THE LANDMARK
2412 LANDMARK DRIVE
RALEIGH, NORTH CAROLINA
MARKET VALUE -
FEE SIMPLE ESTATE
AS OF MAY 13, 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]
JULY 2, 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: THE LANDMARK 2412
LANDMARK DRIVE
RALEIGH, WAKE COUNTY, NORTH 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 292 units with a
total of 326,150 square feet of rentable area. The improvements were built in
1972. The improvements are situated on 34.29 acres. Overall, the improvements
are in average condition. As of the date of this appraisal, the subject property
is 89% 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
THE LANDMARK, RALEIGH, NORTH 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 13, 2003 is:
($12,000,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
-s- Frank Fehribach
July 2, 2003 Frank Fehribach, MAI
#053272 Managing Principal, Real Estate Group
North Carolina Temporary Practice Permit #2578
Report By:
Jimmy Pat James, MAI
North Carolina Temporary Practice Permit #2603
Assisted By:
J. Chad Walker
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
THE LANDMARK, RALEIGH, NORTH 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
THE LANDMARK, RALEIGH, NORTH CAROLINA
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: The Landmark
LOCATION: 2412 Landmark Drive
Raleigh, North 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 13, 2003
DATE OF REPORT: July 2, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 34.29 acres, or 1,493,672 square feet
Assessor Parcel No.: 785932086
Floodplain: Community Panel No. 37183C0336E (March 3, 1992)
Flood Zone X, an area outside the floodplain.
Zoning: R-10 (Residential-10)
BUILDING:
No. of Units: 292 Units
Total NRA: 326,150 Square Feet
Average Unit Size: 1,117 Square Feet
Apartment Density: 8.5 units per acre
Year Built: 1972
UNIT MIX AND MARKET RENT:
GROSS RENTAL INCOME PROJECTION
Market Rent
Square -------------------- Monthly Annual
Unit Type Feet Per Unit Per SF Income Income
=============================================================================================
1A10 600 $549 $0.92 $ 9,882 $ 118,584
- ---------------------------------------------------------------------------------------------
1A15 1,100 $657 $0.60 $ 75,555 $ 906,660
- ---------------------------------------------------------------------------------------------
2A10 1,075 $599 $0.56 $ 10,782 $ 129,384
- ---------------------------------------------------------------------------------------------
2A15 1,100 $669 $0.61 $ 46,161 $ 553,932
- ---------------------------------------------------------------------------------------------
2A20 1,300 $829 $0.64 $ 29,015 $ 348,180
- ---------------------------------------------------------------------------------------------
3A20 1,300 $859 $0.66 $ 31,783 $ 381,396
- ---------------------------------------------------------------------------------------------
Total $203,178 $2,438,136
=============================================================================================
OCCUPANCY: 89%
ECONOMIC LIFE: 45 Years
EFFECTIVE AGE: 25 Years
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
THE LANDMARK, RALEIGH, NORTH CAROLINA
REMAINING ECONOMIC LIFE: 20 Years
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
SUBJECT PHOTOGRAPHS
[PROPERTY - SIGN PICTURE] [EXTERIOR - OFFICE PICTURE]
AREA MAP
[AREA MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
THE LANDMARK, RALEIGH, NORTH CAROLINA
NEIGHBORHOOD MAP
[NEIGHBORHOOD MAP]
HIGHEST AND BEST USE:
As Vacant: Hold for future multi-family development
As Improved: Continuation as its current use
METHOD OF VALUATION: In this instance, the Sales Comparison and Income
Approaches to value were utilized.
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 7
THE LANDMARK, RALEIGH, NORTH CAROLINA
PART TWO - ECONOMIC INDICATORS
INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION Amount $/Unit
- --------------------- ----------- ------
Potential Rental Income $ 2,438,136 $ 8,350
Effective Gross Income $ 2,255,642 $ 7,725
Operating Expenses $ 1,012,142 $ 3,466 44.9% of EGI
Net Operating Income: $ 1,170,500 $ 4,009
Capitalization Rate 9.50%
DIRECT CAPITALIZATION VALUE $12,300,000 * $42,123 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 13%
Stabilized Vacancy & Collection Loss: 10%
Lease-up / Stabilization Period N/A
Terminal Capitalization Rate 10.00%
Discount Rate 11.50%
Selling Costs 3.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $12,000,000 * $41,096 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $12,000,000 $41,096 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $47,138 to $62,939
Range of Sales $/Unit (Adjusted) $39,796 to $47,986
VALUE INDICATION - PRICE PER UNIT $12,200,000 * $41,781 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 6.08 to 7.47
Selected EGIM for Subject 5.50
Subject's Projected EGI $ 2,255,642
EGIM ANALYSIS CONCLUSION $12,300,000 * $42,123 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $12,200,000 * $41,781 / UNIT
RECONCILED SALES COMPARISON VALUE $12,200,000 $41,781 / 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
THE LANDMARK, RALEIGH, NORTH CAROLINA
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $12,200,000
NOI Per Unit $12,200,000
EGIM Multiplier $12,300,000
INDICATED VALUE BY SALES COMPARISON $12,200,000 $41,781 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $12,300,000
Discounted Cash Flow Method: $12,000,000
INDICATED VALUE BY THE INCOME APPROACH $12,000,000 $41,096 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $12,000,000 $41,096 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
THE LANDMARK, RALEIGH, NORTH CAROLINA
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 2412 Landmark Drive, Raleigh, Wake County,
North Carolina. Raleigh identifies it as 785932086.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by J. Chad Walker on
May 13, 2003. Jimmy Pat James, MAI and Frank Fehribach, MAI have not made a
personal inspection of the subject property. J. Chad Walker 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 J. Chad Walker 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 13, 2003. The
date of the report is July 2, 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
THE LANDMARK, RALEIGH, NORTH 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 Angeles Income
Properties Ltd. II. 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
THE LANDMARK, RALEIGH, NORTH 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 Raleigh, North Carolina. Overall, the
neighborhood is characterized as a suburban setting with the predominant land
use being single family residential. The subject's neighborhood is generally
defined by the following boundaries.
