COLONY OF SPRINGDALE
1 KENILWORTH AVENUE
SPRINGDALE, OHIO
MARKET VALUE -
FEE SIMPLE ESTATE
AS OF APRIL 29, 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]
[AMERICAN APPRAISAL ASSOCIATES(R) LOGO]
[AMERICAN APPRAISAL ASSOCIATES(R) LETTERHEAD]
JUNE 30, 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: COLONY OF SPRINGDALE
1 KENILWORTH AVENUE
SPRINGDALE, HAMILTON COUNTY, OHIO
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 261 units with a
total of 215,680 square feet of rentable area. The improvements were built in
1969. The improvements are situated on 22.0479 acres. Overall, the improvements
are in average condition. As of the date of this appraisal, the subject property
is 88% 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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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 April 29, 2003 is:
($10,100,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
-s- Brian Johnson
June 30, 2003 Brian Johnson, MAI
#053272 Managing Principal, Real Estate Group
Report By:
Richard Mupo
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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 ............................................. 38
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: Colony of Springdale
LOCATION: 1 Kenilworth Avenue
Springdale, Ohio
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: April 29, 2003
DATE OF REPORT: June 30, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 22.0479 acres, or 960,407 square feet
Assessor Parcel No.: 599-0042-0200-00
Floodplain: Community Panel No. 390877-5B (December 5,
1990) Flood Zone X, an area outside the
floodplain.
Zoning: RMH-H (Residential Multiple Household High
Density)
BUILDING:
No. of Units: 261 Units
Total NRA: 215,680 Square Feet
Average Unit Size: 826 Square Feet
Apartment Density: 11.8 units per acre
Year Built: 1969
UNIT MIX AND MARKET RENT:
GROSS RENTAL INCOME PROJECTION
- ---------------------------------------------------------------------------------
Market Rent
Square ----------------- Monthly Annual
Unit Type Feet Per Unit Per SF Income Income
- -------------- ------ -------- ------ -------- ----------
1Br/1Ba - 1A10 620 $ 510 $ 0.82 $ 40,800 $ 489,600
2Br/1Ba - 2A10 890 $ 620 $ 0.70 $ 59,520 $ 714,240
2B/1.5B-2A15 920 $ 650 $ 0.71 $ 35,100 $ 421,200
3B/1.5B-3A15 1,020 $ 825 $ 0.81 $ 24,750 $ 297,000
Effic. - EA10 360 $ 450 $ 1.25 $ 450 $ 5,400
-------- ----------
Total $160,620 $1,927,440
======== ==========
OCCUPANCY: 88%
ECONOMIC LIFE: 45 Years
EFFECTIVE AGE: 20 Years
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
REMAINING ECONOMIC LIFE: 25 Years
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
SUBJECT PHOTOGRAPHS
[EXTERIOR - TYPICAL RESIDENTIAL BUILDING [EXTERIOR - STREET SCENE (RTE 4)
PICTURE] PICTURE]
AREA MAP
[MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
PART TWO - ECONOMIC INDICATORS
INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION Amount $/Unit
Potential Rental Income $1,927,440 $7,385
Effective Gross Income $1,982,045 $7,594
Operating Expenses $922,557 $3,535 46.5% of EGI
Net Operating Income: $994,238 $3,809
Capitalization Rate 9.75%
DIRECT CAPITALIZATION VALUE $9,900,000 * $37,931 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 12%
Stabilized Vacancy & Collection Loss: 8%
Lease-up / Stabilization Period 24 months
Terminal Capitalization Rate 10.25%
Discount Rate 11.50%
Selling Costs 2.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $10,200,000* $39,080 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $10,100,000 $38,697 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $30,130 to $59,942
Range of Sales $/Unit (Adjusted) $34,189 to $43,650
VALUE INDICATION - PRICE PER UNIT $9,900,000 * $37,931 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 4.92 to 7.13
Selected EGIM for Subject 5.25
Subject's Projected EGI $1,982,045
EGIM ANALYSIS CONCLUSION $10,100,000 * $38,697 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $9,900,000 * $37,931 / UNIT
RECONCILED SALES COMPARISON VALUE $10,000,000 $38,314 / 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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $9,900,000
NOI Per Unit $9,900,000
EGIM Multiplier $10,100,000
INDICATED VALUE BY SALES COMPARISON $10,000,000 $38,314 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $9,900,000
Discounted Cash Flow Method: $10,200,000
INDICATED VALUE BY THE INCOME APPROACH $10,100,000 $38,697 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $10,100,000 $38,697 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 1 Kenilworth Avenue, Springdale, Hamilton
County, Ohio. Springdale identifies it as 599-0042-0200-00.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by Richard Mupo on
April 29, 2003. Brian Johnson, MAI has not made a personal inspection of the
subject property. Richard Mupo performed the research, valuation analysis and
wrote the report. Brian Johnson, MAI reviewed the report and concurs with the
value. Brian Johnson, MAI and Richard Mupo 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 April 29, 2003.
The date of the report is June 30, 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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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 Colony of Springdale
Associates Ltd.. 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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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 Springdale, Ohio. 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 - I-747
West - Cameron Road
South - Glen Sharon Road
North - Northland Boulevard
MAJOR EMPLOYERS
Major employers in the subject's area include John Morrel Meat Packing, Avon,
and Fox Foods. 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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
NEIGHBORHOOD DEMOGRAPHICS
- ----------------------------------------------------------------------------------------
AREA
------------------------------------------
CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA
- ----------------------------------------------------------------------------------------
POPULATION TRENDS
Current Population 6,758 48,564 158,731 1,664,158
5-Year Population 6,760 47,563 158,567 1,714,553
% Change CY-5Y 0.0% -2.1% - 0.1% 3.0%
Annual Change CY-5Y 0.0% -0.4% 0.0% 0.6%
HOUSEHOLDS
Current Households 3,029 19,873 64,254 657,789
5-Year Projected Households 3,116 19,956 65,809 690,743
% Change CY - 5Y 2.9% 0.4% 2.4% 5.0%
Annual Change CY-5Y 0.6% 0.1% 0.5% 1.0%
INCOME TRENDS
Median Household Income $37,817 $48,885 $ 52,908 $ 44,599
Per Capita Income $23,662 $25,143 $ 25,855 $ 24,315
Average Household Income $52,145 $60,758 $ 63,830 $ 61,515
Source: Demographics Now
The subject neighborhood's population is expected to show increases below that
of the region. The immediate market offers inferior 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 50.13% 35.31% 33.08% 31.34%
5-Year Projected % Renting 51.73% 35.61% 33.52% 30.41%
% of Households Owning 45.08% 59.25% 61.49% 62.66%
5-Year Projected % Owning 43.62% 58.95% 61.19% 63.89%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Assisted Living Facility
South - Retirement Residential Community
East - Commercial Buildings
West - Route 4 / Small Office Buildings
CONCLUSIONS
The subject is well located within the city of Springdale. 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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
MARKET ANALYSIS
The subject property is located in the city of Springdale in Hamilton County.
