COOPER'S POINTE APARTMENTS
2225 GREENRIDGE ROAD
NORTH CHARLESTON, SOUTH CAROLINA
MARKET VALUE -
FEE SIMPLE ESTATE
AS OF MAY 28, 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.
[LETTER OF American Appraisal Associates (R)]
[American Appraisal Associates (R) LOGO]
JULY 3, 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: COOPER'S POINTE APARTMENTS
2225 GREENRIDGE ROAD
NORTH CHARLESTON, CHARLESTON COUNTY, SOUTH CAROLINA
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 192 units with a
total of 161,664 square feet of rentable area. The improvements were built in
1986. The improvements are situated on 14.48 acres. Overall, the improvements
are in average condition. As of the date of this appraisal, the subject property
is 99% 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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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 28, 2003 is:
($9,900,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
/s/ Frank Fehribach
July 3, 2003 Frank Fehribach, MAI
#053272 Managing Principal, Real Estate Group
South Carolina Temporary Practice Permit #095-03
Report By:
Jimmy Pat James, MAI
South Carolina Temporary Practice Permit #103-03
Assisted By:
David Johnsen, MAI
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
TABLE OF CONTENTS
Cover
Letter of Transmittal
Table of Contents
APPRAISAL DATA
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 37
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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: Cooper's Pointe Apartments
LOCATION: 2225 Greenridge Road
North Charleston, South Carolina
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 28, 2003
DATE OF REPORT: July 3, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 14.48 acres, or 630,749 square feet
Assessor Parcel No.: 484-00-00-075
Floodplain: Community Panel No. 4500420005 C (November 5,
1096)
Flood Zone C, an area outside the floodplain.
Zoning: R-2 (Multi-family residential)
BUILDING:
No. of Units: 192 Units
Total NRA: 161,664 Square Feet
Average Unit Size: 842 Square Feet
Apartment Density: 13.3 units per acre
Year Built: 1986
UNIT MIX AND MARKET RENT:
GROSS RENTAL INCOME PROJECTION
Square Market Rent Monthly Annual
Unit Type Feet Per Unit Per SF Income Income
- --------- ------ -------- ------ -------- ----------
1Br/1Ba 697 $599 $0.86 $ 45,524 $ 546,288
2Br/2Ba 937 $699 $0.75 $ 81,084 $ 973,008
----- -------- ----------
Total $126,608 $1,519,296
OCCUPANCY: 99%
ECONOMIC LIFE: 45 Years
EFFECTIVE AGE: 15 Years
REMAINING ECONOMIC LIFE: 30 Years
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
SUBJECT PHOTOGRAPHS
[PICTURE ENTRANCE INTO PROJECT]
[PICTURE INTERIOR OF CLUBHOUSE]
AREA MAP
[MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
NEIGHBORHOOD MAP
[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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
PART TWO - ECONOMIC INDICATORS
INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION Amount $/Unit
- --------------------- -------------- --------------
Potential Rental Income $ 1,519,296 $ 7,913
Effective Gross Income $ 1,547,178 $ 8,058
Operating Expenses $ 661,039 $ 3,443 42.7% of EGI
Net Operating Income: $ 838,139 $ 4,365
Capitalization Rate 8.50%
DIRECT CAPITALIZATION VALUE $ 9,900,000 * $51,563 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 12%
Stabilized Vacancy & Collection Loss: 6%
Lease-up / Stabilization Period N/A
Terminal Capitalization Rate 10.00%
Discount Rate 11.00%
Selling Costs 2.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $ 9,800,000 * $51,042 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $ 9,900,000 $51,563 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $27,691 to $66,383
Range of Sales $/Unit (Adjusted) $47,214 to $53,362
VALUE INDICATION - PRICE PER UNIT $ 9,600,000 * $50,000 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 4.88 to 7.15
Selected EGIM for Subject 6.50
Subject's Projected EGI $1,547,178
EGIM ANALYSIS CONCLUSION $ 10,100,000 * $52,604 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $ 10,000,000 * $52,083 / UNIT
RECONCILED SALES COMPARISON VALUE $ 10,000,000 $52,083 / UNIT
- ----------
* 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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $ 9,600,000
NOI Per Unit $10,000,000
EGIM Multiplier $10,100,000
INDICATED VALUE BY SALES COMPARISON $10,000,000 $52,083 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $ 9,900,000
Discounted Cash Flow Method: $ 9,800,000
INDICATED VALUE BY THE INCOME APPROACH $ 9,900,000 $51,563 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $ 9,900,000 $51,563 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 2225 Greenridge Road, North Charleston,
Charleston County, South Carolina. North Charleston identifies it as
484-00-00-075.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by David Johnsen, MAI
on May 28, 2003. Jimmy Pat James, MAI and Frank Fehribach, MAI have not made a
personal inspection of the subject property. David Johnsen, MAI assisted Jimmy
Pat James, MAI in the research, valuation analysis and writing the report. Frank
Fehribach, MAI reviewed the report and concurs with the value. Frank Fehribach,
MAI, Jimmy Pat James, MAI, and David Johnsen, MAI 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 28, 2003. The
date of the report is July 3, 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 &
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
Income Approaches), subject to the existing short-term leases. A Fee Simple
Estate is 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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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 North Charleston, South Carolina. 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 - US-52
West - Interstate Highway 26
South - US-52 Connector
North - University Boulevard
MAJOR EMPLOYERS
Major employers in the subject's area include Trident Regional Hospital,
Charleston Southern University, and the Charleston International Airport.. 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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
NEIGHBORHOOD DEMOGRAPHICS
AREA
----------------------------------------------
CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA
- --------------------------- ------------ ------------ ------------ -------
POPULATION TRENDS
Current Population 6,808 42,433 103,689 555,374
5-Year Population 7,450 43,187 105,069 573,153
% Change CY-5Y 9.4% 1.8% 1.3% 3.2%
Annual Change CY-5Y 1.9% 0.4% 0.3% 0.6%
HOUSEHOLDS
Current Households 3,161 16,585 37,973 213,507
5-Year Projected Households 3,629 17,370 39,219 225,969
% Change CY - 5Y 14.8% 4.7% 3.3% 5.8%
Annual Change CY-5Y 3.0% 0.9% 0.7% 1.2%
INCOME TRENDS
Median Household Income $38,671 $35,708 $37,117 $37,645
Per Capita Income $20,453 $18,131 $17,494 $20,671
Average Household Income $48,384 $46,704 $48,172 $53,767
Source: Demographics Now
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
AREA
----------------------------------------------
CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA
- --------------------------- ------------ ------------ ------------ -------
HOUSING TRENDS
% of Households Renting 49.57% 43.34% 39.88% 29.38%
5-Year Projected % Renting 48.50% 42.25% 37.35% 28.21%
% of Households Owning 45.02% 49.62% 52.78% 60.14%
5-Year Projected % Owning 46.62% 50.93% 55.52% 61.84%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
SURROUNDING IMPROVEMENTS
The following uses surround the subject Property:
North - Single Family
South - Farrington Place Apartments
East - Commercial
West - Jamison Park Apartments
CONCLUSIONS
The subject is well located within the city of North Charleston. 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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
MARKET ANALYSIS
The subject property is located in the city of North Charleston in Charleston
County. The overall pace of development in the subject's market is more or less
decreasing. The most recent apartment construction in the area is Jamison Park
(YOC 2001), which borders the subject property to the west. The following table
illustrates historical vacancy rates for the subject's market.
