinnville, TN
Penberthy Products................... Lincoln & Locust Street Industrial
Prophetstown, IL
DeVlieg-Bullard -- Frankenmuth....... 126 North Main Street Industrial
Frankenmuth, MI
Stoody Deloro........................ 1201 Eisenhower Drive Industrial
North Goshen, IN
Winn-Dixie........................... 2252 Mt. Meigs Road Retail
Montgomery, AL
14
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CORPORATE PROPERTY ASSOCIATES 6
PORTFOLIO SUMMARY
MARCH 31, 1997
PROPERTY
PROPERTY NAME ADDRESS TYPE
- ------------------------------------------------ ------------------------- ------------------
Holiday Inn -- Petoskey......................... U.S. Highway 131 South Hotel
Petoskey, MI
Holiday Inn -- Alpena........................... 1000 U.S. 23 North Hotel
Alpena, MI
Stoody Deloro................................... 16425 Gale Avenue Industrial
Industry, CA
Yale Security................................... 16300 W. 103rd Street Industrial
Lemont, IL
Motorola........................................ 1101 East University Ave. Office/R&D
Urbana, IL
Autozone (31 properties)........................ See Attached Schedule Retail
Lockheed Martin................................. 6721 Baymeadow Drive Office/Industrial
Glen Burnie, MD
Peerless Chain.................................. 1416 E. Sanborn Street Industrial
Winona, MN
General Cinema.................................. 14551 Burnhaven Circle Cinema
Burnsville, MN
Wal-Mart (Sams Club)............................ 2930 Lebanon Church St. Retail
West Mifflin, PA
Armel/Kinney Shoes.............................. 3499 N.W. 53rd Street Office/Warehouse
Ft. Lauderdale, FL
A.P. Parts -- Toledo............................ 315-543 Matzinger Street Industrial
Toledo, OH
A.P. Parts -- Pinconning........................ 401 E. 5th Street Industrial
Pinconning, MI
Anthony's Manufacturing......................... See Note (1) below Industrial
San Fernando, CA
Holiday Inn -- Livonia.......................... 17123 Laurel Park Drive Hotel
Livonia, MI
Winn-Dixie...................................... 1315 West 15th Street Retail
Panama City, FL
- ---------------
(1) Anthony's Manufacturing is located at the following addresses: 12400 and
12918 Gladstone, San Fernando, CA; 12391 Montero Avenue, San Fernando, CA;
12812 Arroyo Street, San Fernando, CA; and 12354 Gladstone Avenue, San
Fernando, CA.
15
18
CORPORATE PROPERTY ASSOCIATES 6
PORTFOLIO SUMMARY -- (CONTINUED)
MARCH 31, 1997
AUTOZONE LOCATIONS
2006 West Franklin Avenue 295 Craft Highway 1001 Sixth Avenue S.E.
Gastonia, NC Chickasaw, AL Decatur, AL
5136 N. Tyron Street 2501 South Boulevard 1030 Ninth Avenue
Charlotte, NC Montgomery, AL Bessemer, AL
421 South Center Street 950 32nd Street 1420 14th Street
Statesville, NC Columbus, GA Phenix City, AL
1214 Morgantown Blvd 1400 Vandalia Road 407 Holcomb Avenue
Lenoir, NC Collinsville, IL Mobile, AL
2602 South Congress 2609 Washington Avenue 1300 E. Prien Lake Road
Austin, TX Alton, IL Lake Charles, LA
1925 Waco Drive 310 E. Edwardsville Road 2905 Big Bend Boulevard
Waco, TX Wood River, IL Maplewood, MO
2321 Horne Road 521 Carlyle Road 9710 Page Avenue