The overall pace of development in the subject's market is more or less
decreasing. There has been no new construction in the subject's immediate
neighborhood. Most of the activity has occurred in the Northeast Submarket and
to the north of the subject along the West Chester / I-75 corridor. New
development has slowed considerably since it reached its peak in 2001, when over
2,500 units were delivered to the market. Most current activity is tied to
projects that were initiated prior to 2002. New delivery in 2002 declined to
roughly 1,200 units. The following table illustrates historical vacancy rates
for the subject's market.
HISTORICAL VACANCY RATE
- -----------------------------------------------------------------------
Period Region Submarket
- ------ ------ ---------
2Q00 4.4% 4.1%
4Q00 7.3% 6.2%
2Q01 6.6% 5.9%
4Q01 11.9% 9.4%
2Q02 8.5% 7.5%
4Q02 12.4% 11.1%
Source - CB Richard Ellis Apartment Report
Occupancy trends in the subject's market are decreasing. Historically speaking,
the subject's submarket has outperformed the overall market. Occupancy has been
on a general decline since 2000 due to weakening economic conditions, increasing
new development and declining absorption rates. As previously indicated, new
construction has diminished and the market is likely to stabilize over the next
12 months. Rental concessions equal to one free month of rent are typical, and
are likely to remain in place until the market recovers. The subject's submarket
has slightly outperformed the overall market over the past few years. Occupancy
for Class B properties tends to be higher than that of newer Class A product.
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.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
HISTORICAL AVERAGE RENT
- --------------------------------------------------------------------------------------------
Period Region % Change Submarket % Change
- ------ ------ -------- --------- --------
2Q00 $620 - $ 608 -
4Q00 $640 3.2% $ 606 - 0.3%
2Q01 $650 1.6% $ 626 3.3%
4Q01 $653 0.5% $ 615 - 1.8%
2Q02 $662 1.4% $ 631 2.6%
4Q02 $641 - 3.2% $ 600 - 4.9%
Source - CB Richard Ellis Apartment Report
The following table illustrates a summary of the subject's competitive set.
COMPETITIVE PROPERTIES
- --------------------------------------------------------------------------------------------------------------
No. Property Name Units Ocpy. Year Built Proximity to subject
- --- ------------- ----- ----- ---------- --------------------
R-1 Waterstone Place 173 85% 1965 2 Miles east of the subject
R-2 Forest Park Apartments 412 96% 1965 1/2 Mile west of the subject
R-3 Versailles Village 180 96% 1970 1/2 Mile west of the subject
R-4 Carriage Court 192 96% 1987 1/2 Mile north of subject
Subject Colony of Springdale 261 88% 1969
Effective rents have generally declined in 2002 and are projected to remain
stagnant or decline further into 2003. Discussions with area property managers
revealed that larger 3-BR units maintain the highest occupancy levels and are
the least effected by the noted decline in rents.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 22.0479 acres, or 960,407 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 390877-5B, dated December 5, 1990
Flood Zone Zone X
Zoning RMH-H, 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
- -----------------------------------------------------------------------------------------
599-0042-0200-00 $508,240 $2,620,660 $3,128,900 0.04516 $ 141,303
IMPROVEMENT ANALYSIS
Year Built 1969
Number of Units 261
Net Rentable Area 215,680 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,
basketball court, tennis court, playground, barbeque
equipment, meeting hall, laundry room, business
office, and secured parking.
Unit Amenities Individual unit amenities include a balcony, cable TV
connection, and washer dryer connection. Appliances
available in each unit include a refrigerator, stove,
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
dishwasher, water heater, garbage disposal, and oven.
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
--------- --------------- ---------
1Br/1Ba - 1A10 80 620
2Br/1Ba - 2A10 96 890
2B/1.5B-2A15 54 920
3B/1.5B-3A15 30 1,020
Effic. - EA10 1 360
Overall Condition Average
Effective Age 20 years
Economic Life 45 years
Remaining Economic Life 25 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
1969 and consist of a 261-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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2 I - 3
- ----------------------------------------------------------------------------------------------------------------------------------
Property Name Colony of Springdale Goldcrest Apartments Magnolia Pointe Cambridge Park
LOCATION:
Address 1 Kenilworth Avenue 11365 Lippelman Road 484 Old State Rt 74 1088 E. Crescentville Rd
City, State Springdale, Ohio Cincinnati, OH Cincinnati, OH West Chester Twp, OH
County Hamilton Hamilton Hamilton Butler
PHYSICAL
CHARATERISTICS:
Net Rentable Area (SF) 215,680 156,320 129,360 166,440
Year Built 1969 1965 1972 1973
Number of Units 261 173 108 196
Unit Mix: Type Total Type Total Type Total Type Total
1Br/1Ba - 1A10 80 1Br/1Ba 59 1Br/1Ba 18 1Br/1Ba 68
2Br/1Ba - 2A10 96 2Br/1Ba 114 2Br/1Ba 84 2Br/1.5Ba 104
2B/1.5B - 2A15 54 3Br/1Ba 3 3Br/2Ba 24
3B/1.5B - 3A15 30 Efficiency 3
Effic. - EA10 1
Average Unit Size (SF) 826 904 1,198 849
Land Area (Acre) 22.0479 8.8000 6.6800 13.8950
Density (Units/Acre) 11.8 19.7 16.2 14.1
Parking Ratio (Spaces/Unit) 2.67 1.73 1.85 2.04
Parking Type (Gr., Cov., etc.) Garage, Open Covered Open, Covered Open, Covered Open, Covered
CONDITION: Average Fair Average Average
APPEAL: Average Average Average Average
AMENITIES:
Pool/Spa Yes/No Yes/No Yes/No Yes/No
Gym Room No Yes No No
Laundry Room Yes Yes Yes Yes
Secured Parking Yes No No Yes
Sport Courts Yes No No No
Washer/Dryer Connection No No No Yes
Clubhouse
OCCUPANCY: 88% 90% 95% 95%
TRANSACTION DATA:
Sale Date May, 2002 August, 2002 September, 2001
Sale Price ($) $5,212,500 $3,850,000 $7,108,000
Grantor C-K Goldcrest LLC RL Magnolia Ltd. New Plan Excel Realty
Grantee Goldcrest LLC M. & D. Weigel C-K Cambridge Park
Sale Documentation Book 8920, Page 1813 Book 1497, Page 2449 Book 6684, Page 934
Verification Seller Buyer Seller
Telephone Number 516-466-9440 513-489-3363 212-869-3000
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $1,176,780 $6,802 $7.53 $660,960 $6,120 $ 5.11 $1,421,664 $7,253 $8.54
Vacancy/Credit Loss $ 117,678 $ 680 $0.75 $ 33,660 $ 312 $ 0.26 $ 71,083 $ 363 $0.43
Effective Gross Income $1,059,102 $6,122 $6.78 $627,300 $5,808 $ 4.85 $1,350,581 $6,891 $8.11
Operating Expenses $ 504,252 $2,915 $3.23 $240,000 $2,222 $ 1.86 $ 526,090 $2,684 $3.16
Net Operating Income $ 554,850 $3,207 $3.55 $387,300 $3,586 $ 2.99 $ 824,491 $4,207 $4.95
NOTES: This property previously None None
sold in September 2001
for $30,462 per unit.