HISTORICAL VACANCY RATE
Period Region Submarket
- ----------------------------- ------ ---------
Dec. '00 8.5% 5.7%
June '01 8.9% 7.9%
Dec. '01 10.2% 8.4%
June '02 8.9% 6.4%
Dec. '02 8.9% 7.7%
Source: Carolina's Real Data
Occupancy trends in the subject's market are an increasing. Historically
speaking, the subject's submarket has outperformed the overall market. This
market has been exhibiting an increase in the overall vacancy rate; however, it
remains below. the overall market as a whole.
Market rents in the subject's market have been following increasing trend. The
following table illustrates historical rental rates for the subject's market.
HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change
- ---------------------------- ------ -------- --------- --------
Dec. '00 $626 - $528 -
June '01 $644 2.9% $538 1.9%
Dec. '01 $654 1.6% $548 1.9%
June '02 $672 2.8% $556 1.5%
Dec/ '02 $678 0.9% $558 0.4%
Source: Carolina's Real Data
The following table illustrates a summary of the subject's competitive set.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
- ------- -------------------------- ----- ----- ---------- ---------------------------
R-1 Deer Run 152 95% 1985 1 mile north of the subject
R-2 Farrington Place 168 97% 1989 Right next to the subject
R-3 Jamison Park 216 94% 2001 Right next to the subject
R-4 Springhouse Apartments 248 90% 1985 1 block south of the subject
R-5 Audubon Park 228 93% 1991 1 mile east of the subject
Subject Cooper's Pointe Apartments 192 99% 1986
reflection of the increasing vacancy rates. Overall, this market commands
slightly lower rates than the overall Charleston market.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 14.48 acres, or 630,749 square feet
Shape Irregular
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 4500420005 C, dated November 5, 1096
Flood Zone Zone C
Zoning R-2, the subject improvements represent a legal
conforming use of the site.
REAL ESTATE TAXES
ASSESSED VALUE - 2002
-------------------------------------- TAX RATE / PROPERTY
PARCEL NUMBER LAND BUILDING TOTAL MILL RATE TAXES
- ------------- -------- ---------- ---------- --------- --------
484-00-00-075 $652,000 $7,066,000 $7,718,000 0.01577 $121,692
IMPROVEMENT ANALYSIS
Year Built 1986
Number of Units 192
Net Rentable Area 161,664 Square Feet
Construction:
Foundation Reinforced concrete slab
Frame Heavy or light wood
Exterior Walls Brick or masonry
Roof Composition shingle over a wood truss structure
Project Amenities Amenities at the subject include a swimming pool,
spa/jacuzzi, tennis court, laundry room, 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, water
heater, garbage disposal, and oven.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
- --------- --------------- ---------
1Br/1Ba 76 697
2Br/2Ba 116 937
Overall Condition Average
Effective Age 15 years
Economic Life 45 years
Remaining Economic Life 30 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
1986 and consist of a 192-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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I -2 I - 3
----------- ------- ----------- ---------- ----------
Property Name Cooper's Pointe Melrose Park Carrington Place Martin's Creek
Apartments
LOCATION:
Address 2225 Greenridge 2494 Etiwan 1300 Park West 700 Martin's
Road Avenue Boulevard Creek Blvd.
City, State North Charleston, Charleston, SC Mt. Pleasant SC Summerville, SC
South Carolina
County Charleston Charleston Charleston Dorchester
PHYSICAL
CHARATERISTICS:
Net Rentable Area (SF) 161,664 141,024 236,128 195,200
Year Built 1986 1972 2000 1985
Number of Units 192 156 244 200
Unit Mix: Type Total Type Total Type Total Type Total
1Br/1Ba 76 1Br/1Ba 102 1Br/1Ba 96 1Br/1Ba 48
2Br/2Ba 116 2Br/1.5Ba 54 2Br/2Ba 128 2Br/2Ba 128
3Br/2Ba 20 3Br/2Ba 24
Average Unit Size (SF) 842 904 968 976
Land Area (Acre) 14.4800 9.0000 19.0000 N/A
Density (Units/Acre) 13.3 17.3 12.8
Parking Ratio (Spaces/Unit) 0.00 N/A N/A N/A
Parking Type
(Gr., Cov., etc.) Open Open Garages, Open Open
CONDITION: Good Average Very Good Average
APPEAL: Good Average Very Good Average
AMENITIES:
Pool/Spa Yes/Yes Yes/Yes Yes/Yes Yes/Yes
Gym Room No Yes Yes Yes
Laundry Room Yes Yes Yes Yes
Secured Parking No Yes Yes No
Sport Courts No Yes Yes No
Washer/Dryer
Connection Yes No Yes Yes
Fireplaces No No No Yes
OCCUPANCY: 99% 95% N/A 96%
TRANSACTION DATA:
Sale Date February, 2002 June, 2001 December, 2000
Sale Price ($) $6,202,410 $16,197,370 $10,000,000
Grantor N/A The Spanos N/A
Corporation
Grantee JRC JV Town Place Limited Jupiter Realty
Melrose, LLC Partnership, LLC
Sale Book K387, Book A375, N/A
Documentation Page 564 Page 699
Verification Real Data Confidential Real Data
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $1,050,840 $6,736 $7.45 $2,416,800 $9,905 $10.24 $1,473,120 $7,366 $7.55
Vacancy/Credit Loss $ 52,542 $ 337 $0.37 $ 145,008 $ 594 $ 0.61 $ 73,656 $ 368 $0.38
Effective Gross Income $ 998,298 $6,399 $7.08 $2,271,792 $9,311 $ 9.62 $1,399,464 $6,997 $7.17
Operating Expenses $ 499,200 $3,200 $3.54 $ 942,748 $3,864 $ 3.99 $ 600,000 $3,000 $3.07
Net Operating Income $ 499,098 $3,199 $3.54 $1,329,044 $5,447 $ 5.63 $ 799,464 $3,997 $4.10
NOTES: None None None
PRICE PER UNIT $39,759 $66,383 $50,000
PRICE PER SQUARE FOOT $ 43.98 $ 68.60 $ 51.23
EXPENSE RATIO 50.0% 41.5% 42.9%
EGIM 6.21 7.13 7.15
OVERALL CAP RATE 8.05% 8.21% 7.99%
Cap Rate based on
Pro Forma or Actual Income? PRO FORMA PRO FORMA PRO FORMA
COMPARABLE COMPARABLE
DESCRIPTION I - 4 I - 5
----------- ---------- ----------
Property Name Peppertree Westbury Mews
LOCATION:
Address 4640 Forest 1425 Old Trolley
Hills Drive Road
City, State N. Charleston, SC Summerville, SC
