WOODCREEK
1710 S. GILBERT RD
MESA, ARIZONA
MARKET VALUE -
FEE SIMPLE ESATE
AS OF MAY 6, 2003
PREPARED FOR:
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(AIMCO)
C/O LINER YANKELEVITZ SUNSHINE & REGENSTREIF LLP
&
LIEFF CABRASER HEIMANN & BERNSTEIN
ON BEHALF OF NUANES, et. al.
[AMERICAN APPRAISAL ASSOCIATES(R) LOGO]
<Table>
<Caption>
UNITED STATES INTERNATIONAL
Atlanta Milwaukee Brazil Mexico
Boston Minneapolis [AMERICAN APPRAISAL ASSOCIATES(R) LOGO] Canada Morocco
Buffalo New Orleans China Peru
Charlotte New York Croatia Philippines
Chicago Oak Lawn Czech Republic Poland
Cincinnati Philadelphia 9441 LBJ Freeway Suite 114 England Portugal
Dallas Pittsburgh Dallas, Texas 75243 Germany Russia
Denver Princeton Greece Spain
Detroit Schaumburg Hong Kong Taiwan
Houston St. Louis Telephone: (972) 994-9100 Hungary Thailand
Irvine San Francisco Fax: (972) 994-0516 Italy Turkey
Jacksonville Seattle Japan Venezuela
Los Angeles
</Table>
JULY 10, 2003
Apartment Investment and Management
Company ("AIMCO") c/o
Mr. Steven A. Velkei, Esq.
Liner Yankelevitz Sunshine & Regenstreif LLP
1100 Glendon Avenue, 14th Floor
Los Angeles, California 90024-3503
Nuanes, et al.( "Plaintiffs ") c/o
Ms. Joy Kruse
Lieff Cabraser Heimann & Bernstein
Embarcadero Center West
275 Battery Street, 30th Floor
San Francisco, California 94111
RE: WOODCREEK
1710 S. GILBERT RD
MESA, MARICOPA COUNTY, ARIZONA
In accordance with your authorization, we have completed the appraisal of the
above-referenced property. This complete appraisal is intended to report our
analysis and conclusions in a summary format.
The subject property consists of an apartment project having 432 units with a
total of 353,760 square feet of rentable area. The improvements were built in
1985. The improvements are situated on 19.37 acres. Overall, the improvements
are in good condition. As of the date of this appraisal, the subject property is
75% occupied.
It is our understanding the appraisal will be used by the clients to assist the
San Mateo Superior Court in the settlement of litigation between the above
mentioned clients. The appraisal is intended to conform to the Uniform Standards
of Professional Appraisal Practice ("USPAP") as promulgated by the Appraisal
Standards Board of the Appraisal Foundation and the Code of Professional Ethics
and Standards of Professional Practice of the Appraisal Institute. The appraisal
is presented in a summary report, and the Departure Provision of USPAP has not
been invoked in this appraisal. It is entirely inappropriate to use this value
conclusion or the report for any purpose other than the one stated.
AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 2
WOODCREEK, MESA, ARIZONA
The opinions expressed in this appraisal cover letter can only be completely
understood by reading the narrative report, addenda, and other data, which is
attached. The appraisal is subject to the attached general assumptions and
limiting conditions and general service conditions.
As a result of our investigation, it is our opinion that the fee simple market
value of the subject, effective May 6, 2003 is:
($16,800,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
July 10, 2003 -s- Douglas Needham
#053272 Douglas Needham, MAI
Managing Principal, Real Estate Group
Arizona State Certified General Real Estate Appraiser #30943
Report By:
Ryan Tanaka
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
WOODCREEK, MESA, ARIZONA
TABLE OF CONTENTS
Cover
Letter of Transmittal
Table of Contents
APPRAISAL DATA
<Table>
Executive Summary ................................................................ 4
Introduction ..................................................................... 9
Area Analysis .................................................................... 11
Market Analysis .................................................................. 14
Site Analysis .................................................................... 16
Improvement Analysis ............................................................. 16
Highest and Best Use ............................................................. 17
VALUATION
Valuation Procedure .............................................................. 18
Sales Comparison Approach ........................................................ 20
Income Capitalization Approach ................................................... 26
Reconciliation and Conclusion .................................................... 39
</Table>
ADDENDA
Exhibit A - Photographs of Subject Property
Exhibit B - Summary of Rent Comparables and Photograph of Comparables
Exhibit C - Assumptions and Limiting Conditions
Exhibit D - Certificate of Appraiser
Exhibit E - Qualifications
General Service Conditions
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 4
WOODCREEK, MESA, ARIZONA
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
<Table>
PROPERTY NAME: Woodcreek
LOCATION: 1710 S. Gilbert Rd
Mesa, Arizona
INTENDED USE OF ASSIGNMENT: Court Settlement
PURPOSE OF APPRAISAL: "As Is" Market Value of the Fee Simple Estate
INTEREST APPRAISED: Fee simple estate
DATE OF VALUE: May 6, 2003
DATE OF REPORT: July 10, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 19.37 acres, or 843,757 square feet
Assessor Parcel No.: 139-09-002-D
Floodplain: Community Panel No. 04013c2195f (July 19, 2001)
Flood Zone X, an area outside the floodplain.
Zoning: R-3 (Multi Residential/High Density)
BUILDING:
No. of Units: 432 Units
Total NRA: 353,760 Square Feet
Average Unit Size: 819 Square Feet
Apartment Density: 22.3 units per acre
Year Built: 1985
</Table>
UNIT MIX AND MARKET RENT:
GROSS RENTAL INCOME PROJECTION
<Table>
<Caption>
Market Rent
Square --------------------- Monthly Annual
Unit Type Feet Per Unit Per SF Income Income
- --------- ------ ---------- -------- ---------- ----------
1Br/1Ba 579 $ 556 $ 0.96 $ 17,792 $ 213,504
1Br/1Ba 700 $ 590 $ 0.84 $ 47,200 $ 566,400
1Br/1Ba 740 $ 583 $ 0.79 $ 37,312 $ 447,744
1Br/1Ba 768 $ 611 $ 0.80 $ 48,880 $ 586,560
2Br/1Ba 882 $ 662 $ 0.75 $ 31,776 $ 381,312
2Br/2Ba 957 $ 668 $ 0.70 $ 32,064 $ 384,768
Total $ 272,240 $3,266,880
</Table>
OCCUPANCY: 75%
ECONOMIC LIFE: 45 Years
EFFECTIVE AGE: 13 Years
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
WOODCREEK, MESA, ARIZONA
REMAINING ECONOMIC LIFE: 32 Years
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
SUBJECT PHOTOGRAPHS
[EXTERIOR - OFFICE PICTURE] [EXTERIOR - LANDSCAPE & PARK PICTURE]
[AREA MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
WOODCREEK, MESA, ARIZONA
[NEIGHBORHOOD MAP]
HIGHEST AND BEST USE:
As Vacant: Hold for future multi-family development
As Improved: Continuation as its current use
METHOD OF VALUATION: In this instance, the Sales Comparison and Income
Approaches to value were utilized.
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 7
WOODCREEK, MESA, ARIZONA
PART TWO - ECONOMIC INDICATORS
<Table>
<Caption>
Amount $/Unit
------------------ --------------
INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION
Potential Rental Income $ 3,266,880 $ 7,562
Effective Gross Income $ 3,014,448 $ 6,978
Operating Expenses $ 1,347,362 $ 3,119 44.7% of EGI
Net Operating Income: $ 1,559,086 $ 3,609
Capitalization Rate 9.00%
DIRECT CAPITALIZATION VALUE $ 16,900,000* $39,120 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 24%
Stabilized Vacancy & Collection Loss: 15%
Lease-up / Stabilization Period 12 months
Terminal Capitalization Rate 9.50%
Discount Rate 12.00%
Selling Costs 2.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $ 16,900,000* $39,120 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $ 16,900,000 $39,120 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $23,500 to $77,083
Range of Sales $/Unit (Adjusted) $35,688 to $42,396
VALUE INDICATION - PRICE PER UNIT $ 16,800,000* $38,889 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 6.73 to 7.88
Selected EGIM for Subject 6.00
Subject's Projected EGI $ 3,014,448
EGIM ANALYSIS CONCLUSION $ 17,600,000* $40,741 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $ 18,500,000* $42,824 / UNIT
RECONCILED SALES COMPARISON VALUE $ 17,200,000 $39,815 / UNIT
</Table>
- -----------------------------
* Value indications are after adjustments for concessions, deferred maintenance,
excess land and lease-up costs, if any.
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 8
WOODCREEK, MESA, ARIZONA
PART THREE - SUMMARY OF VALUE CONCLUSIONS
<Table>
SALES COMPARISON APPROACH:
Price Per Unit $ 16,800,000
NOI Per Unit $ 18,500,000
EGIM Multiplier $ 17,600,000
INDICATED VALUE BY SALES COMPARISON $ 17,200,000 $39,815 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $ 16,900,000
Discounted Cash Flow Method: $ 16,900,000
INDICATED VALUE BY THE INCOME APPROACH $ 16,900,000 $39,120 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $ 16,900,000 $39,120 / UNIT
</Table>
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
WOODCREEK, MESA, ARIZONA
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 1710 S. Gilbert Rd, Mesa, Maricopa County,
Arizona. Mesa identifies it as 139-09-002-D.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by Ryan Tanaka on May
6, 2003. Douglas Needham, MAI has not made a personal inspection of the subject
property. Ryan Tanaka performed the research, valuation analysis and wrote the
report. Douglas Needham, MAI reviewed the report and concurs with the value.
Douglas Needham, MAI and Ryan Tanaka have extensive experience in appraising
similar properties and meet the USPAP competency provision.
The scope of this investigation comprises the inspection of the property and the
collection, verification, and analysis of general and specific data pertinent to
the subject property. We have researched current improved sales and leases of
similar properties, analyzing them as to their comparability, and adjusting them
accordingly. We completed the Sales Comparison and Income Capitalization
Approaches to value. From these approaches to value, a concluded overall value
was made.
DATE OF VALUE AND REPORT
This appraisal was made to express the opinion of value as of May 6, 2003. The
date of the report is July 10, 2003.
PURPOSE AND USE OF APPRAISAL
The purpose of the appraisal is to estimate the market value of the fee simple
interest in the subject property. It is understood that the appraisal is
intended to assist the clients in litigation settlement proceedings. The
appraisal was not based on a requested minimum valuation, a specific valuation,
or the approval of a loan.
PROPERTY RIGHTS APPRAISED
We have appraised the Fee Simple Estate in the subject property (as applied in
the Sales & Income Approaches), subject to the existing short-term leases. A Fee
Simple Estate is
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10
WOODCREEK, MESA, ARIZONA
defined in The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal
Institute, 1993), as:
"Absolute ownership unencumbered by any other interest or estate,
subject only to the limitations imposed by the governmental powers
of taxation, eminent domain, police power, and escheat."
MARKETING/EXPOSURE PERIOD
MARKETING PERIOD: 6 to 12 months
EXPOSURE PERIOD: 6 to 12 months
HISTORY OF THE PROPERTY
Ownership in the subject property is currently vested in Century Properties
Growth Fund XXII. To the best of our knowledge, no transfers of ownership or
offers to purchase the subject are known to have occurred during the past three
years.