Complex needed
renovation at sale.
PRICE PER UNIT $ 30,130 $ 35,648 $ 36,265
PRICE PER SQUARE FOOT $ 33.35 $ 29.76 $ 42.71
EXPENSE RATIO 47.6% 38.3% 39.0%
EGIM 4.92 6.14 5.26
OVERALL CAP RATE 10.64% 10.06% 11.60%
Cap Rate based on Pro Forma or PRO FORMA PRO FORMA PRO FORMA
Actual Income?
COMPARABLE COMPARABLE
DESCRIPTION I - 4 I - 5
- ------------------------------------------------------------------------------------
Property Name Windsor at Union Station The Huntington
LOCATION:
Address 8197 Meeting Street 11755 Norbourne Drive
City, State West Chester, OH Cincinnati, OH
County Butler Hamilton
PHYSICAL
CHARATERISTICS:
Net Rentable Area (SF) 318,571 161,573
Year Built 1989 1985
Number of Units 347 212
Unit Mix: Type Total Type Total
1Br/1Ba 207 1Br/1Ba 122
2Br/2Ba 140 2Br/1Ba 24
2Br/2Ba 66
Average Unit Size (SF) 918 762
Land Area (Acre) 11.7500 14.0810
Density (Units/Acre) 29.5 15.1
Parking Ratio (Spaces/Unit) 1.88 N/A
Parking Type (Gr., Cov., etc.) Open, Covered Garage, Open, Covered
CONDITION: Good Good
APPEAL: Good Average
AMENITIES:
Pool/Spa Yes/Yes Yes/Yes
Gym Room Yes Yes
Laundry Room No No
Secured Parking Yes Yes
Sport Courts Yes No
Washer/Dryer Connection Yes Yes
Clubhouse Clubhouse
OCCUPANCY: 94% 92%
TRANSACTION DATA:
Sale Date March, 2001 February, 2001
Sale Price ($) $20,800,000 $9,700,000
Grantor Windsor at Union Station Aetna Life Insurance Co.
LP
Grantee Union Station of Huntington Advisors LLC
Westchester LLC
Sale Documentation Book 6573, Page 753 Book 8500, Page 1477
Verification Buyer Seller
Telephone Number 937-434-3095 860-275-2140
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $3,103,680 $8,944 $9.74 $1,716,636 $8,097 $10.62
Vacancy/Credit Loss $ 186,221 $ 537 $0.58 $ 137,331 $ 648 $ 0.85
Effective Gross Income $2,917,459 $8,408 $9.16 $1,579,305 $7,450 $ 9.77
Operating Expenses $ 875,238 $2,522 $2.75 $ 697,575 $3,290 $ 4.32
Net Operating Income $2,042,221 $5,885 $6.41 $ 881,730 $4,159 $ 5.46
NOTES: Younger Class A complex Younger complex.
in superior location.
PRICE PER UNIT $ 59,942 $ 45,755
PRICE PER SQUARE FOOT $ 65.29 $ 60.03
EXPENSE RATIO 30.0% 44.2%
EGIM 7.13 6.14
OVERALL CAP RATE 9.82% 9.09%
Cap Rate based on Pro Forma or ACTUAL PRO FORMA
Actual Income?
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
IMPROVED SALES MAP
[MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $30,130 to $59,942 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 $34,189 to $43,650 per unit with a mean or average adjusted price
of $38,894 per unit. The median adjusted price is $38,179 per unit. Based on the
following analysis, we have concluded to a value of $39,000 per unit, which
results in an "as is" value of $9,900,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2 I - 3
- -----------------------------------------------------------------------------------------------------------------------------------
Property Name Colony of Springdale Goldcrest Apartments Magnolia Pointe Cambridge Park
Address 1 Kenilworth Avenue 11365 Lippelman Road 484 Old State Rt 74 1088 E. Crescentville Rd
City Springdale, Ohio Cincinnati, OH Cincinnati, OH West Chester Twp, OH
Sale Date May, 2002 August, 2002 September, 2001
Sale Price ($) $5,212,500 $3,850,000 $7,108,000
Net Rentable Area (SF) 215,680 156,320 129,360 166,440
Number of Units 261 173 108 196
Price Per Unit $30,130 $35,648 $36,265
Year Built 1969 1965 1972 1973
Land Area (Acre) 22.0479 8.8000 6.6800 13.8950
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 05-2002 3% 08-2002 2% 09-2001 5%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $30,959 $36,361 $37,988
Location Comparable 0% Inferior 20% Comparable 0%
Number of Units 261 173 0% 108 -5% 196 0%
Quality / Appeal Good Comparable 0% Comparable 0% Comparable 0%
Age / Condition 1969 1965 / Fair 20% 1972 / Average 0% 1973 / Average 0%
Occupancy at Sale 88% 90% 0% 95% -5% 95% -5%
Amenities Good Comparable 0% Comparable 0% Superior -5%
Average Unit Size (SF) 826 904 0% 1,198 -5% 849 0%
PHYSICAL ADJUSTMENT 20% 5% -10%
FINAL ADJUSTED VALUE ($/UNIT) $37,150 $38,179 $34,189
COMPARABLE COMPARABLE
DESCRIPTION I - 4 I - 5
- -------------------------------------------------------------------------------------
Property Name Windsor at Union Station The Huntington
Address 8197 Meeting Street 11755 Norbourne Drive
City West Chester, OH Cincinnati, OH
Sale Date March, 2001 February, 2001
Sale Price ($) $20,800,000 $9,700,000
Net Rentable Area (SF) 318,571 161,573
Number of Units 347 212
Price Per Unit $59,942 $45,755
Year Built 1989 1985
Land Area (Acre) 11.7500 14.0810
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 03-2001 6% 02-2001 6%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $63,539 $48,500
Location Superior -10% Comparable 0%
Number of Units 347 0% 212 0%
Quality / Appeal Superior -10% Comparable 0%
Age / Condition 1989 / Good -5% 1985 / Good -5%
Occupancy at Sale 94% -5% 92% 0%
Amenities Superior -5% Superior -5%
Average Unit Size (SF) 918 0% 762 0%
PHYSICAL ADJUSTMENT -35% -10%
FINAL ADJUSTED VALUE ($/UNIT) $41,300 $43,650
SUMMARY
VALUE RANGE (PER UNIT) $34,189 TO $43,650
MEAN (PER UNIT) $38,894
MEDIAN (PER UNIT) $38,179
VALUE CONCLUSION (PER UNIT) $39,000
VALUE OF IMPROVEMENT & MAIN SITE $10,179,000
LESS: LEASE-UP COST -$ 121,000