County Charleston Dorchester
PHYSICAL
CHARATERISTICS:
Net Rentable Area (SF) 302,168 118,536
Year Built 1980 1988
Number of Units 353 132
Unit Mix: Type Total Type Total
1Br/1Ba 122 1Br/1Ba 44
2Br/2Ba 231 2Br/1Ba 12
2Br/2Ba 60
3Br/2Ba 16
Average Unit Size (SF) 856 898
Land Area (Acre) N/A N/A
Density (Units/Acre)
Parking Ratio (Spaces/Unit) N/A N/A
Parking Type
(Gr., Cov., etc.) Open Open
CONDITION: Average Good
APPEAL: Average Good
AMENITIES:
Pool/Spa Yes/Yes Yes/Yes
Gym Room No Yes
Laundry Room Yes Yes
Secured Parking No No
Sport Courts No No
Washer/Dryer
Connection No No
Fireplaces No Yes
OCCUPANCY: 92% 98%
TRANSACTION DATA:
Sale Date March, 1999 September, 1998
Sale Price ($) $9,775,000 $6,125,000
Grantor N/A N/A
Grantee Peppertree High Associates,
I, LLC Ltd.
Sale Book F323, N/A
Documentation Page 772
Verification Real Data Real Data
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $2,163,648 $6,129 $7.16 $960,384 $7,276 $8.10
Vacancy/Credit Loss $ 162,274 $ 460 $0.54 $ 48,019 $ 364 $0.41
Effective Gross Income $2,001,374 $5,670 $6.62 $912,365 $6,912 $7.70
Operating Expenses $1,059,000 $3,000 $3.50 $396,000 $3,000 $3.34
Net Operating Income $ 942,374 $2,670 $3.12 $516,365 $3,912 $4.36
NOTES: None None
PRICE PER UNIT $27,691 $46,402
PRICE PER SQUARE FOOT $ 32.35 $ 51.67
EXPENSE RATIO 52.9% 43.4%
EGIM 4.88 6.71
OVERALL CAP RATE 9.64% 8.43%
Cap Rate based on
Pro Forma or Actual Income? PRO FORMA PRO FORMA
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
[PICTURE IMPROVED SALES ANALYSIS]
[MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $27,691 to $66,383 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 $47,214 to $53,362 per unit with a mean or average adjusted price
of $50,971 per unit. The median adjusted price is $52,250 per unit. Based on the
following analysis, we have concluded to a value of $50,000 per unit, which
results in an "as is" value of $9,600,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
----------- ------- ---------- ----------
Property Name Cooper's Pointe Apartments MelrosePark Carrington Place
Address 2225 Greenridge Road 2494 Etiwan Avenue 1300 Park West Boulevard
City North Charleston, South Carolina Charleston, SC Mt. Pleasant, SC
Sale Date February, 2002 June, 2001
Sale Price ($) $6,202,410 $16,197,370
Net Rentable Area (SF) 161,664 141,024 236,128
Number of Units 192 156 244
Price Per Unit $39,759 $66,383
Year Built 1986 1972 2000
Land Area (Acre) 14.4800 9.0000 19.0000
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 02-2002 3% June, 2001 5%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $40,952 $69,702
Location Comparable 0% Comparable 0%
Number of Units 192 156 0% 244 0%
Quality / Appeal Good Inferior 20% Superior -10%
Age / Condition 1986 1972 / Average 10% 2000 / Very Good -10%
Occupancy at Sale 99% 95% 0% N/A 0%
Amenities Good Comparable 0% Superior -10%
Average Unit Size (SF) 842 904 0% 968 0%
PHYSICAL ADJUSTMENT 30% -30%
FINAL ADJUSTED VALUE ($/UNIT) $53,237 $48,791
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
----------- ---------- ---------- ----------
Property Name Martin's Creek Peppertree Westbury Mews
Address 700 Martin's Creek Blvd. 4640 Forest Hills Drive 1425 Old Trolley Road
City Summerville, SC N. Charleston, SC Summerville, SC
Sale Date December, 2000 March, 1999 September, 1998
Sale Price ($) $10,000,000 $9,775,000 $6,125,000
Net Rentable Area (SF) 195,200 302,168 118,536
Number of Units 200 353 132
Price Per Unit $50,000 $27,691 $46,402
Year Built 1985 1980 1988
Land Area (Acre) N/A N/A N/A
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) December, 2000 10% 03-1999 10% 09-1998 15%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $55,000 $30,460 $53,362
Location Comparable 0% Inferior 25% Comparable 0%
Number of Units 200 0% 353 0% 132 0%
Quality / Appeal Comparable 0% Inferior 20% Comparable 0%
Age / Condition 1985 / Average 0% 1980 / Average 10% 1988 / Good 0%
Occupancy at Sale 96% 0% 92% 0% 98% 0%
Amenities Comparable 0% Comparable 0% Comparable 0%
Average Unit Size (SF) 976 -5% 856 0% 898 0%
PHYSICAL ADJUSTMENT -5% 55% 0%
FINAL ADJUSTED VALUE ($/UNIT) $52,250 $47,214 $53,362
SUMMARY
VALUE RANGE (PER UNIT) $47,214 TO $53,362
MEAN (PER UNIT) $50,971
MEDIAN (PER UNIT) $52,250
VALUE CONCLUSION (PER UNIT) $50,000
VALUE INDICATED BY SALES COMPARISON APPROACH $9,600,000
ROUNDED $9,600,000
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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
NOI PER UNIT COMPARISON
COMPARABLE NO. OF SALE PRICE NOI/ SUBJECT NOI ADJUSTMENT INDICATED
NO. UNITS PRICE/UNIT OAR NOI/UNIT SUBJ. NOI/UNIT FACTOR VALUE/UNIT
- ---------- ------ ---------- --- -------- -------------- ---------- ----------
I-1 156 $ 6,202,410 8.05% $ 499,098 $838,139 1.364 $54,249
$ 39,759 $ 3,199 $ 4 ,365
I-2 244 $16,197,370 8.21% $1,329,044 $838,139 0.801 $53,201
$ 66,383 $ 5,447 $ 4,365
I-3 200 $10,000,000 7.99% $ 799,464 $838,139 1.092 $54,603
$ 50,000 $ 3,997 $ 4,365
I-4 353 $ 9,775,000 9.64% $ 942,374 $838,139 1.635 $45,280
$ 27,691 $ 2,670 $ 4,365
I-5 132 $ 6,125,000 8.43% $ 516,365 $838,139 1.116 $51,780
$ 46,402 $ 3,912 $ 4,365
PRICE/UNIT VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
---------- ------------------------------------------------
Low High Average Median Estimated Price Per Unit $ 52,000
Number of Units 192
$45,280 $54,603 $51,823 $53,201
-----------
Value Based on NOI Analysis $ 9,984,000
Rounded $10,000,000
The adjusted sales indicate a range of value between $45,280 and $54,603 per
unit, with an average of $51,823 per unit. Based on the subject's competitive
position within the improved sales, a value of $52,000 per unit is estimated.