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 11
WOODCREEK, MESA, ARIZONA
AREA / NEIGHBORHOOD ANALYSIS
NEIGHBORHOOD ANALYSIS
A neighborhood is a group of complementary land uses. The function of the
neighborhood analysis is to describe the immediate surrounding environs. The
subject is located in the city of Mesa, Arizona. Overall, the neighborhood is
characterized as a suburban setting with the predominant land use being
residential. The subject's neighborhood is generally defined by the following
boundaries.
NEIGHBORHOOD BOUNDARIES
East - S. Lindsay Rd
West - N. Saddle St
South - E. Baseline Dr
North - W. Southern Ave
MAJOR EMPLOYERS
Major employers in the subject's area include Wells Fargo, Intel, State of
Arizona, Wal-Mart Stores Inc, Motorola Inc, Bank One Corp, Walgreen Co, Target
Corp, American Express Co, and Honeywell International Inc.. The overall
economic outlook for the area is considered favorable.
DEMOGRAPHICS
We have reviewed demographic data within the neighborhood. The following table
summarizes the key data points.
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 12
WOODCREEK, MESA, ARIZONA
NEIGHBORHOOD DEMOGRAPHICS
<Table>
<Caption>
AREA
--------------------------------------------------
CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA
- -------- -------------- -------------- -------------- --------------
POPULATION TRENDS
Current Population 16,584 161,771 390,270 3,441,350
5-Year Population 17,404 184,113 445,785 3,928,765
% Change CY-5Y 4.9% 13.8% 14.2% 14.2%
Annual Change CY-5Y 1.0% 2.8% 2.8% 2.8%
HOUSEHOLDS
Current Households 5,620 54,006 137,795 1,259,651
5-Year Projected Households 5,904 60,851 155,813 1,426,007
% Change CY - 5Y 5.1% 12.7% 13.1% 13.2%
Annual Change CY-5Y 1.0% 2.5% 2.6% 2.6%
INCOME TRENDS
Median Household Income $ 53,277 $ 48,530 $ 51,637 $ 44,128
Per Capita Income $ 19,555 $ 19,625 $ 21,168 $ 22,676
Average Household Income $ 58,572 $ 58,801 $ 60,113 $ 61,951
Source: Demographics Now
</Table>
The subject neighborhood's population is expected to show increases above that
of the region. The immediate market offers superior income levels as compared to
the broader market.
The following table illustrates the housing statistics in the subject's
immediate area, as well as the MSA region.
HOUSING TRENDS
<Table>
<Caption>
AREA
--------------------------------------------
CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA
- -------- ------------ ------------ ------------ ------------
HOUSING TRENDS
% of Households Renting 33.89% 27.70% 27.62% 27.76%
5-Year Projected % Renting 31.94% 27.62% 27.24% 26.96%
% of Households Owning 56.48% 57.24% 56.19% 60.59%
5-Year Projected % Owning 58.13% 58.44% 57.87% 62.26%
</Table>
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
WOODCREEK, MESA, ARIZONA
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Fwy/Residential
South - Residential
East - Retail, Multifamily Residential
West - Movie, Retail Center, Multifamily
CONCLUSIONS
The subject is well located within the city of Mesa. The neighborhood is
characterized as being mostly suburban in nature and is currently in the stable
stage of development. The economic outlook for the neighborhood is judged to be
favorable with a good economic base.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 14
WOODCREEK, MESA, ARIZONA
MARKET ANALYSIS
The subject property is located in the city of Mesa in Maricopa County. The
overall pace of development in the subject's market is more or less decreasing.
There is no new construction coming into the market. The overall economic
downturn in the subject's market has limited new construction. The following
table illustrates historical vacancy rates for the subject's market.
HISTORICAL VACANCY RATE
<Table>
<Caption>
Period Region Submarket
- ------ ------ ---------
1997 5.8%
1998 6.3%
1999 7.3%
2000 6.9%
2001 8.6% 8.6%
2002 10.5% 11.5%
2003 11.0%
</Table>
Occupancy trends in the subject's market are decreasing. Historically speaking,
the subject's submarket has equated the overall market. The Arizona economy is
primarily dependent upon Hi-Tech and manufacturing. The decline in these
industries has created less jobs and less renters in the neighborhood area.
Market rents in the subject's market have been following a decreasing trend. The
following table illustrates historical rental rates for the subject's market.
HISTORICAL AVERAGE RENT
<Table>
<Caption>
Period Region % Change Submarket % Change
- ------ ------ -------- --------- --------
1997 $598 - -
1998 $626 4.7%
1999 $650 3.8%
2000 $676 4.0%
2001 $686 1.5% $657 -
2002 $691 0.7% $648 -1.4%
2003 $694 0.4%
</Table>
The following table illustrates a summary of the subject's competitive set.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
WOODCREEK, MESA, ARIZONA
COMPETITIVE PROPERTIES
<Table>
<Caption>
No. Property Name Units Ocpy. Year Built Proximity to subject
--- ------------- ----- ----- ---------- --------------------
R-1 University Green 0 96% 1984 .4 miles from subject
R-2 Windemere 224 95% 1985 .4 miles from the subject
R-3 The Township Apartments 160 85% 1997 1-mile south of the subject
R-4 Gilbert Meadows Apartments 0 96% 1984 Within.5-mile radius
R-5 Superstition Villas 246 88% 1983 .2 miles away from subject
Subject Woodcreek 432 75% 1985
</Table>
The submarket of rental rates are lower due to the decline in the Hi-Tech
industry that the submarket was dependent upon.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
WOODCREEK, MESA, ARIZONA
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 19.37 acres, or 843,757 square feet
Shape Rectangular
Topography Level
Utilities All necessary utilities are available to the site.
Soil Conditions Stable
Easements Affecting Site None other than typical utility easements
Overall Site Appeal Good
Flood Zone:
Community Panel 04013c2195f, dated July 19, 2001
Flood Zone Zone X
Zoning R-3, the subject
improvements represent a
legal conforming use of the
site.
REAL ESTATE TAXES
<Table>
<Caption>
ASSESSED VALUE - 2002
-------------------------------------------------------
TAX RATE / PROPERTY
PARCEL NUMBER LAND BUILDING TOTAL MILL RATE TAXES
------------- ---------- ----------- ----------- ---------- --------
139-09-002-D $1,265,963 $15,885,037 $17,151,000 0.01175 $201,526
</Table>
IMPROVEMENT ANALYSIS
Year Built 1985
Number of Units 432
Net Rentable Area 353,760 Square Feet
Construction:
Foundation Reinforced concrete slab
Frame Heavy or light wood
Exterior Walls Stucco wall
Roof Tile over a Tile structure
Project Amenities Amenities at the subject include a swimming
pool, spa/jacuzzi, basketball court,
volleyball court, sand volleyball, tennis
court, gym room, car wash, barbeque
equipment, business office, and parking area.
Unit Amenities Individual unit amenities include a balcony,
fireplace, cable TV connection, and washer
dryer connection. Appliances available in
each unit include a refrigerator, stove,
dishwasher, washer/dryer, and oven.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17
WOODCREEK, MESA, ARIZONA
Unit Mix:
<Table>
<Caption>
Unit Area
Unit Type Number of Units (Sq. Ft.)
--------- --------------- ---------
1Br/1Ba 32 579
1Br/1Ba 80 700
1Br/1Ba 64 740
1Br/1Ba 80 768
2Br/1Ba 48 882
2Br/2Ba 48 957
</Table>
Overall Condition Good
Effective Age 13 years
Economic Life 45 years
Remaining Economic Life 32 years
Deferred Maintenance None
HIGHEST AND BEST USE ANALYSIS
In accordance with the definition of highest and best use, an analysis of the
site relating to its legal uses, physical possibilities, and financial
feasibility is appropriate. The highest and best use as vacant is to hold for
future multi-family development. The subject improvements were constructed in
1985 and consist of a 432-unit multifamily project. The highest and best use as
improved is for a continued multifamily use. Overall, the highest and best use
of the subject property is the continued use of the existing apartment project.
AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 18
WOODCREEK, MESA, ARIZONA
THE VALUATION PROCEDURE
There are three traditional approaches, which can be employed in establishing
the market value of the subject property. These approaches and their
applicability to the valuation of the subject are summarized as follows:
THE COST APPROACH
The application of the Cost Approach is based on the principle of substitution.
This principle may be stated as follows: no one is justified in paying more for
a property than that amount by which he or she can obtain, by purchase of a site
and construction of a building, without undue delay, a property of equal
desirability and utility. In the case of a new building, no deficiencies in the
building should exist.
In the case of income-producing real estate, the cost of construction plays a
minor and relatively insignificant role in determining market value. The Cost
Approach is typically only a reliable indicator of value for: (a) new
properties; (b) special use properties; and (c) where the cost of reproducing
the improvements is easily and accurately quantified and there is no economic
obsolescence. In all instances, the issue of an appropriate entrepreneurial
profit - the reward for undertaking the risk of construction, remains a highly
subjective factor especially in a market lacking significant speculative
development.
THE SALES COMPARISON APPROACH
The Sales Comparison Approach is an estimate of value based upon a process of
comparing recent sales of similar properties in the surrounding or competing
areas to the subject property. Inherent in this approach is the principle of
substitution.
The application of this approach consists of comparing the subject property with
similar properties of the same general type, which have been sold recently or
currently are available for sale in competing areas. This comparative process
involves judgment as to the similarity of the subject property and the
comparable sale with respect to many value factors such as location, contract
rent levels, quality of construction, reputation and prestige, age and
condition, among others. The estimated value through this approach represents
the probable price at which a willing seller would sell the subject property to
a willing and knowledgeable buyer as of the date of value.
AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 19
WOODCREEK, MESA, ARIZONA
THE INCOME CAPITALIZATION APPROACH
The theory of the Income Capitalization Approach is based on the premise that
present value is the value of the cash flow and reversionary value the property
will produce over a reasonable holding (ownership) period.
The Discounted Cash Flow Analysis will convert equity cash flows (including cash
flows and equity reversion) into a present value utilizing an internal rate of
return (or discount rate). The Internal Rate of Return (IRR) will be derived
from a comparison of alternate investments, a comparative analysis of IRR's used
by recent buyers of similar properties, and a review of published industry
surveys.
The Direct Capitalization Analysis converts one year of income into an overall
value using overall capitalization rates from similar sales. The overall rates
take into consideration buyers assumptions of the market over the long-term.
The results of the Income Capitalization Analysis are usually the primary value
indicator for income producing properties. Investors expect a reasonable rate of
return on their equity investment based on the ownership risks involved; this
approach closely parallels the investment decision process.
RECONCILIATION
In this instance, we have completed the Sales Comparison and Income
Capitalization Approaches to value. As an income producing property, the income
approach is a primary approach to value. The Sales Comparison Approach is also
considered reliable as investors are buying similar buildings in the market.
Our research indicates that market participants are generally not buying,
selling, investing, or lending with reliance placed on the methodology of the
Cost Approach to establish the value. Therefore, we have decided that the Cost
Approach is not a reliable indicator of value for the subject, and this approach
has not been utilized.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 20
WOODCREEK, MESA, ARIZONA
SALES COMPARISON APPROACH
Use of market or comparable sales requires the collection and analysis of
comparable sales data. Similar properties recently sold are compared to the
subject and adjusted based on any perceived differences. This method is based on
the premise that the costs of acquiring a substitute property would tend to
establish a value for the subject property. The premise suggests that if a
substitute is unavailable in the market, the reliability of the approach may be
subordinate to the other approaches.
The reliance on substitute properties produces shortcomings in the validity of
this approach. Geographic and demographic characteristics from each submarket
restrict which sales may be selected. Recent sales with a similar physical
characteristics, income levels, and location are usually limited. The sales we
have identified, however, do establish general valuation parameters as well as
provide support to our conclusion derived through the income approach method.