PV OF CONCESSIONS -$ 191,000
VALUE INDICATED BY SALES COMPARISON APPROACH $ 9,867,000
ROUNDED $ 9,900,000
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
NOI PER UNIT COMPARISON
SALE PRICE NOI/ SUBJECT NOI
COMPARABLE NO. OF ---------- OAR ----------- -------------- ADJUSTMENT INDICATED
NO. UNITS PRICE/UNIT NOI/UNIT SUBJ. NOI/UNIT FACTOR VALUE/UNIT
- ---------------------------------------------------------------------------------------------
I-1 173 $ 5,212,500 10.64% $ 554,850 $ 994,238 1.188 $ 35,787
$ 30,130 $ 3,207 $ 3,809
I-2 108 $ 3,850,000 10.06% $ 387,300 $ 994,238 1.062 $ 37,867
$ 35,648 $ 3,586 $ 3,809
I-3 196 $ 7,108,000 11.60% $ 824,491 $ 994,238 0.906 $ 32,841
$ 36,265 $ 4,207 $ 3,809
I-4 347 $ 20,800,000 9.82% $ 2,042,221 $ 994,238 0.647 $ 38,798
$ 59,942 $ 5,885 $ 3,809
I-5 212 $ 9,700,000 9.09% $ 881,730 $ 994,238 0.916 $ 41,907
$ 45,755 $ 4,159 $ 3,809
PRICE/UNIT VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
- ---------------------------------------- ----------------------------------------------------
Low High Average Median Estimated Price Per Unit $ 39,000
------------
$32,841 $41,907 $37,440 $37,867 Number of Units 261
Value $ 10,179,000
Less: Lease-Up Cost -$ 121,000
PV of Concessions -$ 191,000
------------
Value Based on NOI Analysis $ 9,867,000
Rounded $ 9,900,000
The adjusted sales indicate a range of value between $32,841 and $41,907 per
unit, with an average of $37,440 per unit. Based on the subject's competitive
position within the improved sales, a value of $39,000 per unit is estimated.
This indicates an "as is" market value of $9,900,000 (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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
EFFECTIVE GROSS INCOME MULTIPLIER COMPARISON
- ----------------------------------------------------------------------------------------------
SALE PRICE
COMPARABLE NO. OF ---------- EFFECTIVE OPERATING OER SUBJECT
NO. UNITS PRICE/UNIT GROSS INCOME EXPENSE PROJECTED OER EGIM
- ----------------------------------------------------------------------------------------------
I-1 173 $ 5,212,500 $ 1,059,102 $ 504,252 47.61% 4.92
$ 30,130
I-2 108 $ 3,850,000 $ 627,300 $ 240,000 38.26% 6.14
$ 35,648
I-3 196 $ 7,108,000 $ 1,350,581 $ 526,090 38.95% 5.26
46.55%
$ 36,265
I-4 347 $ 20,800,000 $ 2,917,459 $ 875,238 30.00% 7.13
$ 59,942
I-5 212 $ 9,700,000 $ 1,579,305 $ 697,575 44.17% 6.14
$ 45,755
EGIM VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
- ---------------------------------------- ----------------------------------------------------
Low High Average Median Estimate EGIM 5.25
4.92 7.13 5.92 6.14 Subject EGI $ 1,982,045
Value $ 10,405,735
Less: Lease-Up Cost -$ 121,000
PV of Concessions -$ 191,000
------------
Value Based on EGIM Analysis $ 10,093,735
Rounded $ 10,100,000
Value Per Unit $ 38,697
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 46.55% before reserves. The comparable sales
indicate a range of expense ratios from 30.00% to 47.61%, while their EGIMs
range from 4.92 to 7.13. Overall, we conclude to an EGIM of 5.25, 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 $ 9,900,000
NOI Per Unit $ 9,900,000
EGIM Analysis $ 10,100,000
Sales Comparison Conclusion $ 10,000,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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 Area ------------------
Unit Type (Sq. Ft.) Per Unit Per SF %Occupied
- -------------------------------------------------------------
1Br/1Ba - 1A10 620 $ 517 $ 0.83 90.0%
2Br/1Ba - 2A10 890 $ 628 $ 0.71 80.2%
2B/1.5B - 2A15 920 $ 690 $ 0.75 96.3%
3B/1.5B - 3A15 1020 $ 844 $ 0.83 90.0%
Effic. - EA10 360 $ 459 $ 1.28 100.0%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
RENT ANALYSIS
COMPARABLE RENTS
------------------------------------------
R-1 R-2 R-3 R-4
------------------------------------------
Waterstone Forest Park Versailles Carriage
Place Apartments Village Court
------------------------------------------
COMPARISON TO SUBJECT
SUBJECT SUBJECT ------------------------------------------
SUBJECT UNIT ACTUAL ASKING
DESCRIPTION TYPE RENT RENT Similar Similar Similar Superior MIN MAX MEDIAN AVERAGE
- ------------------------ -------------------------------------------------------------------------------------------------------
Monthly Rent 1BR/1BA - 1A10 $ 517 $ 539 $ 555 $ 520 $ 555 $ 670 $ 520 $ 670 $ 555 $ 575
Unit Area (SF) 620 620 750 662 610 950 610 950 706 743
Monthly Rent Per Sq. Ft. $ 0.83 $ 0.87 $ 0.74 $ 0.79 $ 0.91 $ 0.71 $ 0.71 $ 0.91 $ 0.76 $ 0.79
Monthly Rent 2BR/1BA - 2A10 $ 628 $ 649 $ 634 $ 590 $ 645 $ 590 $ 645 $ 634 $ 623
Unit Area (SF) 890 890 888 850 900 850 900 888 879
Monthly Rent Per Sq. Ft. $ 0.71 $ 0.73 $ 0.71 $ 0.69 $ 0.72 $ 0.69 $ 0.72 $ 0.71 $ 0.71
Monthly Rent 2B/1.5B-2A15 $ 690 $ 709 $ 670 $ 625 $ 675 $ 738 $ 625 $ 738 $ 673 $ 677
Unit Area (SF) 920 920 1,050 1,183 1,090 1,083 1,050 1,183 1,087 1,102
Monthly Rent Per Sq. Ft. $ 0.75 $ 0.77 $ 0.64 $ 0.53 $ 0.62 $ 0.68 $ 0.53 $ 0.68 $ 0.63 $ 0.62
Monthly Rent 3B/1.5B-3A15 $ 844 $ 869 $ 730 $ 750 $ 730 $ 750 $ 740 $ 740
Unit Area (SF) 1,020 1,020 1,295 1,455 1,295 1,455 1,375 1,375
Monthly Rent Per Sq. Ft. $ 0.83 $ 0.85 $ 0.56 $ 0.52 $ 0.52 $ 0.56 $ 0.54 $ 0.54
Monthly Rent EFFIC. - EA10 $ 459 $ 459