This indicates an "as is" market value of $10,000,000 (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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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-1 156 $ 6,202,410 $ 998,298 $ 499,200 50.01% 6.21
$ 39,759
I-2 244 $16,197,370 $2,271,792 $ 942,748 41.50% 7.13
$ 66,383
I-3 200 $10,000,000 $1,399,464 $ 600,000 42.87% 7.15
$ 50,000 42.73%
I-4 353 $ 9,775,000 $2,001,374 $1,059,000 52.91% 4.88
$ 27,691
I-5 132 $ 6,125,000 $ 912,365 $ 396,000 43.40% 6.71
$ 46,402
EGIM VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
---- --------------------------------------------------
Low High Average Median Estimate EGIM 6.50
Subject EGI $ 1,547,178
4.88 7.15 6.42 6.71
-----------
Value Based on EGIM Analysis $10,056,659
Rounded $10,100,000
Value Per Unit $ 52,604
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 42.73% before reserves. The comparable sales
indicate a range of expense ratios from 41.50% to 52.91%, while their EGIMs
range from 4.88 to 7.15. Overall, we conclude to an EGIM of 6.50, which results
in an "as is" value estimate in the EGIM Analysis of $10,100,000.
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 $10,000,000.
Price Per Unit $ 9,600,000
NOI Per Unit $10,000,000
EGIM Analysis $10,100,000
Sales Comparison Conclusion $10,000,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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.
SUMMARY OF ACTUAL AVERAGE RENTS
Average
-----------------
Unit Type Unit Area (Sq.Ft.) Per Unit Per SF %Occupied
- ----------- ------------------ -------- -------- ---------
1Br/1Ba 697 $588 $0.84 100.0%
2Br/2Ba 937 $686 $0.73 98.0%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
RENT ANALYSIS
COMPARABLE RENTS
--------------------------------------------------------
R-1 R-2 R-3 R-4 R-5
--------------------------------------------------------
Deer Farrington Jamison Springhouse Audubon
Run Place Park Apartments Park
SUBJECT SUBJECT SUBJECT --------------------------------------------------------
UNIT ACTUAL ASKING
DESCRIPTION TYPE RENT RENT COMPARISON TO SUBJECT
- -------------- ------- ------- ------- --------------------------------------------------------
Similar Superior Superior Inferior Similar
-------- ---------- -------- ----------- -------
Monthly Rent 1BR/1BA $ 588 $ 599 $ 580 $ 625 $ 625 $ 542 $ 627
Unit Area (SF) 697 697 780 738 692 718 775
Monthly Rent
Per Sq. Ft. $0.84 $0.86 $ 0.74 $ 0.85 $ 0.90 $ 0.75 $ 0.81
Monthly Rent 2BR/2BA $ 686 $ 699 $ 660 $ 730 $ 755 $ 659 $ 725
Unit Area (SF) 937 937 960 988 1,000 934 970
Monthly Rent
Per Sq. Ft. $0.73 $0.75 $ 0.69 $ 0.74 $ 0.76 $ 0.71 $ 0.75
DESCRIPTION MIN MAX MEDIAN AVERAGE
- -------------- ------- ------- ------- --------
Monthly Rent $ 542 $ 627 $ 625 $ 600
Unit Area (SF) 692 780 738 741
Monthly Rent
Per Sq. Ft. $0.74 $ 0.90 $ 0.81 $ 0.81
Monthly Rent $ 659 $ 755 $ 725 $ 706
Unit Area (SF) 934 1,000 970 970
Monthly Rent
Per Sq. Ft. $0.69 $ 0.76 $ 0.74 $ 0.73
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
Market Rent
Unit Area ------------------ Monthly Annual
Unit Type Number of Units (Sq. Ft.) Per Unit Per SF Income Income
- -------------- --------------- ---------- ------------------ --------- ----------
1Br/1Ba 76 697 $599 $0.86 $ 45,524 $ 546,288
2Br/2Ba 116 937 $699 $0.75 $ 81,084 $ 973,008
Total $ 126,608 $1,519,296
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 29
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
SUMMARY OF HISTORICAL INCOME & EXPENSES
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 $ 1,518,195 $ 7,907 $ 1,557,528 $ 8,112 $ 1,482,750 $ 7,723
Vacancy $ 68,484 $ 357 $ 152,502 $ 794 $ 113,354 $ 590
Credit Loss/Concessions $ 57,412 $ 299 $ 125,499 $ 654 $ 65,031 $ 339
------------ ------------ ------------ ------------ ------------ ------------
Subtotal $ 125,896 $ 656 $ 278,001 $ 1,448 $ 178,385 $ 929
Laundry Income $ 2,607 $ 14 $ 3,950 $ 21 $ 1,617 $ 8
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 93,696 $ 488 $ 90,335 $ 470 $ 143,707 $ 748
------------ ------------ ------------ ------------ ------------ ------------