The standard unit of comparison among similar properties is the sales price per
unit and price per square foot of net rentable area. To accurately adjust prices
to satisfy the requirements of the sales comparison approach, numerous
calculations and highly subjective judgments would be required including
consideration of numerous income and expense details for which information may
be unreliable or unknown. The sales price per unit and square foot are
considered relevant to the investment decision, but primarily as a parameter
against which value estimates derived through the income approach can be judged
and compared.
In examining the comparable sales, we have applied a subjective adjustment
analysis, which includes specific adjustments derived from our experience and
consulting with the market participants.
SALES COMPARISON ANALYSIS
Detailed on the following pages are sales transactions involving properties
located in the subject's competitive investment market.
Photographs of the sale transactions are located in the Addenda. Following the
summary of sales is an adjustment grid that is used to arrive at a value.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 21
WOODCREEK, MESA, ARIZONA
SUMMARY OF COMPARABLE SALES -IMPROVED
<Table>
<Caption>
Comparable Comparable
Description Subject I - 1 I - 2
- ----------- ------- ---------- ----------
Property Name Woodcreek Lakeview at Superstition The Ridge
Springs
LOCATION:
Address 1710 S. Gilbert Rd 1849 S. Power Rd 15202 N. 40th St
City, State Mesa, Arizona Mesa, AZ 85206 Phoenix, AZ 85032
County Maricopa Maricopa Maricopa
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 353,760 650,392 278,424
Year Built 1985 1995 1986
Number of Units 432 676 380
Unit Mix: Type Total Type Total Type Total
1Br/1Ba 32 1BR 230 Studio 44
1Br/1Ba 80 2BR 374 1BR 168
1Br/1Ba 64 3BR 72 2BR 168
1Br/1Ba 80
2Br/1Ba 48
2Br/2Ba 48
2Br/2Ba 48
2Br/1Ba 32
Average Unit Size (SF) 819 962 733
Land Area (Acre) 19.3700 38.0000 13.1100
Density (Units/Acre) 22.3 17.8 29.0
Parking Ratio (Spaces/Unit) 1.00 1.55 1.40
Parking Type (Gr., Cov., etc.) Garage, Open Covered Open, Covered Open, Covered
CONDITION: Good Very Good Average
APPEAL: Good Very Good Average
AMENITIES:
Pool/Spa Yes/Yes
Gym Room Yes
Laundry Room No
Secured Parking No
Sport Courts No
Washer/Dryer Connection Yes
Other
Other
OCCUPANCY: 75% 86% 97%
TRANSACTION DATA:
Sale Date December, 2002 December, 2002
Sale Price ($) $48,250,000 $17,800,000
Grantor Mesa 306 LLC Archstone-Smith Operating
Trust
Grantee Nearon Lakeview LLC
Sale Documentation
Verification
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $7,116,416 $10,527 $10.94 $ 0 $ 0 $0.00
Vacancy/Credit Loss $ 994,163 $ 1,471 $ 1.53 $ 0 $ 0 $0.00
Effective Gross Income $6,122,253 $ 9,057 $ 9.41 $ 0 $ 0 $0.00
Operating Expenses $2,239,524 $ 3,313 $ 3.44 $ 0 $ 0 $0.00
Net Operating Income $3,882,729 $ 5,744 $ 5.97 $1,379,500 $ 3,630 $4.95
NOTES: None None
PRICE PER UNIT $71,376 $46,842
PRICE PER SQUARE FOOT $ 74.19 $ 63.93
EXPENSE RATIO 36.6% N/A
EGIM 7.88 N/A
OVERALL CAP RATE 8.05% 7.75%
Cap Rate based on Pro Forma or Actual Income? Pro Forma Actual
<Caption>
Comparable Comparable Comparable
Description I - 3 I - 4 I - 5
- ----------- ---------- ---------- ----------
Property Name Indigo Springs Paradise Falls Apartments The Commons at Papago Park
LOCATION:
Address 1464 S. Stapley Dr 15611 N 31st St 1010 N 48th ST
City, State Mesa, AZ 85204 Phoenix, AZ 85032 Phoenix, AZ
County Maricopa Maricopa Maricopa
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 222,870 171,845 120,000
Year Built 1999 1986 1982
Number of Units 240 220 200
Unit Mix: Type Total Type Total Type Total
1BR 90 1BR 108 1BR 100
2BR 120 2BR 112 2BR 100
3BR 30
Average Unit Size (SF) 929 781 600
Land Area (Acre) 9.8000 7.7600 4.7400
Density (Units/Acre) 24.5 28.4 42.2
Parking Ratio (Spaces/Unit) 2.03 1.36 1.33
Parking Type (Gr., Cov., etc.) Open, Covered Open, Covered Open, Covered
CONDITION: Very Good Very Good Average
APPEAL: Very Good Very Good Average
AMENITIES:
Pool/Spa
Gym Room
Laundry Room
Secured Parking
Sport Courts
Washer/Dryer Connection
Other
Other
OCCUPANCY: N/A 86% N/A
TRANSACTION DATA:
Sale Date August, 2002 February, 2003 August, 2002
Sale Price ($) $18,500,000 $9,800,000 $4,700,000
Grantor Indigo Springs LLC SWP Properties I Los Verdes LLC
Grantee Indigo Acquisitions LLC Paradise Falls N/A
Sale Documentation
Verification
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $ 0 $ 0 $0.00 $1,700,000 $7,727 $9.89 $ 0 $ 0 $0.00
Vacancy/Credit Loss $ 0 $ 0 $0.00 $ 244,800 $1,113 $1.42 $ 0 $ 0 $0.00
Effective Gross Income $ 0 $ 0 $0.00 $1,455,200 $6,615 $8.47 $ 0 $ 0 $0.00
Operating Expenses $ 0 $ 0 $0.00 $ 660,000 $3,000 $3.84 $ 0 $ 0 $0.00
Net Operating Income $ 0 $ 0 $0.00 $ 795,200 $3,615 $4.63 $ 0 $ 0 $0.00
NOTES: None None None
PRICE PER UNIT $77,083 $44,545 $23,500
PRICE PER SQUARE FOOT $ 83.01 $57.03 $ 39.17
EXPENSE RATIO N/A 45.4% N/A
EGIM N/A 6.73 N/A
OVERALL CAP RATE N/A 8.11% N/A
Cap Rate based on Pro Forma or Actual Income? Pro Forma
</Table>
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
WOODCREEK, MESA, ARIZONA
[IMPROVED SALES MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $23,500 to $77,083 per
unit. Adjustments have been made to the sales to reflect differences in
location, age/condition and quality/appeal. Generally speaking, larger
properties typically have a lower price per unit when compared to smaller
properties, all else being equal. Similarly, those projects with a higher
average unit size will generally have a higher price per unit. After appropriate
adjustments are made, the improved sales demonstrate an adjusted range for the
subject from $35,688 to $42,396 per unit with a mean or average adjusted price
of $39,823 per unit. The median adjusted price is $40,091 per unit. Based on the
following analysis, we have concluded to a value of $40,000 per unit, which
results in an "as is" value of $16,800,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
WOODCREEK, MESA, ARIZONA
SALES ADJUSTMENT GRID
<Table>
<Caption>
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
----------- ------- ----- -----
Property Name Woodcreek Lakeview at Superstition The Ridge
Springs
Address 1710 S. Gilbert Rd 1849 S. Power Rd 15202 N. 40th St
City Mesa, Arizona Mesa, AZ 85206 Phoenix, AZ 85032
Sale Date December, 2002 December, 2002
Sale Price ($) $48,250,000 $17,800,000
Net Rentable Area (SF) 353,760 650,392 278,424
Number of Units 432 676 380
Price Per Unit $71,376 $46,842
Year Built 1985 1995 1986
Land Area (Acre) 19.3700 38.0000 13.1100
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 12-2002 0% 12-2002 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $71,376 $46,842
Location Superior -10% Comparable 0%
Number of Units 432 676 5% 380 5%
Quality / Appeal Good Superior -20% Superior -20%
Age / Condition 1985 1995 / Very Good -15% 1986 / Average 0%
Occupancy at Sale 75% 86% 0% 97% 0%
Amenities Good Superior -5% Comparable 0%
Average Unit Size (SF) 819 962 -5% 733 0%
PHYSICAL ADJUSTMENT -50% 15%
FINAL ADJUSTED VALUE ($/UNIT) $35,688 $39,816
</Table>
<Table>
<Caption>
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
----------- ----- ----- -----
Property Name Indigo Springs Paradise Falls Apartments The Commons at Papago Park
Address 1464 S. Stapley Dr 15611 N 31st St 1010 N 48th ST
City Mesa, AZ 85204 Phoenix, AZ 85032 Phoenix, AZ
Sale Date August, 2002 February, 2003 August, 2002
Sale Price ($) $18,500,000 $9,800,000 $4,700,000
Net Rentable Area (SF) 222,870 171,845 120,000
Number of Units 240 220 200
Price Per Unit $77,083 $44,545 $23,500
Year Built 1999 1986 1982
Land Area (Acre) 9.8000 7.7600 4.7400
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 08-2002 0% February, 2003 0% 08-2002 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $77,083 $44,545 $23,500
Location Superior -5% Inferior 15% Inferior 20%
Number of Units 240 -5% 220 -10% 200 -10%
Quality / Appeal Superior -10% Superior -10% Inferior 20%
Age / Condition 1999 / Very Good-15% 1986 / Very Good -5% 1982 / Average 15%
Occupancy at Sale N/A 0% 86% 0% N/A 0%
Amenities Superior -5% Comparable 0% Inferior 20%
Average Unit Size (SF) 929 -5% 781 0% 600 10%
PHYSICAL ADJUSTMENT -45% -10% 75%
FINAL ADJUSTED VALUE ($/UNIT) $42,396 $40,091 $41,125
</Table>
SUMMARY
<Table>
VALUE RANGE (PER UNIT) $35,688 TO $42,396
MEAN (PER UNIT) $39,823
MEDIAN (PER UNIT) $40,091
VALUE CONCLUSION (PER UNIT) $40,000
VALUE OF IMPROVEMENT & MAIN SITE $17,280,000
LESS: LEASE-UP COST -$221,000
PV OF CONCESSIONS -$245,000
VALUE INDICATED BY SALES COMPARISON APPROACH $16,814,000
ROUNDED $16,800,000
</Table>
NET OPERATING INCOME (NOI) ANALYSIS
We have also conducted a net operating income (NOI) comparison analysis. The NOI
effectively takes into account the various physical, location, and operating
aspects of the sale. When the subject's NOI is compared to the sale NOI, a
percent adjustment can be arrived at.