Unit Area (SF) 360 360
Monthly Rent Per Sq. Ft. $ 1.28 $ 1.28
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 - 1A10 80 620 $ 510 $ 0.82 $ 40,800 $ 489,600
2Br/1Ba - 2A10 96 890 $ 620 $ 0.70 $ 59,520 $ 714,240
2B/1.5B-2A15 54 920 $ 650 $ 0.71 $ 35,100 $ 421,200
3B/1.5B-3A15 30 1,020 $ 825 $ 0.81 $ 24,750 $ 297,000
Effic. - EA10 1 360 $ 450 $ 1.25 $ 450 $ 5,400
Total $ 160,620 $ 1,927,440
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
SUMMARY OF HISTORICAL INCOME & EXPENSES
FISCAL YEAR 2000 FISCAL YEAR 2001 FISCAL YEAR 2002 FISCAL YEAR 2003
------------------------------------------------------------------------------------------
ACTUAL ACTUAL ACTUAL MANAGEMENT BUDGET
------------------------------------------------------------------------------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT
- ---------------------------------------------------------------------------------------------------------------------
Revenues
Rental Income $ 1,917,937 $ 7,348 $ 1,927,685 $ 7,386 $ 1,940,742 $ 7,436 $ 1,969,960 $ 7,548
Vacancy $ 156,914 $ 601 $ 159,637 $ 612 $ 137,205 $ 526 $ 87,500 $ 335
Credit Loss/Concessions $ 63,036 $ 242 $ 177,813 $ 681 $ 97,381 $ 373 $ 130,400 $ 500
----------- ------- ----------- ------- ----------- ------- ----------- -------
Subtotal $ 219,950 $ 843 $ 337,450 $ 1,293 $ 234,586 $ 899 $ 217,900 $ 835
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 118,471 $ 454 $ 185,159 $ 709 $ 239,089 $ 916 $ 207,870 $ 796
----------- ------- ----------- ------- ----------- ------- ----------- -------
Subtotal Other Income $ 118,471 $ 454 $ 185,159 $ 709 $ 239,089 $ 916 $ 207,870 $ 796
----------- ------- ----------- ------- ----------- ------- ----------- -------
Effective Gross Income $ 1,816,458 $ 6,960 $ 1,775,394 $ 6,802 $ 1,945,245 $ 7,453 $ 1,959,930 $ 7,509
Operating Expenses
Taxes $ 156,356 $ 599 $ 102,211 $ 392 $ 144,676 $ 554 $ 150,549 $ 577
Insurance $ 33,602 $ 129 $ 35,228 $ 135 $ 39,314 $ 151 $ 43,271 $ 166
Utilities $ 102,112 $ 391 $ 117,947 $ 452 $ 99,308 $ 380 $ 99,099 $ 380
Repair & Maintenance $ 62,763 $ 240 $ 65,539 $ 251 $ 35,512 $ 136 $ 50,400 $ 193
Cleaning $ 82,275 $ 315 $ 99,246 $ 380 $ 70,162 $ 269 $ 78,000 $ 299
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 43,354 $ 166 $ 54,952 $ 211 $ 37,576 $ 144 $ 36,000 $ 138
General Administrative $ 37,431 $ 143 $ 40,782 $ 156 $ 31,975 $ 123 $ 30,000 $ 115
Management $ 91,554 $ 351 $ 96,361 $ 369 $ 114,844 $ 440 $ 99,317 $ 381
Miscellaneous $ 317,885 $ 1,218 $ 352,076 $ 1,349 $ 306,078 $ 1,173 $ 266,561 $ 1,021
----------- ------- ----------- ------- ----------- ------- ----------- -------
Total Operating Expenses $ 927,332 $ 3,553 $ 964,342 $ 3,695 $ 879,445 $ 3,370 $ 853,197 $ 3,269
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
----------- ------- ----------- ------- ----------- ------- ----------- -------
Net Income $ 889,126 $ 3,407 $ 811,052 $ 3,107 $ 1,065,800 $ 4,084 $ 1,106,733 $ 4,240
ANNUALIZED 2003
---------------------
PROJECTION AAA PROJECTION
----------------------------------------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT %
- -------------------------------------------------------------------------------
Revenues
Rental Income $ 1,950,748 $ 7,474 $ 1,927,440 $ 7,385 100.0%
Vacancy $ 215,404 $ 825 $ 96,372 $ 369 5.0%
Credit Loss/Concessions $ 160,008 $ 613 $ 57,823 $ 222 3.0%
----------- ------- ----------- ------- -----
Subtotal $ 375,412 $ 1,438 $ 154,195 $ 591 8.0%
Laundry Income $ 0 $ 0 $ 0 $ 0 0.0%
Garage Revenue $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 238,728 $ 915 $ 208,800 $ 800 10.8%
----------- ------- ----------- ------- -----
Subtotal Other Income $ 238,728 $ 915 $ 208,800 $ 800 10.8%
----------- ------- ----------- ------- -----
Effective Gross Income $ 1,814,064 $ 6,950 $ 1,982,045 $ 7,594 100.0%
Operating Expenses
Taxes $ 157,004 $ 602 $ 156,600 $ 600 7.9%
Insurance $ 40,900 $ 157 $ 44,370 $ 170 2.2%
Utilities $ 151,996 $ 582 $ 99,180 $ 380 5.0%
Repair & Maintenance $ 77,944 $ 299 $ 52,200 $ 200 2.6%
Cleaning $ 122,548 $ 470 $ 84,825 $ 325 4.3%
Landscaping $ 0 $ 0 $ 0 $ 0 0.0%
Security $ 0 $ 0 $ 0 $ 0 0.0%
Marketing & Leasing $ 53,724 $ 206 $ 39,150 $ 150 2.0%
General Administrative $ 50,136 $ 192 $ 33,930 $ 130 1.7%
Management $ 95,292 $ 365 $ 99,102 $ 380 5.0%
Miscellaneous $ 273,412 $ 1,048 $ 313,200 $ 1,200 15.8%
----------- ------- ----------- ------- -----
Total Operating Expenses $ 1,022,956 $ 3,919 $ 922,557 $ 3,535 46.5%
Reserves $ 0 $ 0 $ 65,250 $ 250 7.1%
----------- ------- ----------- ------- -----
Net Income $ 791,108 $ 3,031 $ 994,238 $ 3,809 50.2%
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 8% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
SUMMARY OF OVERALL
CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
- ----------------------------------------------------
I-1 May-02 90% $ 30,130 10.64%
I-2 Aug-02 95% $ 35,648 10.06%
I-3 Sep-01 95% $ 36,265 11.60%
I-4 Mar-01 94% $ 59,942 9.82%
I-5 Feb-01 92% $ 45,755 9.09%
High 11.60%
Low 9.09%
Average 10.24%
Based on this information, we have concluded the subject's overall
capitalization rate should be 9.75%. 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 10.25%. 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 11.50%.