Subtotal Other Income $ 96,303 $ 502 $ 94,285 $ 491 $ 145,324 $ 757
------------ ------------ ------------ ------------ ------------ ------------
Effective Gross Income $ 1,488,602 $ 7,753 $ 1,373,812 $ 7,155 $ 1,449,689 $ 7,550
Operating Expenses
Taxes $ 105,946 $ 552 $ 105,131 $ 548 $ 148,277 $ 772
Insurance $ 19,868 $ 103 $ 43,907 $ 229 $ 43,970 $ 229
Utilities $ 78,837 $ 411 $ 74,212 $ 387 $ 83,165 $ 433
Repair & Maintenance $ 131,403 $ 684 $ 127,963 $ 666 $ 134,948 $ 703
Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 38,342 $ 200 $ 16,827 $ 88 $ 16,784 $ 87
General Administrative $ 150,301 $ 783 $ 164,798 $ 858 $ 145,806 $ 759
Management $ 75,711 $ 394 $ 74,463 $ 388 $ 76,204 $ 397
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------ ------------ ------------
Total Operating Expenses $ 600,408 $ 3,127 $ 607,301 $ 3,163 $ 649,154 $ 3,381
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------ ------------ ------------
Net Income $888,194 $ 4,626 $ 766,511 $ 3,992 $ 800,535 $ 4,169
------------ ------------ ------------ ------------ ------------ ------------
FISCAL YEAR 2003 ANNUALIZED 2003 AAA PROJECTION
------------ ------------ ------------ ------------ -------------------------------------
MANAGEMENT BUDGET PROJECTION
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT %
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------
Revenues
Rental Income $ 1,471,500 $ 7,664 $ 1,479,120 $ 7,704 $ 1,519,296 $ 7,913 100.0%
Vacancy $ 86,500 $ 451 $ 53,468 $ 278 $ 75,965 $ 396 5.0%
Credit Loss/Concessions $ 33,180 $ 173 $ 46,556 $ 242 $ 15,193 $ 79 1.0%
------------ ------------ ------------ ------------ ------------ ------------ ------
Subtotal $ 119,680 $ 623 $ 100,024 $ 521 $ 91,158 $ 475 6.0%
Laundry Income $ 8,400 $ 44 $ 5,992 $ 31 $ 3,840 $ 20 0.3%
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 117,000 $ 609 $ 119,024 $ 620 $ 115,200 $ 600 7.6%
------------ ------------ ------------ ------------ ------------ ------------ ------
Subtotal Other Income $ 125,400 $ 653 $ 125,016 $ 651 $ 119,040 $ 620 7.8%
------------ ------------ ------------ ------------ ------------ ------------ ------
Effective Gross Income $ 1,477,220 $ 7,694 $ 1,504,112 $ 7,834 $ 1,547,178 $ 8,058 100.0%
Operating Expenses
Taxes $ 143,123 $ 745 $ 156,440 $ 815 $ 153,600 $ 800 9.9%
Insurance $ 44,396 $ 231 $ 42,340 $ 221 $ 44,160 $ 230 2.9%
Utilities $ 78,000 $ 406 $ 81,320 $ 424 $ 80,640 $ 420 5.2%
Repair & Maintenance $ 138,500 $ 721 $ 139,656 $ 727 $ 139,200 $ 725 9.0%
Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Marketing & Leasing $ 17,100 $ 89 $ 18,636 $ 97 $ 17,280 $ 90 1.1%
General Administrative $ 141,274 $ 736 $ 149,052 $ 776 $ 148,800 $ 775 9.6%
Management $ 74,061 $ 386 $ 78,516 $ 409 $ 77,359 $ 403 5.0%
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Total Operating Expenses $ 636,454 $ 3,315 $ 665,960 $ 3,469 $ 661,039 $ 3,443 42.7%
------------ ------------ ------------ ------------ ------------ ------------ ------
Reserves $ 0 $ 0 $ 0 $ 0 $ 48,000 $ 250 7.3%
------------ ------------ ------------ ------------ ------------ ------------ ------
Net Income $ 840,766 $ 4,379 $ 838,152 $ 4,365 $ 838,139 $ 4,365 54.2%
------------ ------------ ------------ ------------ ------------ ------------ ------
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 6% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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
CAPITALIZATION RATES
GOING-IN TERMINAL
LOW HIGH LOW HIGH
RANGE 6.00% 10.00% 7.00% 10.00%
AVERAGE 8.14% 8.47%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
SUMMARY OF OVERALL
CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
I-1 Feb-02 95% $39,759 8.05%
I-2 June, 2001 N/A $66,383 8.21%
I-3 December, 2000 96% $50,000 7.99%
I-4 Mar-99 92% $27,691 9.64%
I-5 Sep-98 98% $46,402 8.43%
High 9.64%
Low 7.99%
Average 8.46%
Based on this information, we have concluded the subject's overall
capitalization rate should be 8.50%. 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 10.00%. 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 11.00%.