The following table illustrates this analysis.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 24
SWOODCREEK, MESA, ARIZONA
<Table>
<Caption>
NOI PER UNIT COMPARISON
- ----------------------------------------------------------------------------------------------------------------------------------
COMPARABLE NO. OF SALE PRICE OAR NOI/ SUBJECT NOI ADJUSTMENT INDICATED
NO. UNITS PRICE/UNIT NOI/UNIT SUBJ. NOI/UNIT FACTOR VALUE/UNIT
- ----------------------------------------------------------------------------------------------------------------------------------
I-1 676 $48,250,000 8.05% $3,882,729 $1,559,086 0.628 $44,848
$ 71,376 $ 5,744 $ 3,609
I-2 380 $17,800,000 7.75% $1,379,500 $1,559,086 0.994 $46,568
$ 46,842 $ 3,630 $ 3,609
I-3 240 $18,500,000 0.00% $1,559,086
$ 77,083 $ 3,609
I-4 220 $ 9,800,000 8.11% $ 795,200 $1,559,086 0.998 $44,477
$ 44,545 $ 3,615 $ 3,609
I-5 200 $ 4,700,000 0.00% $1,559,086
$ 23,500 $ 3,609
</Table>
<Table>
<Caption>
PRICE/UNIT VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
- ----------------------------------------------------------------------------------------------------------------------------------
Low High Average Median Estimated Price Per Unit $ 44,000
Number of Units 432
$44,477 $46,568 $45,298 $44,848
Value $19,008,000
Less: Lease-Up Cost -$ 221,000
PV of Concessions -$ 245,000
Value Based on NOI Analysis $18,542,000
Rounded $18,500,000
</Table>
The adjusted sales indicate a range of value between $44,477 and $46,568 per
unit, with an average of $45,298 per unit. Based on the subject's competitive
position within the improved sales, a value of $44,000 per unit is estimated.
This indicates an "as is" market value of $18,500,000 (rounded after necessary
adjustment, if any) for the NOI Per Unit Analysis.
EFFECTIVE GROSS INCOME MULTIPLIER (EGIM) ANALYSIS
The effective gross income multiplier (EGIM) is derived by dividing the sales
price by the total effective gross income. The following table illustrates the
EGIMs for the comparable improved sales.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 25
WOODCREEK, MESA, ARIZONA
<Table>
<Caption>
EFFECTIVE GROSS INCOME MULTIPLIER COMPARISON
- ----------------------------------------------------------------------------------------------------------------------------------
COMPARABLE NO. OF SALE PRICE EFFECTIVE OPERATING SUBJECT
NO. UNITS PRICE/UNIT GROSS INCOME EXPENSE OER PROJECTED OER EGIM
- ----------------------------------------------------------------------------------------------------------------------------------
I-1 676 $48,250,000 $6,122,253 $2,239,524 36.58% 7.88
$71,376
I-2 380 $17,800,000
$46,842
I-3 240 $18,500,000
$77,083
I-4 220 $9,800,000 $1,455,200 $660,000 45.35% 6.73
$44,545
I-5 200 $4,700,000
$23,500
</Table>
<Table>
<Caption>
EGIM VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
- ----------------------------------------------------------------------------------------------------------------------------------
Low High Average Median Estimate EGIM 6.00
--- ---- ------- ------
Subject EGI $3,014,448
6.73 7.88 7.31 7.31
Value $18,086,688
Less: Lease-Up Cost -$221,000
PV of Concessions -$245,000
-----------
Value Based on EGIM Analysis $17,620,688
Rounded $17,600,000
Value Per Unit $40,741
</Table>
There is an inverse relationship, which generally holds among EGIMs and
operating expenses. Properties, which have higher expense ratios, typically sell
for relatively less and therefore produce a lower EGIM. As will be illustrated
in the Income Capitalization Approach of this report, the subject's operating
expense ratio (OER) is estimated at 44.70% before reserves. The comparable sales
indicate a range of expense ratios from 36.58% to 45.35%, while their EGIMs
range from 6.73 to 7.88. Overall, we conclude to an EGIM of 6.00, which results
in an "as is" value estimate in the EGIM Analysis of $17,600,000.
SALES COMPARISON CONCLUSION
The three valuation methods in the Sales Comparison Approach are shown below.
The overall value via the Sales Comparison Approach is estimated at $17,200,000.
<Table>
Price Per Unit $16,800,000
NOI Per Unit $18,500,000
EGIM Analysis $17,600,000
Sales Comparison Conclusion $17,200,000
</Table>
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
WOODCREEK, MESA, ARIZONA
INCOME CAPITALIZATION APPROACH
The income capitalization approach is based on the premise that value is created
by the expectation of future benefits. We estimated the present value of those
benefits to derive an indication of the amount that a prudent, informed
purchaser-investor would pay for the right to receive them as of the date of
value.
This approach requires an estimate of the NOI of a property. The estimated NOI
is then converted to a value indication by use of either the direct
capitalization or the discounted cash flow analysis (yield capitalization).
Direct capitalization uses a single year's stabilized NOI as a basis for a value
indication by dividing the income by a capitalization rate. The rate chosen
accounts for a recapture of the investment by the investor and should reflect
all factors that influence the value of the property, such as tenant quality,
property condition, neighborhood change, market trends, interest rates, and
inflation. The rate may be extracted from local market transactions or, when
transaction evidence is lacking, obtained from trade sources.
A discounted cash flow analysis focuses on the operating cash flows expected
from the property and the proceeds of a hypothetical sale at the end of a
holding period (the reversion). The cash flows and reversion are discounted to
their present values using a market-derived discount rate and are added together
to obtain a value indication. Because benefits to be received in the future are
worth less than the same benefits received in the present, this method weights
income in the early years more heavily than the income and the sale proceeds to
be received later. The strength of the discounted cash flow method is its
ability to recognize variations in projected net income, such as those caused by
inflation, stepped leases, neighborhood change, or tenant turnover. Its weakness
is that it requires many judgments regarding the actions of likely buyers and
sellers of the property in the future.
In some situations, both methods yield a similar result. The discounted cash
flow method is typically more appropriate for the analysis of investment
properties with multiple or long-term leases, particularly leases with
cancellation clauses or renewal options. It is especially useful for
multi-tenant properties in volatile markets. The direct capitalization
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 27
WOODCREEK, MESA, ARIZONA
method is normally more appropriate for properties with relatively stable
operating histories and expectations.
A pro forma analysis for the first year of the investment is made to estimate a
reasonable potential net operating income for the Subject Property. Such an
analysis entails an estimate of the gross income the property should command in
the marketplace. From this total gross income must be deducted an allowance for
vacancy/collection loss and operating expenses as dictated by general market
conditions and the overall character of the subject's tenancy and leased income
to arrive at a projected estimate of net operating income. Conversion of the net
operating income to an indication of value is accomplished by the process of
capitalization, as derived primarily from market data.
MARKET RENT ANALYSIS
In order to determine a market rental rate for the subject, a survey of
competing apartment communities was performed. This survey was displayed
previously in the market analysis section of the report. Detailed information
pertaining to each of the comparable rental communities, along with photographs,
is presented in the Addenda of this report.
The following charts display the subject's current asking and actual rent rates
as well as a comparison with the previous referenced comparable rental
properties.
<Table>
<Caption>
SUMMARY OF ACTUAL AVERAGE RENTS
- --------------------------------------------------------------------------------
Average
Unit Area --------------------------
Unit Type (Sq. Ft.) Per Unit Per SF %Occupied
- --------------------------------------------------------------------------------
1Br/1Ba 579 $556 $0.96 71.9%
1Br/1Ba 700 $559 $0.80 62.5%
1Br/1Ba 740 $583 $0.79 64.1%
1Br/1Ba 768 $611 $0.80 81.3%
2Br/1Ba 882 $662 $0.75 85.4%
2Br/2Ba 957 $668 $0.70 81.3%
</Table>
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
WOODCREEK, MESA, ARIZONA
RENT ANALYSIS
<Table>
<Caption>
SUBJECT SUBJECT
SUBJECT UNIT ACTUAL ASKING
DESCRIPTION TYPE RENT RENT
- --------------------------------------------------------------------
Monthly Rent 1BR/1BA $ 556 $ 569
Unit Area (SF) 579 579
Monthly Rent Per Sq. Ft. $ 0.96 $ 0.98
Monthly Rent 1BR/1BA $ 559 $ 609
Unit Area (SF) 700 700
Monthly Rent Per Sq. Ft. $ 0.80 $ 0.87
Monthly Rent 1BR/1BA $ 583 $ 649
Unit Area (SF) 740 740
Monthly Rent Per Sq. Ft. $ 0.79 $ 0.88
Monthly Rent 1BR/1BA $ 611 $ 659
Unit Area (SF) 768 768
Monthly Rent Per Sq. Ft. $ 0.80 $ 0.86
Monthly Rent 2BR/1BA $ 662 $ 689
Unit Area (SF) 882 882
Monthly Rent Per Sq. Ft. $ 0.75 $ 0.78
Monthly Rent 2BR/2BA $ 668 $ 699
Unit Area (SF) 957 957
Monthly Rent Per Sq. Ft. $ 0.70 $ 0.73
Monthly Rent 2BR/2BA $ 714 $ 719
Unit Area (SF) 1,017 1,017
Monthly Rent Per Sq. Ft. $ 0.70 $ 0.71
Monthly Rent 2BR/1BA $ 729 $ 739
Unit Area (SF) 1,042 1,042
Monthly Rent Per Sq. Ft. $ 0.70 $ 0.71
<Caption>
COMPARABLE RENTS
-----------------------------------------------------
R-1 R-2 R-3 R-4 R-5
-----------------------------------------------------
The Gilbert
University Township Meadows Separations
Green Windemere Apartments Apartments Villas
-----------------------------------------------------
COMPARISON TO SUBJECT
- --------------------------------------------------------------------------------
Slightly
DESCRIPTION Superior Similar Superior Superior Superior
- --------------------------------------------------------------------------------
Monthly Rent $ 525 $ 629 $ 700 $ 525 $ 450
Unit Area (SF) 579 704 730 608 600
Monthly Rent Per Sq. Ft. $ 0.91 $ 0.89 $ 0.96 $ 0.86 $ 0.75
Monthly Rent $ 585 $ 654 $ 700 $ 550
Unit Area (SF) 700 740 730 672
Monthly Rent Per Sq. Ft. $ 0.84 $ 0.88 $ 0.96 $ 0.82
Monthly Rent $ 627 $ 733 $ 805 $ 650 $ 550
Unit Area (SF) 802 932 1,000 840 700
Monthly Rent Per Sq. Ft. $ 0.78 $ 0.79 $ 0.81 $ 0.77 $ 0.79
Monthly Rent $ 685 $ 756 $ 805
Unit Area (SF) 957 964 1,000
Monthly Rent Per Sq. Ft. $ 0.72 $ 0.78 $ 0.81
Monthly Rent $ 710 $ 791
Unit Area (SF) 1,017 982
Monthly Rent Per Sq. Ft. $ 0.70 $ 0.81
Monthly Rent $ 719 $ 804
Unit Area (SF) 1,042 1,049
Monthly Rent Per Sq. Ft. $ 0.69 $ 0.77
Monthly Rent
Unit Area (SF)
Monthly Rent Per Sq. Ft.
Monthly Rent
Unit Area (SF)
Monthly Rent Per Sq. Ft.
<Caption>
DESCRIPTION MIN MAX MEDIAN AVERAGE
- --------------------------------------------------------------------------
Monthly Rent $ 450 $ 700 $ 525 $ 566
Unit Area (SF) 579 730 608 644
Monthly Rent Per Sq. Ft. $ 0.75 $ 0.96 $ 0.89 $ 0.87
Monthly Rent $ 550 $ 700 $ 620 $ 622
Unit Area (SF) 672 740 715 711
Monthly Rent Per Sq. Ft. $ 0.82 $ 0.96 $ 0.86 $ 0.87
Monthly Rent $ 550 $ 805 $ 650 $ 673
Unit Area (SF) 700 1,000 840 855
Monthly Rent Per Sq. Ft. $ 0.77 $ 0.81 $ 0.79 $ 0.79
Monthly Rent $ 685 $ 805 $ 756 $ 749
Unit Area (SF) 957 1,000 964 974
Monthly Rent Per Sq. Ft. $ 0.72 $ 0.81 $ 0.78 $ 0.77
Monthly Rent $ 710 $ 791 $ 751 $ 751
Unit Area (SF) 982 1,017 1,000 1,000
Monthly Rent Per Sq. Ft. $ 0.70 $ 0.81 $ 0.75 $ 0.75
Monthly Rent $ 719 $ 804 $ 762 $ 762
Unit Area (SF) 1,042 1,049 1,046 1,046
Monthly Rent Per Sq. Ft. $ 0.69 $ 0.77 $ 0.73 $ 0.73
Monthly Rent
Unit Area (SF)
Monthly Rent Per Sq. Ft.