Corpus Christi, TX Belleville, IL Overland, MO
3201 Leopard Street 3011-3013 Cypress Drive 3405 Gravois Avenue
Corpus Christi, TX West Monroe, LA St. Louis, MO
1211 Rio Grande 9007 Greenwell Springs Rd. 9644 St. Charles Rock Road
Victoria, TX Baton Rouge, LA Breckenridge, MO
1411 Pleasanton Road E. Medorm St. & Hwy. 171 2003 Mac Arthur Drive
San Antonio, TX Lake Charles, LA West Orange, TX
1819 Nederland Avenue
Nederland, TX
16
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CORPORATE PROPERTY ASSOCIATES 7
PORTFOLIO SUMMARY
MARCH 31, 1997
PROPERTY NAME ADDRESS PROPERTY TYPE
- --------------------------------------------- ------------------------- --------------------
Holiday Inn -- Livonia....................... 17123 N. Laurel Avenue Hotel
Livonia, MI
Seven-Up Bottling............................ 555 McDonnell Boulevard Distribution/
St. Louis, MO Warehouse
Winn-Dixie................................... Highway 59 & W. 53rd St. Retail
Bay Minette, AL
M-Tex, Travelers Rest........................ Highway 25 Industrial
Travelers Rest, SC
M-Tex, Liberty............................... Peachtree Street Industrial
Liberty, SC
Autozone (13 properties)..................... See Attached Schedule Retail
Northern Auto/Popular Stores................. 7214 E. Thomas Road Retail
Scottsdale, AZ
Northern Automotive/Scallon's................ 310 E. Florence Blvd. Retail
Casa Grande, AZ
Northern Automotive/Building 7............... 555 W. U.S. Highway 60 Retail
Apache Junction, AZ
Northern Auto/Crafters Mall.................. 4322 W. Bell Road Retail
Glendale, AZ
Northern Auto/Advanced Paper................. 1255 W. Guadalupe Retail
Mesa, AZ
Capin Mercantile Corp........................ 1410 Pinos Altos Road Retail
Silver City, NM
Northern Automotive.......................... 2953 West 30th Avenue Retail
Denver, CO
Family Bargain Center........................ 1150 Main Street Retail
Colville, WA
NYNEX........................................ Catamount Drive Office/R&D
Milton, VT
The Gap...................................... 1500 Jamike Avenue Distribution/
Erlanger, KY Warehouse
Policy Management Systems.................... One ASA Plaza Office
Bloomingdale, IL
Sybron/Kerr Manufacturing.................... 28200 Wick Road Industrial/
Romulus, MI Manufacturing
Sybron/Barnstead............................. 2555 Kerper Boulevard Industrial/
Dubuque, IA Manufacturing
Sybron/Erie Scientific....................... Post Road Industrial/
Portsmouth, NH Manufacturing
Sybron/Nalge................................. 75 Panorama Creek Drive Industrial/
Rochester, NY Manufacturing
Sybron/Ormco................................. 1308 South Lone Hill Ave. Office/R&D
Glendora, CA
NVR -- Thurmont.............................. 210 N. Carroll Street Industrial
Thurmont, MD
NVR -- Farmington............................ 1043 Hook Road Industrial
Farmington, NY
17
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CORPORATE PROPERTY ASSOCIATES 7
PORTFOLIO SUMMARY -- (CONTINUED)
MARCH 31, 1997
PROPERTY NAME ADDRESS PROPERTY TYPE
- --------------------------------------------- ------------------------- --------------------