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 11.00% indicates a value of $9,800,000. In this instance, the reversion
figure contributes
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
approximately 40% 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 33
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
DISCOUNTED CASH FLOW ANALYSIS
COOPER'S POINTE APARTMENTS
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009
FISCAL YEAR 1 2 3 4 5 6
- -----------------------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $1,519,296 $1,564,875 $1,611,821 $1,660,176 $1,709,981 $1,761,280
Vacancy $ 75,965 $ 78,244 $ 80,591 $ 83,009 $ 85,499 $ 88,064
Credit Loss $ 15,193 $ 15,649 $ 16,118 $ 16,602 $ 17,100 $ 17,613
Concessions $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
---------------------------------------------------------------------------------------
Subtotal $ 91,158 $ 93,892 $ 96,709 $ 99,611 $ 102,599 $ 105,677
Laundry Income $ 3,840 $ 3,955 $ 4,074 $ 4,196 $ 4,322 $ 4,452
GarageRevenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 115,200 $ 118,656 $ 122,216 $ 125,882 $ 129,659 $ 133,548
---------------------------------------------------------------------------------------
Subtotal Other Income $ 119,040 $ 122,611 $ 126,290 $ 130,078 $ 133,981 $ 138,000
EFFECTIVE GROSS INCOME $1,547,178 $1,593,594 $1,641,401 $1,690,643 $1,741,363 $1,793,604
OPERATING EXPENSES:
Taxes $ 153,600 $ 158,208 $ 162,954 $ 167,843 $ 172,878 $ 178,064
Insurance $ 44,160 $ 45,485 $ 46,849 $ 48,255 $ 49,702 $ 51,194
Utilities $ 80,640 $ 83,059 $ 85,551 $ 88,118 $ 90,761 $ 93,484
Repair & Maintenance $ 139,200 $ 143,376 $ 147,677 $ 152,108 $ 156,671 $ 161,371
Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 17,280 $ 17,798 $ 18,332 $ 18,882 $ 19,449 $ 20,032
GeneralAdministrative $ 148,800 $ 153,264 $ 157,862 $ 162,598 $ 167,476 $ 172,500
Management $ 77,359 $ 79,680 $ 82,070 $ 84,532 $ 87,068 $ 89,680
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
---------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $ 661,039 $ 680,870 $ 701,296 $ 722,335 $ 744,005 $ 766,325
Reserves $ 48,000 $ 49,440 $ 50,923 $ 52,451 $ 54,024 $ 55,645
---------------------------------------------------------------------------------------
NET OPERATING INCOME $ 838,139 $ 863,284 $ 889,182 $ 915,857 $ 943,333 $ 971,633
=======================================================================================
Operating Expense Ratio (% of EGI) 42.7% 42.7% 42.7% 42.7% 42.7% 42.7%
Operating Expense Per Unit $ 3,443 $ 3,546 $ 3,653 $ 3,762 $ 3,875 $ 3,991
=======================================================================================
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 7 8 9 10 11
- ---------------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $1,814,119 $1,868,542 $1,924,599 $1,982,337 $2,041,807
Vacancy $ 90,706 $ 93,427 $ 96,230 $ 99,117 $ 102,090
Credit Loss $ 18,141 $ 18,685 $ 19,246 $ 19,823 $ 20,418
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------------------
Subtotal $ 108,847 $ 112,113 $ 115,476 $ 118,940 $ 122,508
Laundry Income $ 4,585 $ 4,723 $ 4,864 $ 5,010 $ 5,161
GarageRevenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 137,555 $ 141,681 $ 145,932 $ 150,310 $ 154,819
--------------------------------------------------------------------------
Subtotal Other Income $ 142,140 $ 146,404 $ 150,796 $ 155,320 $ 159,980
EFFECTIVE GROSS INCOME $1,847,412 $1,902,834 $1,959,919 $2,018,717 $2,079,278
OPERATING EXPENSES:
Taxes $ 183,406 $ 188,909 $ 194,576 $ 200,413 $ 206,426
Insurance $ 52,729 $ 54,311 $ 55,941 $ 57,619 $ 59,347
Utilities $ 96,288 $ 99,177 $ 102,152 $ 105,217 $ 108,373
Repair & Maintenance $ 166,212 $ 171,198 $ 176,334 $ 181,624 $ 187,073
Cleaning $ 0 $ 0 $ 0 $ 0 $ 0
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 20,633 $ 21,252 $ 21,890 $ 22,546 $ 23,223
GeneralAdministrative $ 177,675 $ 183,005 $ 188,495 $ 194,150 $ 199,975
Management $ 92,371 $ 95,142 $ 97,996 $ 100,936 $ 103,964
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $ 789,315 $ 812,994 $ 837,384 $ 862,506 $ 888,381
Reserves $ 57,315 $ 59,034 $ 60,805 $ 62,629 $ 64,508
--------------------------------------------------------------------------
NET OPERATING INCOME $1,000,782 $1,030,806 $1,061,730 $1,093,582 $1,126,389
==========================================================================
Operating Expense Ratio (% of EGI) 42.7% 42.7% 42.7% 42.7% 42.7%
Operating Expense Per Unit $ 4,111 $ 4,234 $ 4,361 $ 4,492 $ 4,627
==========================================================================
"DCF" VALUE ANALYSIS
Gross Residual Sale Price $11,263,892 Deferred
Maintenance $ 0
Estimated Stabilized NOI $838,139 Sales Expense Rate 2.00% Less: Sales Expense $ 225,278 Add: Excess Land $ 0
-----------
Months to Stabilized 1 Discount Rate 11.00% Net Residual Sale Price $11,038,614 Other Adjustments $ 0
----------
Stabilized Occupancy 95.0% Terminal Cap Rate 10.00% PV of Reversion $ 3,887,628 Value Indicated By
"DCF" $9,763,045
Add: NPV of NOI $ 5,875,416 Rounded $9,800,000
-----------
PV Total $ 9,763,045
"DCF" VALUE SENSITIVITY TABLE
TOTAL VALUE DISCOUNT RATE
-----------------------------------------------------------------------------------------
TERMINAL CAP RATE
10.50% 10.75% 11.00% 11.25% 11.50%
9.50% $10,298,440 $10,131,226 $9,967,657 $9,807,641 $9,651,089
9.75% $10,188,665 $10,023,904 $9,862,728 $9,705,046 $9,550,771
10.00% $10,084,379 $ 9,921,948 $9,763,045 $9,607,581 $9,455,469
10.25% $ 9,985,180 $ 9,824,966 $9,668,225 $9,514,870 $9,364,816
10.50% $ 9,890,705 $ 9,732,601 $9,577,920 $9,426,574 $9,278,480
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
INCOME LOSS DURING LEASE-UP
The subject is currently near or at a stabilized condition. Therefore, there is
no income loss during lease-up at the subject property.
CONCESSIONS
Concessions have historically not been utilized a the subject property or in the
subject's market. Therefore, no adjustment was included for concessions.
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.