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 11.50% indicates a value of $10,200,000. In this instance, the reversion
figure contributes
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
DISCOUNTED CASH FLOW ANALYSIS
COLONY OF SPRINGDALE
- -------------------------------------------------------------------------------------------------------------------------------
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009 APR-2010
FISCAL YEAR 1 2 3 4 5 6 7
- -------------------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $1,927,400 $1,927,440 $1,985,263 $2,044,821 $2,106,166 $2,169,351 $2,234,431
Vacancy $ 204,244 $ 134,273 $ 99,263 $ 102,241 $ 105,308 $ 108,468 $ 111,722
Credit Loss $ 57,823 $ 57,823 $ 59,558 $ 61,345 $ 63,185 $ 65,081 $ 67,033
Concessions $ 160,614 $ 57,823 $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------------
Subtotal $ 422,681 $ 249,919 $ 158,821 $ 163,586 $ 168,493 $ 173,548 $ 178,754
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 208,800 $ 208,800 $ 215,064 $ 221,516 $ 228,161 $ 235,006 $ 242,056
----------------------------------------------------------------------------------------
Subtotal Other Income $ 208,800 $ 208,800 $ 215,064 $ 221,516 $ 228,161 $ 235,006 $ 242,056
----------------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME $1,713,559 $1,886,559 $2,041,506 $2,102,751 $2,165,834 $2,230,809 $2,297,733
OPERATING EXPENSES:
Taxes $ 156,600 $ 161,298 $ 166,137 $ 171,121 $ 176,255 $ 181,542 $ 186,989
Insurance $ 44,370 $ 45,701 $ 47,072 $ 48,484 $ 49,939 $ 51,437 $ 52,980
Utilities $ 99,180 $ 102,155 $ 105,220 $ 108,377 $ 111,628 $ 114,977 $ 118,426
Repair & Maintenance $ 52,200 $ 53,766 $ 55,379 $ 57,040 $ 58,752 $ 60,514 $ 62,330
Cleaning $ 84,825 $ 87,370 $ 89,991 $ 92,691 $ 95,471 $ 98,335 $ 101,285
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 39,150 $ 40,325 $ 41,534 $ 42,780 $ 44,064 $ 45,386 $ 46,747
General Administrative $ 33,930 $ 34,948 $ 35,996 $ 37,076 $ 38,189 $ 39,334 $ 40,514
Management $ 85,678 $ 94,316 $ 102,075 $ 105,138 $ 108,292 $ 111,540 $ 114,887
Miscellaneous $ 313,200 $ 322,596 $ 332,274 $ 342,242 $ 352,509 $ 363,085 $ 373,977
----------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $ 909,133 $ 942,475 $ 975,679 $1,004,949 $1,035,098 $1,066,150 $1,098,135
Reserves $ 65,250 $ 67,208 $ 69,224 $ 71,300 $ 73,439 $ 75,643 $ 77,912
----------------------------------------------------------------------------------------
NET OPERATING INCOME $ 739,176 $ 876,638 $ 996,604 $1,026,502 $1,057,297 $1,089,016 $1,121,686
----------------------------------------------------------------------------------------
Operating Expense Ratio (% of EGI) 53.1% 50.0% 47.8% 47.8% 47.8% 47.8% 47.8%
Operating Expense Per Unit $ 3,483 $ 3,611 $ 3,738 $ 3,850 $ 3,966 $ 4,085 $ 4,207
COLONY OF SPRINGDALE
- ----------------------------------------------------------------------------------------
YEAR APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 8 9 10 11
- ----------------------------------------------------------------------------------------
REVENUE
Base Rent $2,301,464 $2,370,508 $2,441,623 $2,514,872
Vacancy $ 115,073 $ 118,525 $ 122,081 $ 125,744
Credit Loss $ 69,044 $ 71,115 $ 73,249 $ 75,446
Concessions $ 0 $ 0 $ 0 $ 0
-------------------------------------------------
Subtotal $ 184,117 $ 189,641 $ 195,330 $ 201,190
Laundry Income $ 0 $ 0 $ 0 $ 0
GarageRevenue $ 0 $ 0 $ 0 $ 0
-------------------------------------------------
Other Misc. Revenue $ 249,318 $ 256,798 $ 264,502 $ 272,437
-------------------------------------------------
Subtotal Other Income $ 249,318 $ 256,798 $ 264,502 $ 272,437
EFFECTIVE GROSS INCOME $2,366,665 $2,437,665 $2,510,795 $2,586,119
OPERATING EXPENSES:
Taxes $ 192,598 $ 198,376 $ 204,327 $ 210,457
Insurance $ 54,570 $ 56,207 $ 57,893 $ 59,630
Utilities $ 121,979 $ 125,638 $ 129,407 $ 133,290
Repair & Maintenance $ 64,199 $ 66,125 $ 68,109 $ 70,152
Cleaning $ 104,324 $ 107,454 $ 110,677 $ 113,998
Landscaping $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 48,150 $ 49,594 $ 51,082 $ 52,614
General Administrative $ 41,730 $ 42,982 $ 44,271 $ 45,599
Management $ 118,333 $ 121,883 $ 125,540 $ 129,306
Miscellaneous $ 385,196 $ 396,752 $ 408,655 $ 420,915
-------------------------------------------------
TOTAL OPERATING EXPENSES $1,131,079 $1,165,011 $1,199,962 $1,235,961
Reserves $ 80,249 $ 82,657 $ 85,136 $ 87,691
-------------------------------------------------
NET OPERATING INCOME $1,155,337 $1,189,997 $1,225,697 $1,262,468
-------------------------------------------------
Operating Expense Ratio (% of EGI) 47.8% 47.8% 47.8% 47.8%
Operating Expense Per Unit $ 4,334 $ 4,464 $ 4,598 $ 4,735
Gross Residual Sale Price $12,316,759 Deferred Maintenance $ 0
Estimated Stabilized NOI $994,238 Sales Expense Rate 2.00% Less: Sales Expense $ 246,335 Add: Excess Land $ 0
-----------
Months to Stabilized 24 Discount Rate 11.50% Net Residual Sale Price $12,070,423 Other Adjustments $ 0
-----------
Stabilized Occupancy 95.0% Terminal Cap Rate 10.25% PV of Reversion $ 4,064,188 Value Indicated By
Add: NPV of NOI $ 6,179,272 "DCF" $10,243,460
-----------
PV Total $10,243,460 Rounded $10,200,000
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE
- ------------------------------------------------------------------------------------------
TOTAL VALUE 11.00% 11.25% 11.50% 11.75% 12.00%
- ------------------------------------------------------------------------------------------
9.75% $10,800,055 $10,624,060 $10,451,880 $10,283,419 $10,118,585
10.00% $10,688,329 $10,514,820 $10,345,065 $10,178,970 $10,016,443
TERMINAL CAP RATE 10.50% $10,480,839 $10,311,946 $10,146,694 $ 9,984,992 $ 9,826,752
10.75% $10,384,332 $10,217,586 $10,054,428 $ 9,894,770 $ 9,738,524
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
INCOME LOSS DURING LEASE-UP
The subject is currently 88% occupied, below our stabilized occupancy
projection. We have estimated a 24-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 $121,000 as shown in the following table.