Stair Plans America.......................... 29 Synan Road Industrial
Fredericksburg, VA
Allied Plywood............................... 7891 Notes Drive Industrial/Light
Manasas, VA Manufacturing
Holiday Inn -- Topeka........................ 605 Fairlawn Hotel
Topeka, KS
AUTOZONE LOCATIONS
8102 North Davis Highway
Pensacola, FL
1301 W. 15th Street
Panama City, FL
3520 Main Street
Jacksonville, FL
10418 Florida Boulevard
Baton Rouge, LA
6152 Plank Road
Baton Rouge, LA
2740 Highway 190 West
Hammond, LA
129 Centre Pointe Drive
St. Peters, MO
35 E. Mexico Road
St. Peters, MO
721 South Lafayette St.
Shelby, NC
399 E. Cannon Boulevard
Kannapolis, NC
220 Fleming Drive
Morgantown, NC
5317 Ringold Road
East Ridge, TN
3315 Chapman Highway
Knoxville, TN
18
21
CORPORATE PROPERTY ASSOCIATES 8
PORTFOLIO SUMMARY
MARCH 31, 1997
PROPERTY
PROPERTY NAME ADDRESS TYPE
- -------------------------------------------------- --------------------------- --------------
Policy Management................................. One ASA Plaza Office
Bloomingdale, IL
Sybron/Kerr Manufacturing......................... 28200 Wick Road Industrial/
Romulus, MI Manufacturing
Sybron/Barnstead.................................. 2555 Kerper Boulevard Industrial/
Dubuque, IA Manufacturing
Sybron/Erie Scientific............................ Post Road Industrial/
Portsmouth, NH Manufacturing
Sybron/Nalge...................................... 75 Panorama Creek Drive Industrial/
Rochester, NY Manufacturing
Sybron/Ormco...................................... 1308 South Lone Hill Ave. Office/R&D
Glendora, CA
NVR -- Thurmont................................... 210 N. Carroll Street Industrial
Thurmont, MD
NVR -- Farmington................................. 1043 Hook Road Industrial
Farmington, NY
Stair Plans America............................... 29 Synan Road Industrial
Fredericksburg, VA
Allied Plywood.................................... 7891 Notes Drive Industrial
Manasas, VA
American Signature -- Olive Branch................ 8649 Hacks Cross Industrial
Olive Branch, MS
American Signature -- Doraville................... 3101 McCall Boulevard Industrial
Doraville, GA
Autozone (11 properties).......................... See Footnote 1 below Retail
Wozniak Industries................................ 3700 N. Rose Street Industrial
Schiller Park, IL
General Electric.................................. 720 Vanderburg Road Office/R&D
King of Prussia, PA
United Stationers (3 properties).................. See Footnote 2 below Distribution/
Warehouse
Furon Buildings (6 properties).................... See Footnote 3 below 5-Industrial
1-Office
High Voltage...................................... 13 Pratt Junction Industrial
Sterling, MA
Datcon Instrument................................. 1811 Rohrerstown Road Industrial
Lancaster, PA
Federal Express................................... 3205 Longmire Drive Distribution/
College Station, TX Warehouse
Dr. Pepper Buildings.............................. See Footnote 4 below Distribution/
Warehouse
Orbital Sciences.................................. 3380 S. Price Road Industrial
Chandler, AZ
Detroit Diesel.................................... 13400 Outer Drive W. Industrial
Detroit, MI
19
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CORPORATE PROPERTY ASSOCIATES 8
PORTFOLIO SUMMARY -- (CONTINUED)
MARCH 31, 1997
PROPERTY
PROPERTY NAME ADDRESS TYPE
- -------------------------------------------------- --------------------------- --------------
Winn-Dixie *...................................... Douglas Avenue/Route 31 Retail
Brenton, AL
Holiday Inn -- Topeka............................. 605 Fairlawn Hotel
Topeka, KS
- ---------------
* Property is subject to a ground lease.
(1) The locations of the facilities leased to Autozone are as follows:
7035 Atlantic Boulevard 4909 Central Avenue
Jacksonville, FL Albuquerque, NM
5350 Beach Boulevard 760 Broadway
Jacksonville, FL Farmington, NM
209 S. Slappey Boulevard 6126 St. Andrews Road
Albany, GA Lexington, SC
2616 Community Road 5320 W. Bellfort Avenue
Brunswick, GA Houston, TX
2318 Milledgeville Road 5615 Babcock Road
Augusta, GA San Antonio, TX
2215 Pio Nono Avenue
Macon, GA
(2) The three locations of facilities leased to United Stationers are: 3615
Highpoint Drive, San Antonio, TX; 2483 Harbor Ave., Memphis, TN; and
Elmwood/Plauche Industrial Park, New Orleans, LA.
(3) The six locations of facilities leased to Furon are: 407 East Street, New
Haven, CT; Interstate 295 & Harmony Road, Mickleton, NJ; 1199 S. Chillicothe
Road, Aurora, OH; 10585 Main Street, Mantua, OH; 386 Metacoro Ave., Bristol,
RI; and 1395 Danner Drive, Aurora, OH.
(4) The two locations of facilities leased to Dr. Pepper Bottling are: 2304
Century Center Blvd., Irving, TX and 2400 Holly Hill Drive, Houston, TX.