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 8.50% percent is applicable to the
subject. The results of our direct capitalization analysis are as follows:
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
COOPER'S POINTE APARTMENTS
TOTAL PER SQ. FT. PER UNIT %OF EGI
- ------------------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $1,519,296 $9.40 $ 7,913
Less: Vacancy & Collection Loss 6.00% $ 91,158 $0.56 $ 475
Plus: Other Income
Laundry Income $ 3,840 $0.02 $ 20 0.25%
Garage Revenue $ 0 $0.00 $ 0 0.00%
Other Misc. Revenue $ 115,200 $0.71 $ 600 7.45%
--------------------------------------------------------------
Subtotal Other Income $ 119,040 $0.74 $ 620 7.69%
EFFECTIVE GROSS INCOME $1,547,178 $9.57 $ 8,058
OPERATING EXPENSES:
Taxes $ 153,600 $0.95 $ 800 9.93%
Insurance $ 44,160 $0.27 $ 230 2.85%
Utilities $ 80,640 $0.50 $ 420 5.21%
Repair & Maintenance $ 139,200 $0.86 $ 725 9.00%
Cleaning $ 0 $0.00 $ 0 0.00%
Landscaping $ 0 $0.00 $ 0 0.00%
Security $ 0 $0.00 $ 0 0.00%
Marketing & Leasing $ 17,280 $0.11 $ 90 1.12%
General Administrative $ 148,800 $0.92 $ 775 9.62%
Management 5.00% $ 77,359 $0.48 $ 403 5.00%
Miscellaneous $ 0 $0.00 $ 0 0.00%
TOTAL OPERATING EXPENSES $ 661,039 $4.09 $ 3,443 42.73%
Reserves $ 48,000 $0.30 $ 250 3.10%
--------------------------------------------------------------
NET OPERATING INCOME $ 838,139 $5.18 $ 4,365 54.17%
--------------------------------------------------------------
"GOING IN" CAPITALIZATION RATE 8.50%
VALUE INDICATION $9,860,463 $60.99 $51,357
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $9,860,463
ROUNDED $9,900,000 $61.24 $51,563
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
7.75% $10,814,701 $10,800,000 $ 56,250 $ 66.81
8.00% $10,476,742 $10,500,000 $ 54,688 $ 64.95
8.25% $10,159,265 $10,200,000 $ 53,125 $ 63.09
8.50% $ 9,860,463 $ 9,900,000 $ 51,563 $ 61.24
8.75% $ 9,578,735 $ 9,600,000 $ 50,000 $ 59.38
9.00% $ 9,312,659 $ 9,300,000 $ 48,438 $ 57.53
9.25% $ 9,060,966 $ 9,100,000 $ 47,396 $ 56.29
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $9,900,000.
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:
Discounted Cash Flow Analysis $9,800,000
Direct Capitalization Method $9,900,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$9,900,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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
Cost Approach Not Utilized
Sales Comparison Approach $10,000,000
Income Approach $ 9,900,000
Reconciled Value $ 9,900,000
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 Income 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 28, 2003 the market value of the fee simple estate in the property is:
$9,900,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CARLINA
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
SUBJECT PHOTOGRAPHS
[ENTRANCE INTO PROJECT PICTURE] [INTERIOR OF CLUBHOUSE PICTURE]
[POOL AND SPA PICTURE] [INTERIOR - APARTMENT UNIT PICTURE]
[EXTERIOR - APARTMENT UNITS PICTURE] [EXTERIOR - APARTMENT UNITS PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
SUBJECT PHOTOGRAPHS
[INTERIOR - LIVING ROOM PICTURE] [INTERIOR - KITCHEN PICTURE]
[INTERIOR - BATHROOM PICTURE] [INTERIOR - BEDROOM PICTURE]
[EXTERIOR - BALCONY PICTURE] [EXTERIOR - STORAGE CLOSET AND LANDING
AREA PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
MELROSE PARK CARRINGTON PLACE MARTIN'S CREEK
2494 Etiwan Avenue 1300 Park West Boulevard 700 Martin's Creek Blvd.
Charleston, SC Mt. Pleasant, SC Summerville, SC
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
PEPPERTREE WESTBURY MEWS
4640 Forest Hills Drive 1425 Old Trolley Road
N. Charleston, SC Summerville, SC
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
- -----------------------------------------------------------------------------------------------------------------------------------
Property Name Cooper's Pointe Apartments Deer Run
Management Company AIMCO Churchill Forge Properties
LOCATION:
Address 2225 Greenridge Road 8755 Jenny Lind Street
City, State North Charleston, South Carolina North Charleston, South Carolina
County Charleston Charleston
Proximity to Subject 1 mile north of the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 161,664 138,080
Year Built 1986 1985
Effective Age 15 15
Building Structure Type Brick & wood siding walls; asphalt shingle roof Brick & wood siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 192 152
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba 697 76 $588 1 1BD/1BH 780 56 $580
2 2Br/2Ba 937 116 $686 2 2BD/2BH 960 80 $660
0 3BD/2BH 1,100 16 $790
Average Unit Size (SF) 842 908
Unit Breakdown: Efficiency 0% 2-Bedroom 60% Efficiency 0% 2-Bedroom 53%
1-Bedroom 40% 3-Bedroom 0% 1-Bedroom 37% 3-Bedroom 10%
CONDITION: Good Good
APPEAL: Good Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage X Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace X Fireplace X
X Cable TV Ready X Cable TV Ready Full-size washer/dryer
Project Amenities X Swimming Pool X Swimming Pool
X Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment X Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall X Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
Gym Room X Gym Room
OCCUPANCY: 99% 95%
LEASING DATA:
Available Leasing Terms 6 to 15 Months 6, 9 & 12 Months
Concessions None $40.00 off per month for 1BR units
Pet Deposit $300 - $500 $200
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water Trash Water Trash
Confirmation May 20, 2003; Karen Burk (Property Manager) May 20, 2003; Renee (Property Manager)
Telephone Number (843) 572-1716 (843) 553-5310
NOTES: A $10.00 premium is charged for fireplaces.
The rental rates included in this analysis
reflect units with fireplaces.
COMPARISON TO SUBJECT: Similar
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
- ----------------------------------------------------------------------------------------------------------------------------------
Property Name Farrington Place Jamison Park
Management Company HVM Management Company Pendergraph Management
LOCATION:
Address 7927 St. ives Road 2245 Greenridge Road
City, State North Charleston, South Carolina North Charleston, South Carolina
County Charleston Charleston
Proximity to Subject Right next to the subject Right next to the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 156,272 208,143
Year Built 1989 2001
Effective Age 10 1
Building Structure Type Brick & wood siding walls; asphalt shingle roof Brick & wood siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc.) Open Garages, Open
Number of Units 168 216
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1BR/1BA 738 64 $625 1 1BD/1BH 692 54 $625
2 2BR/2BA 988 80 $730 2 2BD/2BH - Type 1 1,000 63 $755
0 3BR/3BA 1,250 24 $890 0 2BD/2BH - Type 2 1,009 63 $765
0 3BD/2BH 1,228 36 $905
Average Unit Size (SF) 930 964
Unit Breakdown: Efficiency 0% 2-Bedroom 48% Efficiency 0% 2-Bedroom 58%
1-Bedroom 38% 3-Bedroom 14% 1-Bedroom 25% 3-Bedroom 17%
CONDITION: Good Good
APPEAL: Good Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling X Attach. Garage X Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
X Spa/Jacuzzi Car Wash Spa/Jacuzzi X Car Wash
X Basketball Court X BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room X Gym Room
OCCUPANCY: 97% 94%
LEASING DATA:
Available Leasing Terms 6 to 24 Months 6, 9 & 13 Months
Concessions 1 - 1 1/2 Months Free 1 - 1 1/2 Months Free
Pet Deposit $300 $200
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
Water Trash X Water Trash
Confirmation May 20, 2003; (Property Manager) May 20, 2003; Tracy (Property Manager)
Telephone Number (843) 569-3509 (843) 797-5100
NOTES: Project is located immediately south of the Garages are an additional $69 per month, while
subject and includes a controlled access storage units are an additional $25 per month.