Monthly Rent
Unit Area (SF)
Monthly Rent Per Sq. Ft.
</Table>
CONCLUDED MARKET RENTAL RATES AND TERMS
Based on this analysis above, the subject's concluded market rental rates and
gross rental income is calculated as follows:
GROSS RENTAL INCOME PROJECTION
<Table>
<Caption>
Market Rent
Unit Area ---------------------- Monthly Annual
Unit Type Number of Units (Sq. Ft.) Per Unit Per SF Income Income
--------- --------------- --------- -------- ------ -------- ----------
1Br/1Ba 32 579 $556 $0.96 $ 17,792 $ 213,504
1Br/1Ba 80 700 $590 $0.84 $ 47,200 $ 566,400
1Br/1Ba 64 740 $583 $0.79 $ 37,312 $ 447,744
1Br/1Ba 80 768 $611 $0.80 $ 48,880 $ 586,560
2Br/1Ba 48 882 $662 $0.75 $ 31,776 $ 381,312
2Br/2Ba 48 957 $668 $0.70 $ 32,064 $ 384,768
-------- ----------
Total $272,240 $3,266,880
</Table>
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 29
WOODCREEK, MESA, ARIZONA
PRO FORMA ANALYSIS
For purposes of this appraisal, we were provided with income and expense data
for the subject property. A summary of this data is presented on the following
page.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30
WOODCREEK, MESA, ARIZONA
SUMMARY OF HISTORICAL INCOME & EXPENSES
<Table>
<Caption>
FISCAL YEAR 2000 FISCAL YEAR 2001 FISCAL YEAR 2002
----------------------------------------------------------------------------------
DESCRIPTION ACTUAL ACTUAL ACTUAL
----------------------------------------------------------------------------------
TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT
----------------------------------------------------------------------------------
Revenues
Rental Income $ 3,297,414 $ 7,633 $ 3,405,567 $ 7,883 $ 3,333,537 $ 7,717
Vacancy $ 205,922 $ 477 $ 182,860 $ 423 $ 545,942 $ 1,264
Credit Loss/Concessions $ 146,192 $ 338 $ 205,348 $ 475 $ 255,314 $ 591
----------------------------------------------------------------------------------
Subtotal $ 352,114 $ 815 $ 388,208 $ 899 $ 801,256 $ 1,855
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 139,700 $ 323 $ 208,449 $ 483 $ 289,243 $ 670
----------------------------------------------------------------------------------
Subtotal Other Income $ 139,700 $ 323 $ 208,449 $ 483 $ 289,243 $ 670
----------------------------------------------------------------------------------
Effective Gross Income $ 3,085,000 $ 7,141 $ 3,225,808 $ 7,467 $ 2,821,524 $ 6,531
Operating Expenses
Taxes $ 207,030 $ 479 $ 200,198 $ 463 $ 201,961 $ 468
Insurance $ 44,874 $ 104 $ 52,041 $ 120 $ 74,176 $ 172
Utilities $ 222,502 $ 515 $ 261,404 $ 605 $ 251,439 $ 582
Repair & Maintenance $ 83,057 $ 192 $ 86,098 $ 199 $ 63,106 $ 146
Cleaning $ 89,163 $ 206 $ 114,083 $ 264 $ 111,553 $ 258
Landscaping $ 59,081 $ 137 $ 48,736 $ 113 $ 51,948 $ 120
Security $ (161) $ 0 $ 3,750 $ 9 $ 1,523 $ 4
Marketing & Leasing $ 50,722 $ 117 $ 35,960 $ 83 $ 44,435 $ 103
General Administrative $ 375,721 $ 870 $ 359,962 $ 833 $ 356,854 $ 826
Management $ 160,548 $ 372 $ 170,600 $ 395 $ 139,212 $ 322
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------
Total Operating Expenses $ 1,292,537 $ 2,992 $ 1,332,832 $ 3,085 $ 1,296,207 $ 3,000
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------
Net Income $ 1,792,463 $ 4,149 $ 1,892,976 $ 4,382 $ 1,525,317 $ 3,531
----------------------------------------------------------------------------------
<Caption>
FISCAL YEAR 2003 ANNUALIZED 2003
-----------------------------------------------------
DESCRIPTION MANAGEMENT BUDGET PROJECTION AAA PROJECTION
----------------------------------------------------- ---------------------------------------
TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT %
----------------------------------------------------- ---------------------------------------
Revenues
Rental Income $ 3,000,681 $ 6,946 $ 3,218,408 $ 7,450 $ 3,266,880 $ 7,562 100.0%
Vacancy $ 177,503 $ 411 $ 925,988 $ 2,143 $ 326,688 $ 756 10.0%
Credit Loss/Concessions $ 84,633 $ 196 $ 314,344 $ 728 $ 163,344 $ 378 5.0%
-----------------------------------------------------------------------------------------------
Subtotal $ 262,136 $ 607 $ 1,240,332 $ 2,871 $ 490,032 $ 1,134 15.0%
Laundry Income $ 20,148 $ 47 $ 0 $ 0 $ 0 $ 0 0.0%
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 234,108 $ 542 $ 286,284 $ 663 $ 237,600 $ 550 7.3%
-----------------------------------------------------------------------------------------------
Subtotal Other Income $ 254,256 $ 589 $ 286,284 $ 663 $ 237,600 $ 550 7.3%
-----------------------------------------------------------------------------------------------
Effective Gross Income $ 2,992,801 $ 6,928 $ 2,264,360 $ 5,242 $ 3,014,448 $ 6,978 100.0%
Operating Expenses
Taxes $ 203,632 $ 471 $ 204,224 $ 473 $ 201,744 $ 467 6.7%
Insurance $ 79,326 $ 184 $ 75,848 $ 176 $ 75,600 $ 175 2.5%
Utilities $ 249,147 $ 577 $ 219,316 $ 508 $ 237,600 $ 550 7.9%
Repair & Maintenance $ 51,840 $ 120 $ 95,096 $ 220 $ 73,440 $ 170 2.4%
Cleaning $ 91,000 $ 211 $ 161,732 $ 374 $ 118,800 $ 275 3.9%
Landscaping $ 75,800 $ 175 $ 57,592 $ 133 $ 56,160 $ 130 1.9%
Security $ 0 $ 0 $ 5,212 $ 12 $ 1,296 $ 3 0.0%
Marketing & Leasing $ 53,000 $ 123 $ 73,924 $ 171 $ 60,480 $ 140 2.0%
General Administrative $ 365,118 $ 845 $ 424,180 $ 982 $ 371,520 $ 860 12.3%
Management $ 147,732 $ 342 $ 121,668 $ 282 $ 150,722 $ 349 5.0%
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
-----------------------------------------------------------------------------------------------
Total Operating Expenses $ 1,316,595 $ 3,048 $ 1,438,792 $ 3,331 $ 1,347,362 $ 3,119 44.7%
Reserves $ 0 $ 0 $ 0 $ 0 $ 108,000 $ 250 8.0%
-----------------------------------------------------------------------------------------------
Net Income $ 1,676,206 $ 3,880 $ 825,568 $ 1,911 $ 1,559,086 $ 3,609 51.7%
-----------------------------------------------------------------------------------------------
</Table>
REVENUES AND EXPENSES
The subject's revenue and expense projections are displayed on the previous
chart. Rental income is based on the market analysis previously discussed. Other
income consists of forfeited deposits, laundry income, late rent payments, month
to month fees, pet fees, vending machine revenue, etc.
We forecasted the property's annual operating expenses after reviewing its
historical performance at the subject property. We analyzed each item of expense
and attempted to forecast amounts a typical informed investor would consider
reasonable.
VACANCY AND COLLECTION LOSS
An investor is primarily interested in the annual revenue an income property is
likely to produce over a specified period of time, rather than the income it
could produce if it were always 100% occupied and all tenants were paying their
rent in full and on time. An investor normally expects some income loss as
tenants vacate, fail to pay rent, or pay their rent late.
We have projected a stabilized vacancy and collection loss rate of 15% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31
WOODCREEK, MESA, ARIZONA
RESERVES FOR REPLACEMENT
"Reserves for replacements" is a contingency account allocated to the expenses
of the property to provide for replacement of short-lived items and for
unforeseen necessary capital expenditures. We have utilized the Korpacz Real
Estate Investor Survey of the national apartment market, which reports a range
of replacement reserves between $150 and $400 per unit. For purposes of this
analysis, we have included an allowance of $250 per unit for reserves for
replacement.
CAPITAL EXPENDITURES
Capital expenditures represent expenses for immediate repair or replacement of
items that have average to long lives. Based on our inspection of the property
as well as discussions with property management personnel, there are no major
items remaining in need of repair or replacement that would require an expense
beyond our reserves for replacement. Therefore an allowance of $250 per unit
should be satisfactory in our reserves for replacement to cover future capital
expenditures.
DISCOUNTED CASH FLOW ANALYSIS
As the subject is a multi-tenant income property, the Discounted Cash Flow
Method is considered appropriate. This method is especially meaningful in that
it isolates the timing of the annual cash flows and discounts them, along with
the expected equity reversion, to a present value. The present value of the cash
flow is added to the present value of the reversion, resulting in a total
property value.
INVESTMENT CRITERIA
Appropriate investment criteria will be derived for the subject based upon
analysis of comparable sales and a survey of real estate investors. The
following table summarizes the findings of Korpacz National Investor Survey for
the most recent period.
KORPACZ NATIONAL INVESTOR SURVEY
1ST QUARTER 2003
NATIONAL APARTMENT MARKET
<Table>
<Caption>
CAPITALIZATION RATES
----------------------------------------------------
GOING-IN TERMINAL
---------------------- ----------------------
LOW HIGH LOW HIGH
----- ------ ----- ------
RANGE 6.00% 10.00% 7.00% 10.00%
AVERAGE 8.14% 8.47%
</Table>
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
WOODCREEK, MESA, ARIZONA
SUMMARY OF OVERALL
CAPITALIZATION RATES
<Table>
<Caption>
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
- ----------------------------------------------------------------------------
I-1 Dec-02 86% $71,376 8.05%
I-2 Dec-02 97% $46,842 7.75%
I-3 Aug-02 N/A $77,083 N/A
I-4 February, 2003 86% $44,545 8.11%
I-5 Aug-02 N/A $23,500 N/A
High 8.11%
Low 7.75%
Average 7.97%
</Table>
Based on this information, we have concluded the subject's overall
capitalization rate should be 9.00%. The terminal capitalization rate is applied
to the net operating income estimated for the year following the end of the
holding period. Based on the concluded overall capitalization rate, the age of
the property and the surveyed information, we have concluded the subject's
terminal capitalization rate to be 9.50%. Finally, the subject's discount rate
or yield rate is estimated based on the previous investor survey and an
examination of returns available on alternative investments in the market. Based
on this analysis, the subject's discount rate is estimated to be 12.00%.