20
23
CORPORATE PROPERTY ASSOCIATES 9
PORTFOLIO SUMMARY
MARCH 31, 1997
PROPERTY
PROPERTY NAME ADDRESS TYPE
- ------------------------------------------------- ----------------------- ----------------
American Signature -- Doraville.................. 3101 McCall Blvd. Industrial
Doraville, GA
General Electric................................. 720 Vanderburg Road Office/R&D
King of Prussia, PA
Furon Buildings (6 properties)................... See Footnote 1 below 5 -- Industrial
1 -- Office
Dr. Pepper (2 properties)........................ See Footnote 2 below Distribution/
Warehouse
Orbital Sciences................................. 3380 S. Price Road Industrial
Chandler, AZ
Detroit Diesel................................... 13400 Outer Drive W. Industrial
Detroit, MI
Childtime (12 properties)........................ See Footnote 3 below Retail
Federal Express.................................. 201 S. Padre Island Dr. Distribution/
Corpus Christi, TX Warehouse
NV Ryan -- Pittsburgh............................ 100 Ryan Court & 111 Office
Ryan Court,
Pittsburgh, PA
Pepsi............................................ 15180 Grand Point Dr. Distribution/
Houston, TX Warehouse
Titan............................................ 3033 Science Park Road Office/R&D
San Diego, CA
Vacant Facility *................................ 835 Hope Street Office/R&D
Stanford, CT
Information Resources............................ 150 N. Clinton Street & Office
564 West Randolph
Chicago, IL
Red Bank Distribution............................ 4000 Red Bank Road Distribution/
Cincinnati, OH Warehouse
- ---------------
* Management has represented that the property is being given to lender in
satisfaction of nonrecourse debt obligation.
(1) The locations of the six buildings leased to Furon are as follows: 407 East
Street, New Haven, CT; Interstate 295 & Harmony Road, Mickletown, NJ; 1199
S. Chillicothe Road, Aurora, OH; 10585 Main Street, Mantua, OH; 386 Metacon
Ave., Bristol, RI; and 1395 Danner Drive, Aurora, OH.
(2) The locations of the two buildings leased to Dr. Pepper Bottling are as
follows: 2304 Century Center Blvd., Irving, TX and 2400 Holly Hill Drive,
Houston, TX.
(3) The locations of the twelve buildings leased to Childtime are as follows:
5792 W. Oakland Street, Chandler, AZ; 7090 N. Thornydale Road, Tucson, AZ;
1485 Vega Street, Alhambra, CA; 3656 Riverside Drive, Chino, CA; 12421
Springdale Street, Garden Grove, CA; 13881 N. Prospect Ave., Tustin, CA;
34203 Ford Road, Westland, MI; 2171 Fifteen Mile Road, Sterling Heights, MI;
32503 Ann Arbor Trail, Westland, MI; 1028 MacArthur Drive, Carrolton, TX;
550 W. Danieldale Road, Duncanville, TX and 1597 Glencairn Lane, Lewisville,
TX.
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24
ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal report is subject to the assumptions and limiting conditions
as set forth below.
1. No responsibility is assumed for matters of a legal nature affecting the
portfolio properties or the titles thereto. Titles to the properties are assumed
to be good and marketable and the properties are assumed free and clear of all
liens unless otherwise stated.
2. The Portfolio Valuations assume (a) responsible ownership and competent
management of the properties; (b) there are no hidden or unapparent conditions
of the properties' subsoil or structures that render the properties more or less
valuable (no responsibility is assumed for such conditions or for arranging for
engineering studies that may be required to discover them); (c) full compliance
with all applicable federal, state and local zoning, access and environmental
regulations and laws, unless noncompliance is stated, defined and considered in
the Portfolio Valuations; and (d) all required licenses, certificates of
occupancy and other governmental consents have been or can be obtained and
renewed for any use on which the value estimates contained in the Portfolio
Valuations are based.
3. The Appraiser shall not be required to give testimony or appear in court
because of having made the appraisal with reference to the portfolio in
question, unless arrangements have been previously made therefore.
4. The information contained in the Portfolio Valuations or upon which the
Portfolio Valuations are based has been provided by or gathered from sources
assumed to be reliable and accurate. Some of such information has been provided
by the owner of the properties. The Appraiser shall not be responsible for the
accuracy or completeness of such information, including the correctness of
estimates, opinions, dimensions, exhibits and other factual matters. The
Portfolio Valuations and the opinion of value stated therein are as of the date
stated in the Portfolio Valuations. Changes since that date in portfolios,
external and market factors can significantly affect property values.
5. Disclosure of the contents of the appraisal report is governed by the
Bylaws and Regulations of the professional appraisal organization with which the
Appraiser is affiliated.