DESCRIPTION YEAR 1 YEAR 2
- ------------------------------------------------------------
"As Is" Net Operating Income $739,176 $876,638
Stabilized Net Operating Income $841,655 $912,644
---------------------
Difference $102,479 $36,006
PV of Income Loss During Lease-Up $120,871
--------
Rounded $121,000
--------
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
$191,000 (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 35
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 9.75% percent is applicable to the
subject. The results of our direct capitalization analysis are as follows:
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
COLONY OF SPRINGDALE
TOTAL PER SQ. FT. PER UNIT %OF EGI
----------------------------------------------
REVENUE
Base Rent $ 1,927,440 $ 8.94 $ 7,385
Less: Vacancy & Collection Loss 8.00% $ 154,195 $ 0.71 $ 591
Plus: Other Income
Laundry Income $ 0 $ 0.00 $ 0 0.00%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 208,800 $ 0.97 $ 800 10.53%
--------------------------------------------
Subtotal Other Income $ 208,800 $ 0.97 $ 800 10.53%
EFFECTIVE GROSS INCOME $ 1,982,045 $ 9.19 $ 7,594
OPERATING EXPENSES:
Taxes $ 156,600 $ 0.73 $ 600 7.90%
Insurance $ 44,370 $ 0.21 $ 170 2.24%
Utilities $ 99,180 $ 0.46 $ 380 5.00%
Repair & Maintenance $ 52,200 $ 0.24 $ 200 2.63%
Cleaning $ 84,825 $ 0.39 $ 325 4.28%
Landscaping $ 0 $ 0.00 $ 0 0.00%
Security $ 0 $ 0.00 $ 0 0.00%
Marketing & Leasing $ 39,150 $ 0.18 $ 150 1.98%
General Administrative $ 33,930 $ 0.16 $ 130 1.71%
Management 5.00% $ 99,102 $ 0.46 $ 380 5.00%
Miscellaneous $ 313,200 $ 1.45 $ 1,200 15.80%
TOTAL OPERATING EXPENSES $ 922,557 $ 4.28 $ 3,535 46.55%
Reserves $ 65,250 $ 0.30 $ 250 3.29%
--------------------------------------------
NET OPERATING INCOME $ 994,238 $ 4.61 $ 3,809 50.16%
--------------------------------------------
"GOING IN" CAPITALIZATION RATE 9.75%
VALUE INDICATION $10,197,308 $47.28 $39,070
LESS: LEASE-UP COST ($ 121,000)
PV OF CONCESSIONS ($ 191,000)
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $ 9,885,308
ROUNDED $ 9,900,000 $45.90 $37,931
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 37
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- ------------------------------------------------------------------------
9.00% $10,735,084 $10,700,000 $40,996 $49.61
9.25% $10,436,514 $10,400,000 $39,847 $48.22
9.50% $10,153,659 $10,200,000 $39,080 $47.29
9.75% $ 9,885,308 $ 9,900,000 $37,931 $45.90
10.00% $ 9,630,376 $ 9,600,000 $36,782 $44.51
10.25% $ 9,387,879 $ 9,400,000 $36,015 $43.58
10.50% $ 9,156,929 $ 9,200,000 $35,249 $42.66
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 $10,200,000
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
$10,100,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 38
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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 $10,100,000
Reconciled Value $10,100,000
The Direct 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
April 29, 2003 the market value of the fee simple estate in the property is:
$10,100,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
EXTERIOR - TYPICAL RESIDENTIAL BUILDING EXTERIOR - STREET SCENE (RTE 4)
[PICTURE] [PICTURE]
EXTERIOR - POOL INTERIOR - TYPICAL KITCHEN
[PICTURE] [PICTURE]
INTERIOR - TYPICAL BATH INTERIOR - TYPICAL LIVING AREA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
GOLDCREST APARTMENTS MAGNOLIA POINTE CAMBRIDGE PARK
11365 Lippelman Road 484 Old State Rt 74 1088 E. Crescentville Rd
Cincinnati, OH Cincinnati, OH West Chester Twp, OH
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
WINDSOR AT UNION STATION THE HUNTINGTON
8197 Meeting Street 11755 Norbourne Drive
West Chester, OH Cincinnati, OH
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
- ---------------------------------------------------------------------------------------------------------------------
Property Name Colony of Springdale Waterstone Place
Management Company Aimco Domain Equity
LOCATION:
Address 1 Kenilworth Avenue 11365 Lippelman Road
City, State Springdale, Ohio Cincinnati, Ohio
County Hamilton Hamilton
Proximity to Subject 2 Miles east of the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 215,680 156,320
Year Built 1969 1965
Effective Age 20 10
Building Structure Type Brick & wood siding walls; asphalt Brick siding walls; flat built-up
shingle roof roof
Parking Type (Gr., Cov., etc.) Open, Covered Open, Covered
Number of Units 261 173
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba - 1A10 620 80 $517 1 1BR/1BTH 750 59 $555
2 2Br/1Ba - 2A10 890 96 $628 2 2BR/1BTH - Type 1 850 11 $615
3 2B/1.5B-2A15 920 54 $690 2 2BR/1BTH - Type 2 900 36 $640
4 3B/1.5B-3A15 1,020 30 $844 3 2BR/1BTH - Type 3 1,050 67 $670
5 Effic. - EA10 360 1 $459
Average Unit Size (SF) 826 904
Unit Breakdown: Efficiency 1% 2-Bedroom 57% Efficiency 0% 2-Bedroom 66%
1-Bedroom 31% 3-Bedroom 11% 1-Bedroom 34% 3-Bedroom 0%
CONDITION: Average Good
APPEAL: Average Average
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony W/D Connect. X Balcony W/D Connect.