HOLDING PERIOD
The survey of investors indicates that most investors are completing either
10-year cash flows or extending the analysis to the end of the lease if it is
more than 10-years. A 10-year period has been used in the analysis of the
subject with the eleventh year stabilized NOI used to determine the reversion.
SELLING COSTS
Sales of similar size properties are typically accomplished with the aid of a
broker and will also incur legal and other transaction related cost. Based on
our survey of brokers and a review of institutional investor projections, an
allowance of 2.00% of the sale amount is applied.
DISCOUNTED CASH FLOW CONCLUSION
Discounting the annual cash flows and the equity reversion at the selected rate
of 12.00% indicates a value of $16,900,000. In this instance, the reversion
figure contributes
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 33
WOODCREEK, MESA, ARIZONA
approximately 41% of the total value. Investors surveyed for this assignment
indicated they would prefer to have the cash flow contribute anywhere from 50%
to 60%. Overall, the blend seems reasonable. The cash flow and pricing matrix
are located on the following pages.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
WOODCREEK, MESA, ARIZONA
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
<Table>
<Caption>
WOODCREEK
- ------------------------------------------------------------------------------------------------------------------------
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009
FISCAL YEAR 1 2 3 4 5 6
- ------------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $3,266,880 $3,364,886 $3,465,833 $3,569,808 $3,676,902 $3,787,209
Vacancy $ 587,796 $ 336,489 $ 346,583 $ 356,981 $ 367,690 $ 378,721
Credit Loss $ 163,344 $ 168,244 $ 173,292 $ 178,490 $ 183,845 $ 189,360
Concessions $ 274,752 $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------
Subtotal $1,025,892 $ 504,733 $ 519,875 $ 535,471 $ 551,535 $ 568,081
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 237,600 $ 244,728 $ 252,070 $ 259,632 $ 267,421 $ 275,444
--------------------------------------------------------------------------------
Subtotal Other Income $ 237,600 $ 244,728 $ 252,070 $ 259,632 $ 267,421 $ 275,444
--------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME $2,478,588 $3,104,881 $3,198,028 $3,293,969 $3,392,788 $3,494,571
OPERATING EXPENSES:
Taxes $ 201,744 $ 207,796 $ 214,030 $ 220,451 $ 227,065 $ 233,877
Insurance $ 75,600 $ 77,868 $ 80,204 $ 82,610 $ 85,088 $ 87,641
Utilities $ 237,600 $ 244,728 $ 252,070 $ 259,632 $ 267,421 $ 275,444
Repair & Maintenance $ 73,440 $ 75,643 $ 77,912 $ 80,250 $ 82,657 $ 85,137
Cleaning $ 118,800 $ 122,364 $ 126,035 $ 129,816 $ 133,710 $ 137,722
Landscaping $ 56,160 $ 57,845 $ 59,580 $ 61,368 $ 63,209 $ 65,105
Security $ 1,296 $ 1,335 $ 1,375 $ 1,416 $ 1,459 $ 1,502
Marketing & Leasing $ 60,480 $ 62,294 $ 64,163 $ 66,088 $ 68,071 $ 70,113
General Administrative $ 371,520 $ 382,666 $ 394,146 $ 405,970 $ 418,149 $ 430,694
Management $ 123,929 $ 155,244 $ 159,901 $ 164,698 $ 169,639 $ 174,729
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $1,320,569 $1,387,783 $1,429,417 $1,472,299 $1,516,468 $1,561,962
Reserves $ 108,000 $ 111,240 $ 114,577 $ 118,015 $ 121,555 $ 125,202
--------------------------------------------------------------------------------
NET OPERATING INCOME $1,050,018 $1,605,858 $1,654,034 $1,703,655 $1,754,765 $1,807,408
--------------------------------------------------------------------------------
Operating Expense Ratio (% of EGI) 53.3% 44.7% 44.7% 44.7% 44.7% 44.7%
Operating Expense Per Unit $ 3,057 $ 3,212 $ 3,309 $ 3,408 $ 3,510 $ 3,616
<Caption>
WOODCREEK
- ----------------------------------------------------------------------------------------------------------
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 7 8 9 10 11
- ----------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $3,900,826 $4,017,850 $4,138,386 $4,262,537 $4,390,414
Vacancy $ 390,083 $ 401,785 $ 413,839 $ 426,254 $ 439,041
Credit Loss $ 195,041 $ 200,893 $ 206,919 $ 213,127 $ 219,521
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------
Subtotal $ 585,124 $ 602,678 $ 620,758 $ 639,381 $ 658,562
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 283,707 $ 292,218 $ 300,985 $ 310,014 $ 319,315
------------------------------------------------------------------
Subtotal Other Income $ 283,707 $ 292,218 $ 300,985 $ 310,014 $ 319,315
------------------------------------------------------------------
EFFECTIVE GROSS INCOME $3,599,409 $3,707,391 $3,818,613 $3,933,171 $4,051,166
OPERATING EXPENSES:
Taxes $ 240,893 $ 248,120 $ 255,563 $ 263,230 $ 271,127
Insurance $ 90,270 $ 92,978 $ 95,768 $ 98,641 $ 101,600
Utilities $ 283,707 $ 292,218 $ 300,985 $ 310,014 $ 319,315
Repair & Maintenance $ 87,691 $ 90,322 $ 93,032 $ 95,823 $ 98,697
Cleaning $ 141,853 $ 146,109 $ 150,492 $ 155,007 $ 159,657
Landscaping $ 67,058 $ 69,070 $ 71,142 $ 73,276 $ 75,474
Security $ 1,547 $ 1,594 $ 1,642 $ 1,691 $ 1,742
Marketing & Leasing $ 72,216 $ 74,383 $ 76,614 $ 78,913 $ 81,280
General Administrative $ 443,614 $ 456,923 $ 470,630 $ 484,749 $ 499,292
Management $ 179,970 $ 185,370 $ 190,931 $ 196,659 $ 202,558
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------
TOTAL OPERATING EXPENSES $1,608,821 $1,657,086 $1,706,798 $1,758,002 $1,810,742
Reserves $ 128,958 $ 132,826 $ 136,811 $ 140,916 $ 145,143
------------------------------------------------------------------
NET OPERATING INCOME $1,861,630 $1,917,479 $1,975,003 $2,034,253 $2,095,281
------------------------------------------------------------------
Operating Expense Ratio (% of EGI) 44.7% 44.7% 44.7% 44.7% 44.7%
Operating Expense Per Unit $ 3,724 $ 3,836 $ 3,951 $ 4,069 $ 4,192
</Table>
<Table>
<Caption>
"DCF" VALUE ANALYSIS
Gross Residual Sale Price $22,055,586 Deferred
Estimated Stabilized Maintenance $ 0
NOI $1,559,086 Sales Expense Rate 2.00% Less: Sales Expense $ 441,112 Add: Excess Land $ 0
Months to Stabilized 12 Discount Rate 12.00% Net Residual Sale Price $21,614,474 Other Adjustments $ 0
Stabilized Occupancy 90.0% Terminal Cap Rate 9.50% PV of Reversion $ 6,959,282 Value Indicated By
Add: NPV of NOI $ 9,975,166 "DCF" $16,934,449
PV Total $16,934,449 Rounded $16,900,000
</Table>
<Table>
<Caption>
"DCF" VALUE SENSITIVITY TABLE
- -------------------------------------------------------------------------------------------------------
DISCOUNT RATE
- -------------------------------------------------------------------------------------------------------
TOTAL VALUE 11.50% 11.75% 12.00% 12.25% 12.50%
- -------------------------------------------------------------------------------------------------------
9.00% $ 17,900,467 $ 17,607,602 $ 17,321,075 $ 17,040,729 $ 16,766,408
TERMINAL 9.25% $ 17,692,844 $ 17,404,578 $ 17,122,537 $ 16,846,569 $ 16,576,520
CAP RATE 9.50% $ 17,496,149 $ 17,212,238 $ 16,934,449 $ 16,662,627 $ 16,396,625
9.75% $ 17,309,540 $ 17,029,763 $ 16,756,006 $ 16,488,119 $ 16,225,956
10.00% $ 17,132,262 $ 16,856,411 $ 16,586,485 $ 16,322,336 $ 16,063,821
</Table>
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35
WOODCREEK, MESA, ARIZONA
INCOME LOSS DURING LEASE-UP
The subject is currently 75% occupied, below our stabilized occupancy
projection. We have estimated a 12-month lease-up period. An adjustment must be
made to bring the subject to a stabilized operating level. To account for this
income loss during lease-up, we have compared the current DCF analysis to an "as
stabilized" DCF analysis assuming the subject's occupancy were stabilized. The
difference in net operating income during the lease-up period is discounted to a
present value figure of $221,000 as shown in the following table.
<Table>
<Caption>
DESCRIPTION YEAR 1 YEAR 2 YEAR 3
- ---------------------------------------------------------------------------------------
"As Is" Net Operating Income $ 1,050,018 $ 0 $ 0
Stabilized Net Operating Income $ 1,298,071 $ 0 $ 0
---------------------------------------
Difference $ 248,053 $ 0 $ 0
PV of Income Loss During Lease-Up $ 221,476
-----------
Rounded $ 221,000
</Table>
CONCESSIONS
Due to softness in the market, concessions have been utilized at the subject
property and within the market. Based on our discussions with the subject's
property manager and those at competing properties, these concessions are
expected to continue in the near term until the market returns to a stabilized
level. Concessions have been included as a line item deduction within the
discounted cash flow analysis. The present value of these concessions equates to
$245,000 (rounded). This amount has been deducted from the Direct Capitalization
analysis, as well as the Sales Comparison Approach value.
DIRECT CAPITALIZATION METHOD
After having projected the income and expenses for the property, the next step
in the valuation process is to capitalize the net income into an estimate of
value. The selected overall capitalization rate ("OAR") covers both return on
and return of capital. It is the overall rate of return an investor expects.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
WOODCREEK, MESA, ARIZONA
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 9.00% percent is applicable to the
subject. The results of our direct capitalization analysis are as follows:
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 37
WOODCREEK, MESA, ARIZONA
WOODCREEK
<Table>
<Caption>
TOTAL PER SQ. FT. PER UNIT %OF EGI
--------------------------------------------------------------------------
REVENUE
Base Rent $ 3,266,880 $9.23 $7,562
Less: Vacancy & Collection Loss 15.00% $ 490,032 $1.39 $1,134
Plus: Other Income
Laundry Income $ 0 $0.00 $ 0 0.00%
Garage Revenue $ 0 $0.00 $ 0 0.00%
Other Misc. Revenue $ 237,600 $0.67 $ 550 7.88%
--------------------------------------------------------------
Subtotal Other Income $ 237,600 $0.67 $ 550 7.88%
EFFECTIVE GROSS INCOME $ 3,014,448 $8.52 $6,978
OPERATING EXPENSES:
Taxes $ 201,744 $0.57 $ 467 6.69%
Insurance $ 75,600 $0.21 $ 175 2.51%
Utilities $ 237,600 $0.67 $ 550 7.88%
Repair & Maintenance $ 73,440 $0.21 $ 170 2.44%
Cleaning $ 118,800 $0.34 $ 275 3.94%
Landscaping $ 56,160 $0.16 $ 130 1.86%
Security $ 1,296 $0.00 $ 3 0.04%
Marketing & Leasing $ 60,480 $0.17 $ 140 2.01%
General Administrative $ 371,520 $1.05 $ 860 12.32%
Management 5.00% $ 150,722 $0.43 $ 349 5.00%
Miscellaneous $ 0 $0.00 $ 0 0.00%
TOTAL OPERATING EXPENSES $ 1,347,362 $3.81 $3,119 44.70%
Reserves $ $108,000 $0.31 $ 250 3.58%
--------------------------------------------------------------
NET OPERATING INCOME $ 1,559,086 $4.41 $3,609 51.72%
--------------------------------------------------------------
"GOING IN" CAPITALIZATION RATE 9.00%
VALUE INDICATION $17,323,173 $48.97 $40,100
LESS: LEASE-UP COST $ (221,000)
PV OF CONCESSIONS $ (245,000)
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $16,857,173
ROUNDED $16,900,000 $47.77 $39,120
</Table>
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 38
WOODCREEK, MESA, ARIZONA
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
<Table>
<Caption>
CAP RATE VALUE ROUNDED $/UNIT $/SF
- -------- ----------- ----------- ------- ------
8.25% $18,432,007 $18,400,000 $42,593 $52.01
8.50% $17,876,184 $17,900,000 $41,435 $50.60
8.75% $17,352,121 $17,400,000 $40,278 $49.19
9.00% $16,857,173 $16,900,000 $39,120 $47.77
9.25% $16,388,979 $16,400,000 $37,963 $46.36
9.50% $15,945,427 $15,900,000 $36,806 $44.95
9.75% $15,524,622 $15,500,000 $35,880 $43.82
</Table>
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $16,900,000.