6. Neither all, nor any part of the content of the report, or copy thereof
(including conclusions as to the portfolios' values, the identity of the
Appraiser, professional designations, reference to any professional appraisal
organizations, or the firm with which the Appraiser is connected) shall be used
for any purpose by anyone other than the client specified in the report,
including, but not limited to, the mortgagee or its successors and assignees,
mortgage insurers, consultants, professional appraisal organizations, any state
or federally approved financial institution, any department, agency or
instrumentality without the previous written consent of the Appraiser; nor shall
it be conveyed by anyone to the public through advertising, public relations,
news sales or other media, without the written consent and approval of the
Appraiser.
7. On all appraisals subject to completion, repairs or alterations, the
appraisal report and value conclusions are contingent upon completion of the
improvements in a workmanlike manner.
8. The physical condition of the improvements considered by the Portfolio
Valuations are based on visual inspection by the Appraiser or other
representatives of Stanger and on representations by the owner. Stanger assumes
no responsibility for the soundness of structural members or for the condition
of mechanical equipment, plumbing or electrical components. The Appraiser has
made no survey of the properties.
9. The projections of income and expenses and the valuation parameters
utilized are not predictions of the future. Rather, they are the Appraiser's
best estimate of current market thinking relating to future income and expenses.
The Appraiser makes no warranty or representations that these projections will
materialize. The real estate market is constantly fluctuating and changing. It
is not the Appraiser's task to predict or in any way warrant the conditions of a
future real estate market; the Appraiser can only reflect what the investment
community, as of the date of the appraisal, envisions for the future in terms of
rental rates, expenses, supply and demand. We have used methods and assumptions
deemed appropriate in our professional judgment; however, future events may
demonstrate that the assumptions were incorrect or that other different methods
or assumptions may have been more appropriate.
22
25
ASSUMPTIONS AND LIMITING CONDITIONS -- (CONTINUED)
10. The Portfolio Valuations represent normal consideration for the
properties sold based on the buyer's assumption of existing third-party
indebtedness and unaffected by special terms, services, fees, costs, or credits
incurred in the transaction.
11. Unless otherwise stated in the report, the existence of hazardous
materials, which may or may not be present on the properties, was not disclosed
to the Appraiser by the owner. The Appraiser has no knowledge of the existence
of such materials on or in the properties. However, the Appraiser is not
qualified to detect such substances. The presence of substances such as
asbestos, ureaformaldehyde foam insulation, oil spills, or other potentially
hazardous materials may affect the values of the portfolios. The portfolio value
estimates are predicated on the assumption that there is no such material on or
in the portfolio properties that would cause a loss of value. No responsibility
is assumed for such conditions, or for any expertise or engineering knowledge
required to discover them. The client is urged to retain an expert in this
field, if desired.
12. For purposes of this report, it is assumed that each property is free
of any negative impact with regard to the Environmental Cleanup Responsibility
Act (ECRA) or any other environmental problems or with respect to non-compliance
with the Americans with Disabilities Act (ADA). No investigation has been made
by the Appraiser with respect to any potential environmental or ADA problems.
Environmental and ADA compliance studies are not within the scope of this
report.
13. Pursuant to the Engagement Agreement, the Portfolio Valuations have
been prepared on a limited scope basis in conformity with the departure
provisions of the Uniform Standards of Professional Appraisal Practice and the
Standards of Professional Appraisal Practice of the Appraisal Institute, relying
solely on the income approach to value primarily utilizing discounted cash flow
analysis assuming leases and debt in place. Further, the engagement calls for
delivery of a summary appraisal report in which the content has been limited to
that data presented herein. As such, the summary appraisal report is not
designed to meet the requirements of Title XI of the Federal Financial
Institutions Reform, Recovery and Enforcement Act of 1989. Therefore, federally
regulated institutions should not rely on this report for financing purposes.
14. The Portfolio Valuations reported herein may not reflect the premium or
discount a potential buyer may assign to an assembled portfolio of properties or
to a group of properties in a particular local market which provides
opportunities for enhanced market presence and penetration. In addition, where
properties are owned jointly with other entities affiliated with the general
partner, minority interest discounts were not applied.
15. The appraisal is solely for the purpose of providing our opinion of the
values of the Portfolios, and we make no representation as to the adequacy of
such a review for any other purpose. The properties in the portfolios are
generally leased to corporate tenants under long-term triple net leases. The
owner has directed that the leased fee interests be valued based on existing
lease contracts and debt in place using a discounted cash flow analysis. The use
of other valuation methodologies might produce a higher or lower value.
16. In addition to these general assumptions and limiting conditions, any
assumptions and conditions applicable to specific properties have been retained
in our files.
23