gate.
COMPARISON TO SUBJECT: Superior Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 4 R - 5
- ----------------------------------------------------------------------------------------------------------------------------------
Property Name Springhouse Apartments Audubon Park
Management Company AIMCO Steven D. Bell & Company
LOCATION:
Address 7930 St. Ives Road 1700 Eagle Landing Boulevard
City, State North Charleston Hanahan, South Carolina
County Charleston Charleston
Proximity to Subject 1 block south of the subject 1 mile east of the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 214,848 207,554
Year Built 1985 1991
Effective Age 15 10
Building Structure Type Brick & wood siding walls; asphalt shingle roof Brick & wood siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 248 228
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1BD/1BH - Type 1 680 68 $529 1 1BD/1BA 690 12 $565
1 1BD/1BH - Type 2 826 24 $579 1 1BD/1BA 800 40 $645
0 2BD/1BH 837 24 $639 2 2BD/2BA 960 72 $715
2 2BD/2BH - Type 1 934 92 $659 2 2BD/2BA 1,000 24 $755
0 2BD/2BH - Type 2 1,048 24 $709 0 2BR/2BA 1,070 40 $770
0 3BR/3BA 1,101 16 $849 0 3BD/2BA 1,220 40 $905
Average Unit Size (SF) 866 987
Unit Breakdown: Efficiency 0% 2-Bedroom 56% Efficiency 0% 2-Bedroom 60%
1-Bedroom 37% 3-Bedroom 7% 1-Bedroom 23% 3-Bedroom 17%
CONDITION: Good Good
APPEAL: Good Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling X Attach. Garage X Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace X Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi X Car Wash
X Basketball Court BBQ Equipment X Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room X Gym Room
OCCUPANCY: 90% 93%
LEASING DATA:
Available Leasing Terms 6 to 13 Months Flexible
Concessions 1 - 1 1/2 Months Free None
Pet Deposit $250 375
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
Water Trash Water Trash
Confirmation May 20, 2003; (Property Manager) May 20, 2003; (Property Manager)
Telephone Number (972)234-1231 (843) 569-0055
NOTES: None Garages are an additional $75 per month, while
storage units are an additional $45 per month.
COMPARISON TO SUBJECT: Inferior Similar
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
DEER RUN FARRINGTON PLACE JAMISON PARK
8755 Jenny Lind Street 7927 St. ives Road 2245 Greenridge Road
North Charleston, South Carolina North Charleston, South Carolina North Charleston, South Carolina
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4 COMPARABLE R-5
SPRINGHOUSE APARTMENTS AUDUBON PARK
7930 St. Ives Road 1700 Eagle Landing Boulevard
North Charleston Hanahan, South Carolina
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
It is assumed that all applicable zoning and use regulations and restrictions
have been complied with unless a nonconformity 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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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 American Society of Appraisers 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
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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. David Johnsen, MAI
and Jimmy Pat James, MAI 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- Frank Fehribach MAI
-------------------------------
Frank Fehribach, MAI
Managing Principal, Real Estate Group
South Carolina Temporary Practice Permit
#095-03
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
FRANK A. FEHRIBACH, MAI
MANAGING PRINCIPAL, REAL ESTATE GROUP
POSITION Frank A. Fehribach is a Managing
Principal for the Dallas Real Estate
Group of American Appraisal
Associates, Inc. ("AAA").
EXPERIENCE
Valuation Mr. Fehribach has experience in
valuations for resort hotels; Class A
office buildings; Class A multifamily
complexes; industrial buildings and
distribution warehousing; multitract
mixed-use vacant land; regional malls;
residential subdivision development;
and special-purpose properties such as
athletic clubs, golf courses,
manufacturing facilities, nursing
homes, and medical buildings.
Consulting assignments include
development and feasibility studies,
economic model creation and
maintenance, and market studies.
Mr. Fehribach also has been involved
in overseeing appraisal and consulting
assignments in Mexico and South
America.
Business Mr. Fehribach joined AAA as an
engagement director in 1998. He was
promoted to his current position in
1999. Prior to that, he was a manager
at Arthur Andersen LLP. Mr. Fehribach
has been in the business of real
estate appraisal for over ten years.
EDUCATION University of Texas - Arlington
Master of Science - Real Estate
University of Dallas
Master of Business Administration -
Industrial Management
Bachelor of Arts - Economics
STATE State of Arizona
CERTIFICATIONS Certified General Real Estate
Appraiser, #30828
State of Arkansas
State Certified General Appraiser,
#CG1387N
State of Colorado
Certified General Appraiser,
#CG40000445
State of Georgia
Certified General Real Property
Appraiser, #218487
State of Michigan
Certified General Appraiser,
#1201008081
State of Texas
Real Estate Salesman License,
#407158 (Inactive)
State of Texas
State Certified General Real Estate
Appraiser, #TX-1323954-G
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
PROFESSIONAL Appraisal Institute, MAI Designated
Member
AFFILIATIONS Candidate Member of the CCIM
Institute pursuing Certified
Commercial Investment Member (CCIM)
designation
PUBLICATIONS "An Analysis of the Determinants of
Industrial Property -authored with Dr.
Ronald C. Rutherford and Dr. Mark
Eakin, The Journal of Real Estate
Research, Vol. 8, No. 3, Summer 1993,
p. 365.
AMERICAN APPRAISAL ASSOCIATES, INC.
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
COOPER'S POINTE APARTMENTS, NORTH CHARLESTON, SOUTH CAROLINA
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.