CORRELATION AND CONCLUSION BY THE INCOME APPROACH
The two methods used to estimate the market value of the subject property by the
income approach resulted in the following indications of value:
<Table>
Discounted Cash Flow Analysis $16,900,000
Direct Capitalization Method $16,900,000
</Table>
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$16,900,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 39
WOODCREEK, MESA, ARIZONA
RECONCILIATION AND CONCLUSION
This appraisal was made to express an opinion as of the Market Value of the fee
simple estate in the property.
AS IS MARKET VALUE OF THE FEE SIMPLE ESTATE
<Table>
Cost Approach Not Utilized
Sales Comparison Approach $17,200,000
Income Approach $16,900,000
Reconciled Value $16,900,000
</Table>
The Income Capitalization Method is considered a reliable indicator of value.
Income and expenses were estimated and projected based on historical operating
statements and market oriented expenses. This method is primarily used by
investors in their underwriting analysis. Furthermore, there was good support
for an overall rate in the Direct Capitalization Method.
The Sales Comparison Approach to value supported the value conclusion by the
Income Approach and was given secondary consideration. Investment-grade,
income-producing properties such as the subject are not typically traded based
on cost. Therefore, the Cost Approach has not been considered in our valuation.
FINAL VALUE - FEE SIMPLE ESTATE
Based on the investigation and premise outlined, it is our opinion that as of
May 6, 2003 the market value of the fee simple estate in the property is:
$16,900,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
WOODCREEK, MESA, ARIZONA
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
WOODCREEK, MESA, ARIZONA
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
WOODCREEK, MESA, ARIZONA
SUBJECT PHOTOGRAPHS
[EXTERIOR - OFFICE PICTURE] [EXTERIOR - LANDSCAPE & PARK PICTURE]
[INTERIOR - APARTMENT UNIT PICTURE] [INTERIOR - APARTMENT UNIT PICTURE]
[EXTERIOR - PARKING LOT PICTURE] [INTERIOR - APARTMENT UNIT PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
WOODCREEK, MESA, ARIZONA
SUBJECT PHOTOGRAPHS
[EXTERIOR - APARTMENT BUILDING PICTURE] [INTERIOR -APARTMENT UNIT PICTURE]
[EXTERIOR - APARTMENT BUILDING PICTURE] [EXTERIOR - APARTMENT BUILDING PICTURE]
[INTERIOR - APARTMENT UNIT PICTURE] [INTERIOR - APARTMENT UNIT PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
WOODCREEK, MESA, ARIZONA
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
WOODCREEK, MESA, ARIZONA
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
LAKEVIEW AT SUPERSTITION SPRINGS THE RIDGE INDIGO SPRINGS
1849 S. Power Rd 15202 N. 40th St 1464 S. Stapley Dr
Mesa, AZ 85206 Phoenix, AZ 85032 Mesa, AZ 85204
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
PARADISE FALLS APARTMENTS THE COMMONS AT PAPAGO PARK
15611 N 31st St 1010 N 48th ST
Phoenix, AZ 85032 Phoenix, AZ
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
WOODCREEK, MESA, ARIZONA
SUMMARY OF COMPARABLE RENTAL PROPERTIES
<Table>
<Caption>
COMPARABLE
DESCRIPTION SUBJECT R - 1
- ----------------------------------------------------------------------------------------------------------------------------------
Property Name Woodcreek University Green
Management Company
- ----------------------------------------------------------------------------------------------------------------------------------
LOCATION:
- ----------------------------------------------------------------------------------------------------------------------------------
Address 1710 S. Gilbert Rd 265 N. Gilbert Road
City, State Mesa, Arizona Mesa, Arizona
County Maricopa Maricopa
Proximity to Subject .4 miles from subject
- ----------------------------------------------------------------------------------------------------------------------------------
PHYSICAL CHARATERISTICS:
- ----------------------------------------------------------------------------------------------------------------------------------
Net Rentable Area (SF) 353,760 312,952
Year Built 1985 1984
Effective Age 13 10
Building Structure Type Brick & wood siding walls; asphalt shingle roof Brick & wood siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc.) Garage, Open Covered Open, Covered
- ----------------------------------------------------------------------------------------------------------------------------------
Number of Units 432
- ----------------------------------------------------------------------------------------------------------------------------------
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba 579 32 $556 1 1BD/1BH 579 64 $525
2 1Br/1Ba 700 80 $559 2 1BD/1BH 700 72 $585
3 1Br/1Ba 740 64 $583 3 1BD/1BH 768 56 $615
4 1Br/1Ba 768 80 $611 3 1BD/1BH 740 32 $600
5 2Br/1Ba 882 48 $662 3 2BD/1BH 882 48 $660
6 2Br/2Ba 957 48 $668 4 2BD/2BH 957 40 $685
7 2Br/2Ba 1,017 48 $714 5 2BD/2BH 1,017 40 $710
8 2Br/1Ba 1,042 32 $729 6 3BD/2BH 1,042 36 $719
- ----------------------------------------------------------------------------------------------------------------------------------
Average Unit Size (SF) 819 807
Unit Breakdown: Efficiency 0% 2-Bedroom 39% Efficiency 0% 2-Bedroom 38%
1-Bedroom 61% 3-Bedroom 0% 1-Bedroom 31% 3-Bedroom 16%
CONDITION: Good Average
APPEAL: Average Average
- ----------------------------------------------------------------------------------------------------------------------------------
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony W/D Connect. Balcony W/D Connect.
X Fireplace Other X Fireplace Other
X Cable TV Ready Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
-------------------------------------------------------------------------------------------------
X Spa/Jacuzzi X Car Wash X Spa/Jacuzzi Car Wash
X Basketball CourtX BBQ Equipment Basketball Court X BBQ Equipment
X Volleyball Court Theater Room Volleyball Court Theater Room
X Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
-------------------------------------------------------------------------------------------------
Racquet Ball Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room Gym Room
- ----------------------------------------------------------------------------------------------------------------------------------
OCCUPANCY: 75% 96%
LEASING DATA:
Available Leasing Terms 6 to 15 Months 6 to 15 Months
Concessions 1 - 1 1/2 Months Free 1 Month Free
Pet Deposit $300 - $500 $335
Utilities Paid by Tenant: X Electric X Natural Gas Electric Natural Gas
X Water Trash Water Trash
Confirmation May 1, 2003; Joseph Beard (Property Manager) Property Manager
Telephone Number (972)234-1231 480-835-7200
- ----------------------------------------------------------------------------------------------------------------------------------
NOTES: None
- ----------------------------------------------------------------------------------------------------------------------------------
COMPARISON TO SUBJECT: Slightly Superior
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
- ----------------------------------------------------------------------------------------------------------------------------------
Property Name Windemere The Township Apartments
Management Company
- ----------------------------------------------------------------------------------------------------------------------------------
LOCATION:
- ----------------------------------------------------------------------------------------------------------------------------------
Address 2020 E. Inverness 1295 N. Ash St
City, State Mesa, AZ 85204 Gilbert, AZ 85233
County Maricopa Maricopa
Proximity to Subject .4 miles from the subject 1-mile south of the subject
- ----------------------------------------------------------------------------------------------------------------------------------
PHYSICAL CHARATERISTICS:
- ----------------------------------------------------------------------------------------------------------------------------------
Net Rentable Area (SF) 190,820
Year Built 1985 1997
Effective Age 10 10
Building Structure Type Brick & wood siding walls; asphalt shingle roof Brick & wood siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc.) Open, Covered Open, Covered
- ----------------------------------------------------------------------------------------------------------------------------------
Number of Units 224 160
- ----------------------------------------------------------------------------------------------------------------------------------
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1BD/1BH 704 56 $629 1 1BD/1BH 730 $700
2 1BD/1BH 740 56 $654 2 1BD/1BH 730 $700
3 2BD/2BH 932 28 $733 3 2BD/1BH 1,000 $805
4 2BD/2BH 964 28 $756 4 2BD/2BH 1,000 $805
5 2BD/2BH 982 28 $791
6 2BD/2BH 1,049 28 $804
- ----------------------------------------------------------------------------------------------------------------------------------
Average Unit Size (SF) 852
Unit Breakdown: Efficiency 0% 2-Bedroom 43% Efficiency 0% 2-Bedroom 50%
1-Bedroom 49% 3-Bedroom 8% 1-Bedroom 37% 3-Bedroom 13%
CONDITION: Excellent Very Good
APPEAL: Excellent Very Good
- ----------------------------------------------------------------------------------------------------------------------------------
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony W/D Connect. X Balcony X W/D Connect.