Fireplace Other Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
X Basketball Court X BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall Sand Volley Ball X Meeting Hall
X Tennis Court X Secured Parking Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
Gym Room X Gym Room
X Playground Playground
OCCUPANCY: 88% 85%
LEASING DATA:
Available Leasing Terms 6 to 15 Months 6 to 18 Months
Concessions 1 Month Free None
Pet Deposit $200 - $300 $200
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water X Trash X Water X Trash
Confirmation April 29, 2003; Marianne King (PM) April 29, 2003; Marianne King (PM)
and Domain
Telephone Number (513) 333-0580 (513) 333-0580
NOTES: None
COMPARISON TO SUBJECT: Similar
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
- -------------------------------------------------------------------------------------------------------------------
Property Name Forest Park Apartments Versailles Village
Management Company Metro-Prop Realty Goldcrest Realty
LOCATION:
Address 580 Dewdrop Circle 151 Versailles Drive
City, State Cincinnati, Ohio Cincinnati, Ohio
County Hamilton Hamilton
Proximity to Subject 1/2 Mile west of the subject 1/2 Mile west of the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 413,944 173,340
Year Built 1965 1970
Effective Age 20 20
Building Structure Type Brick siding walls; flat Brick siding walls; asphalt
built-up roof shingle roof
Parking Type (Gr., Cov., etc.) Open, Covered Open, Covered
Number of Units 412 180
Unit Mix: Type Unit Qty Mo. Type Unit Qty. Mo.
1 1BR/1BTH 662 68 $520 1 1BR/1BTH 610 28 $555
2 2BR/1BTH 850 154 $590 2 2BR/1BTH 900 58 $645
3 2BR/1.5BTH 1,183 76 $625 3 2BR/1.5BTH 1,090 14 $675
4 3BR/1.5BTH 1,295 110 $730 4 3BR/2BTH 1,455 24 $750
Average Unit Size (SF) 1,001 963
Unit Breakdown: Efficiency 0% 2-Bedroom 56% Efficiency 0% 2-Bedroom 40%
1-Bedroom 17% 3-Bedroom 27% 1-Bedroom 16% 3-Bedroom 13%
CONDITION: Average Average
APPEAL: Average Average
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony W/D Connect. X Balcony W/D Connect.
Fireplace Other X Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall 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
Jogging Track X Business Office Jogging Track X Business Office
Gym Room Gym Room
Playground Playground
OCCUPANCY: 96% 96%
LEASING DATA:
Available Leasing Terms 6 to 15 Months 6 to 15 Months
Concessions 1 Month Free 1 Month Free
Pet Deposit $200 - $300 $200 - $300
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water X Trash X Water X Trash
Confirmation April 29, 2003; Marianne King April 29, 2003; Marianne King
(PM) and Metro- (PM) and Goldcrest
Telephone Number (513) 333-0580 (513) 333-0580
NOTES: None None
COMPARISON TO SUBJECT: Similar Similar
COMPARABLE
DESCRIPTION R - 4
- ------------------------------------------------------------------------------------
Property Name Carriage Court
Management Company Ackerman Enterprises
LOCATION:
Address 11580 Olde Gate Drive
City, State Springdale, Ohio
County Hamilton
Proximity to Subject 1/2 Mile north of subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 201,600
Year Built 1987
Effective Age 15
Building Structure Type Brick & wood siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc.) Open, Covered
Number of Units 192
Unit Mix: Type Unit Qty. Mo.
1 1BR/1.5BTH 950 48 $670
3 1BR/1.5BTH 1,000 48 $705
3 2BR/2BTH 1,050 48 $738
3 2BR/2BTH 1,200 48 $770
Average Unit Size (SF) 1,050
Unit Breakdown: Efficiency 0% 2-Bedroom 50%
1-Bedroom 50% 3-Bedroom
CONDITION: Slightly Superior
APPEAL: Good
AMENITIES:
Unit Amenities Attach. Garage X Vaulted Ceiling
X Balcony W/D Connect.
X Fireplace Other
X Cable TV Ready
Project Amenities X Swimming Pool
X Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment
Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall
Tennis Court Secured Parking
Racquet Ball X Laundry Room
Jogging Track X Business Office
X Gym Room
Playground
OCCUPANCY: 96%
LEASING DATA:
Available Leasing Terms 6 to 15 Months
Concessions 1 Month Free
Pet Deposit $200 - $300
Utilities Paid by Tenant: X Electric X Natural Gas
X Water X Trash
Confirmation April 29, 2003; Marianne King (PM) and Ackerman
Telephone Number (513) 333-0580
NOTES: None
COMPARISON TO SUBJECT: Superior
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
WATERSTONE PLACE FOREST PARK APARTMENTS VERSAILLES VILLAGE
11365 Lippelman Road 580 Dewdrop Circle 151 Versailles Drive
Cincinnati, Ohio Cincinnati, Ohio Cincinnati, Ohio
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4
CARRIAGE COURT
11580 Olde Gate Drive
Springdale, Ohio
[PICTURE] N/A
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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. Richard Mupo
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- F. Brian Johnson
----------------------------
Brian Johnson, MAI
Managing Principal, Real Estate Group
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
F. BRIAN JOHNSON, MAI
MANAGING PRINCIPAL, REAL ESTATE ADVISORY GROUP
POSITION F. Brian Johnson is the Managing Principal of the New
York Real Estate Advisory Group of American Appraisal
Associates, Inc. ("AAA").
EXPERIENCE
Valuation Mr. Johnson has completed appraisals for securitization
and pension funds/insurance industries. Analyses he has
performed involve various types of investment-grade
real estate throughout the continental United States
including apartments, cooperatives, hotels, industrial
and research and development parks, office buildings,
regional shopping centers, and undeveloped acreage.
Additional experience includes the valuation of
existing and proposed investment-grade real estate,
market and feasibility studies and offering memorandums
for debt placement, equity investments and
acquisitions, and disposition analysis.
Court Mr. Johnson is qualified as an expert witness for the
New Jersey Supreme Court.
Business Mr. Johnson joined AAA in 1998 and was promoted to his
current position in 1999. Prior to joining AAA, Mr.
Johnson was a Senior Vice President at Koeppel Tener
Real Estate Services and a Vice President at L. W.
Ellwood & Co.
EDUCATION Fairleigh Dickinson
Bachelor of Science - Finance
STATE CERTIFICATIONS State of New Jersey, General Appraiser, #42RG00158300
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
PROFESSIONAL Appraisal Institute, MAI Designated Member
AFFILIATIONS
VALUATION AND Several courses are completed on an annual basis as
SPECIAL COURSES part of the continuing education requirements of the
Appraisal Institute. In addition, Mr. Johnson attends
real estate and financial industry-related conferences
and seminars.
PUBLICATIONS "Operational Items to Consider When Appraising a
Regional Mall," Appraisal Journal, 1991
AMERICAN APPRAISAL ASSOCIATES, INC.
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
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.