X Fireplace Other X Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
-------------------------------------------------------------------------------------------------
X Spa/Jacuzzi X Car Wash X Spa/Jacuzzi X Car Wash
X Basketball Court X BBQ Equipment X Basketball Court X BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
X Sand Volley Ball X Meeting Hall X Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
-------------------------------------------------------------------------------------------------
Racquet Ball Laundry Room Racquet Ball X Laundry Room
Jogging Track Business Office X Jogging Track X Business Office
X Gym Room X Gym Room
- ----------------------------------------------------------------------------------------------------------------------------------
OCCUPANCY: 95% 85%
LEASING DATA:
Available Leasing Terms 6 to 12 Months 6 to 15 Months
Concessions 1 - 1 1/2 Months Free 1 - 1 1/2 Months Free
Pet Deposit $300 - $500 $150
Utilities Paid by Tenant: Electric Natural Gas X Electric X Natural Gas
Water Trash Water X Trash
Confirmation Property Manager Property Manager
Telephone Number 480-497-9416 (972)234-1231
- ----------------------------------------------------------------------------------------------------------------------------------
NOTES: None Located in area close to
industrial area in the
south
- ----------------------------------------------------------------------------------------------------------------------------------
COMPARISON TO SUBJECT: Superior Superior
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
COMPARABLE COMPARABLE
DESCRIPTION R - 4 R - 5
- --------------------------------------------------------------------------------------------------------------------------------
Property Name Gilbert Meadows Apartments Superstition Villas
Management Company
- --------------------------------------------------------------------------------------------------------------------------------
LOCATION:
- --------------------------------------------------------------------------------------------------------------------------------
Address 275 West Juniper Ave 2055 E. Hampton
City, State Gilbert, AZ Mesa, AZ
County Maricopa Maricopa
Proximity to Subject Within.5-mile radius .2 miles away from subject
- --------------------------------------------------------------------------------------------------------------------------------
PHYSICAL CHARATERISTICS:
- --------------------------------------------------------------------------------------------------------------------------------
Net Rentable Area (SF) 160,000
Year Built 1984 1983
Effective Age 10 10
Building Structure Type Brick & wood siding walls; asphalt shingle roof Brick & wood siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc.) Garage, Open, Covered Open, Covered
- --------------------------------------------------------------------------------------------------------------------------------
Number of Units 246
- --------------------------------------------------------------------------------------------------------------------------------
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1BD/1BH 608 $525 1 1BD/1BH 600 122 $450
2 2BD/2BH 672 $550 3 2BD/2BH 700 124 $550
3 2BD/2BH 840 $650
- --------------------------------------------------------------------------------------------------------------------------------
Average Unit Size (SF) 650
Unit Breakdown: Efficiency 0% 2-Bedroom 55% Efficiency 0% 2-Bedroom 41%
1-Bedroom 29% 3-Bedroom 16% 1-Bedroom 50% 3-Bedroom
CONDITION: Good Good
APPEAL: Good Good
- --------------------------------------------------------------------------------------------------------------------------------
AMENITIES:
Unit Amenities X Attach. Garage X Vaulted Ceiling X Attach. Garage X Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace Other X Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
-----------------------------------------------------------------------------------------------
Spa/Jacuzzi X Car Wash Spa/Jacuzzi X Car Wash
X Basketball Court X BBQ Equipment X Basketball Court X BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
X Sand Volley Ball X Meeting Hall X Sand Volley Ball X Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
-----------------------------------------------------------------------------------------------
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
X Jogging Track X Business Office X Jogging Track X Business Office
X Gym Room X Gym Room
- --------------------------------------------------------------------------------------------------------------------------------
OCCUPANCY: 96% 88%
LEASING DATA:
Available Leasing Terms 6 to 15 Months 6 to 15 Months
Concessions 1 - 1 1/2 Months Free 8 weeks free went Months Free
Pet Deposit $300 - $500 $200
Utilities Paid by Tenant: X Electric X Natural Gas X Electric Natural Gas
X Water Trash X Water Trash
Confirmation Property Manager Property Manager
Telephone Number 480-892-7577 480-892-2468
- --------------------------------------------------------------------------------------------------------------------------------
NOTES: None None
- --------------------------------------------------------------------------------------------------------------------------------
COMPARISON TO SUBJECT: Superior Superior
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
WOODCREEK, MESA, ARIZONA
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
UNIVERSITY GREEN WINDEMERE THE TOWNSHIP APARTMENTS
265 N. Gilbert Road 2020 E. Inverness 1295 N. Ash St
Mesa, Arizona Mesa, AZ 85204 Gilbert, AZ 85233
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4 COMPARABLE R-5
GILBERT MEADOWS APARTMENTS SUPERSTITION VILLAS
275 West Juniper Ave 2055 E. Hampton
Gilbert, AZ Mesa, AZ
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
WOODCREEK, MESA, ARIZONA
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
WOODCREEK, MESA, ARIZONA
No responsibility is assumed for matters legal in nature. No investigation has
been made of the title to or any liabilities against the property appraised. In
this appraisal, it is presumed that, unless otherwise noted, the owner's claim
is valid, the property rights are good and marketable, and there are no
encumbrances which cannot be cleared through normal processes.
To the best of our knowledge, all data set forth in this report are true and
accurate. Although gathered from reliable sources, no guarantee is made nor
liability assumed for the accuracy of any data, opinions, or estimates
identified as being furnished by others which have been used in formulating this
analysis.
Land areas and descriptions used in this appraisal were obtained from public
records and have not been verified by legal counsel or a licensed surveyor.
No soil analysis or geological studies were ordered or made in conjunction with
this report, nor were any water, oil, gas, or other subsurface mineral and use
rights or conditions investigated.
Substances such as asbestos, urea-formaldehyde foam insulation, other chemicals,
toxic wastes, or other potentially hazardous materials could, if present,
adversely affect the value of the property. Unless otherwise stated in this
report, the existence of hazardous substance, which may or may not be present on
or in the property, was not considered by the appraiser in the development of
the conclusion of value. The stated value estimate is predicated on the
assumption that there is no material on or in the property that would cause such
a loss in value. No responsibility is assumed for any such conditions, and the
client has been advised that the appraiser is not qualified to detect such
substances, quantify the impact on values, or develop the remedial cost.
No environmental impact study has been ordered or made. Full compliance with
applicable federal, state, and local environmental regulations and laws is
assumed unless otherwise stated, defined, and considered in the report. It is
also assumed that all required licenses, consents, or other legislative or
administrative authority from any local, state, or national government or
private entity organization either have been or can be obtained or renewed for
any use which the report covers.
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
WOODCREEK, MESA, ARIZONA
It is assumed that all applicable zoning and use regulations and restrictions
have been complied with unless a nonconformi ty has been stated, defined, and
considered in the appraisal report. Further, it is assumed that the utilization
of the land and improvements is within the boundaries of the property described
and that no encroachment or trespass exists unless noted in the report.
The Americans with Disabilities Act ("ADA") became effective January 26, 1992.
We have 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 on the value of the
property. Since we have no direct evidence relating to this issue, we did not
consider the possible noncompliance with the requirements of ADA in estimating
the value of the property.
We have made a physical inspection of the property and noted visible physical
defects, if any, in our report. This inspection was made by individuals
generally familiar with real estate and building construction. However, these
individuals are not architectural or structural engineers who would have
detailed knowledge of building design and structural integrity. Accordingly, we
do not opine on, nor are we responsible for, the structural integrity of the
property including its conformity to specific governmental code requirements,
such as fire, building and safety, earthquake, and occupancy, or any physical
defects which were not readily apparent to the appraiser during the inspection.
The value or values presented in this report are based upon the premises
outlined herein and are valid only for the purpose or purposes stated.
The date of value to which the conclusions and opinions expressed apply is set
forth in this report. The value opinion herein rendered is based on the status
of the national business economy and the purchasing power of the U.S. dollar as
of that date.
Testimony or attendance in court or at any other hearing is not required by
reason of this appraisal unless arrangements are previously made within a
reasonable time in advance for
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
WOODCREEK, MESA, ARIZONA
such testimony, and then such testimony shall be at American Appraisal
Associates, Inc.'s, prevailing per diem for the individuals involved.
Possession of this report or any copy thereof does not carry with it the right
of publication. No portion of this report (especially any conclusion to use, the
identity of the appraiser or the firm with which the appraiser is connected, or
any reference to the Appraisal Institute or the designations awarded by this
organization) shall be disseminated to the public through prospectus,
advertising, public relations, news, or any other means of communication without
the written consent and approval of American Appraisal Associates, Inc.
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D
WOODCREEK, MESA, ARIZONA
EXHIBIT D
CERTIFICATE OF APPRAISER
(1 PAGE)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D
CERTIFICATE OF APPRAISER
I certify that, to the best of my knowledge and belief:
The statements of fact contained in this report are true and correct.
The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and represent the
unbiased professional analyses, opinions, and conclusions of American
Appraisal Associates, Inc.
American Appraisal Associates, Inc. and I personally, have no present
or prospective interest in the property that is the subject of this
report and have no personal interest or bias with respect to the
parties involved.
Compensation for American Appraisal Associates, Inc. is not contingent
on an action or event resulting from the analyses, opinions, or
conclusions in, or the use of, this report.
The analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the requirements of the Uniform
Standards of Professional Appraisal Practice and the Code of
Professional Ethics and the Standards of Professional Practice of the
Appraisal Institute.
The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
I personally did not inspect the subject property. Ryan Tanaka provided
significant real property appraisal assistance in the preparation of
this report.
I am currently in compliance with the Appraisal Institute's continuing
education requirements.
-s- Douglas Needham
---------------------------------------------
Douglas Needham, MAI
Managing Principal, Real Estate Group
Arizona State Certified General Real Estate
Appraiser #30943
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
WOODCREEK, MESA, ARIZONA
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
WOODCREEK, MESA, ARIZONA
DOUGLAS A. NEEDHAM, MAI
MANAGING PRINCIPAL, REAL ESTATE ADVISORY GROUP
POSITION Douglas A. Needham is a Managing Principal for the Irvine
Real Estate Advisory Group of American Appraisal
Associates, Inc. ("AAA").
EXPERIENCE
Valuation Mr. Needham has appraised all types of major commercial
real estate including apartments, hotels/motels, light and
heavy industrial facilities, self-storage facilities,
mobile home parks, offices, retail shopping centers,
service stations, special-use properties, and vacant land.
Business Mr. Needham joined AAA in 1998. Prior to joining AAA, he
was a senior associate at Koeppel Tener, a senior analyst
at Great Western Appraisal Group, and an associate
appraiser at R. L. McLaughlin & Associates.
EDUCATION Texas A&M University Bachelor of Business Administration -
Finance
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
WOODCREEK, MESA, ARIZONA
STATE CERTIFICATIONS State of Arizona, Certified General Real Estate Appraiser,
#30943
State of California, Certified General Real Estate
Appraiser, #AG025443
State of Colorado, Certified General Appraiser,
#CG40017035
State of Oregon, Certified General Appraiser, #C000686
State of Washington, Certified General Real Estate
Appraiser, #1101111
PROFESSIONAL Appraisal Institute, MAI Designated Member
AFFILIATIONS
VALUATION AND Appraisal Institute Advanced Income Capitalization
SPECIAL COURSES Appraisal Principles Appraisal Procedures Basic Income
Capitalization Standards of Professional Practice
AMERICAN APPRAISAL ASSOCIATES, INC.
WOODCREEK, MESA, ARIZONA
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
WOODCREEK, MESA, ARIZONA
GENERAL SERVICE CONDITIONS
The services(s) provided by AAA will be performed in accordance with
professional appraisal standards. Our compensation is not contingent in any way
upon our conclusions of value. We assume, without independent verification, the
accuracy of all data provided to us. We will act as an independent contractor
and reserve the right to use subcontractors. All files, workpapers or documents
developed by us during the course of the engagement will be our property. We
will retain this data for at least five years.
Our report is to be used only for the specific purpose stated herein; and any
other use is invalid. No reliance may be made by any third party without our
prior written consent. You may show our report in its entirety to those third
parties who need to review the information contained herein. No one should rely
on our report as a substitute for their own due diligence. We understand that
our reports will be described in public tender offer documents distributed to
limited partners. We reserve the right to review the public tender offer
documents prior to their issuance to confirm that disclosures of facts from the
current appraisals are accurate. No reference to our name or our report, in
whole or in part, in any other SEC filing or private placement memorandum you
prepare and/or distribute to third parties may be made without our prior written
consent.
The Tender Offer Partnerships, as that term is defined in the Settlement
Agreement, agree to indemnify and hold us harmless against and from any and all
losses, claims, actions, damages, expenses or liabilities, including reasonable
attorneys' fees, to which we may become subject in connection with this
engagement except where such losses, claims, actions, damages, expenses or
liabilities, including reasonable attorney's fees, arise or result from AAA's
misconduct, bad faith or negligence. Co-Clients will not be liable for any of
our acts or omissions.
AAA is an equal opportunity employer.