NEIGHBORHOOD BOUNDARIES
East - Interstate Highway 440
West - Blue Ridge Road
South - Raleigh-Chapel Hill Expressway
North - Edwards Mill Road/ Glen Eden Drive
MAJOR EMPLOYERS
Major employers in the subject's area include MCI Telecommunications; Nortel;
Cisco Systems; IBM; State of North Carolina; Wake County Public School; North
Carolina State University; Wake County: and the City of Raleigh. 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
THE LANDMARK, RALEIGH, NORTH CAROLINA
NEIGHBORHOOD DEMOGRAPHICS
AREA
----------------------------------------
CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA
- ------------------------------------------------------------------------------------
POPULATION TRENDS
- ------------------------------------------------------------------------------------
Current Population 6,759 59,601 180,655 1,249,659
- ------------------------------------------------------------------------------------
5-Year Population 7,047 64,604 193,933 1,408,794
- ------------------------------------------------------------------------------------
% Change CY-5Y 4.3% 8.4% 7.3% 12.7%
- ------------------------------------------------------------------------------------
Annual Change CY-5Y 0.9% 1.7% 1.5% 2.5%
- ------------------------------------------------------------------------------------
HOUSEHOLDS
- ------------------------------------------------------------------------------------
Current Households 3,191 23,356 76,822 484,776
- ------------------------------------------------------------------------------------
5-Year Projected Households 3,405 25,222 82,629 545,189
- ------------------------------------------------------------------------------------
% Change CY - 5Y 6.7% 8.0% 7.6% 12.5%
- ------------------------------------------------------------------------------------
Annual Change CY-5Y 1.3% 1.6% 1.5% 2.5%
- ------------------------------------------------------------------------------------
INCOME TRENDS
- ------------------------------------------------------------------------------------
Median Household Income $ 64,729 $ 57,056 $ 50,710 $ 55,832
- ------------------------------------------------------------------------------------
Per Capita Income $ 35,411 $ 29,231 $ 27,731 $ 25,814
- ------------------------------------------------------------------------------------
Average Household Income $ 75,308 $ 74,322 $ 65,682 $ 66,544
- ------------------------------------------------------------------------------------
Source: Demographics Now
The subject neighborhood's population is expected to show increases below 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 43.58% 47.99% 49.19% 33.18%
- -----------------------------------------------------------------------------------------------
5-Year Projected % Renting 44.80% 49.16% 49.39% 32.28%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
% of Households Owning 48.18% 46.03% 44.34% 61.69%
- -----------------------------------------------------------------------------------------------
5-Year Projected % Owning 47.05% 45.10% 44.36% 63.00%
- -----------------------------------------------------------------------------------------------
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
THE LANDMARK, RALEIGH, NORTH CAROLINA
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Single family residential
South - Lake Boone Trail, vacant land, and office
East - Single family residential and apartments
West - Hospital
CONCLUSIONS
The subject is well located within the city of Raleigh. 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
THE LANDMARK, RALEIGH, NORTH CAROLINA
MARKET ANALYSIS
The subject property is located in the city of Raleigh in Wake County. The
overall pace of development in the subject's market is more or less decreasing.
Drucker & Falk started units over the past six months at Overlook at Simms Creek
on Capital Boulevard, just north of I-540. There are no new units proposed to be
built at this time. The following table illustrates historical vacancy rates for
the subject's market.
HISTORICAL VACANCY RATE
Period Region Submarket
==================================
1Q01 8.1% 6.1%
- ----------------------------------
3Q01 9.6% 9.5%
- ----------------------------------
1Q02 12.5% 12.3%
- ----------------------------------
3Q02 12.0% 7.9%
- ----------------------------------
1Q03 12.6% 8.5%
- ----------------------------------
Source : REAL DATA Real Estate Information Services, Apartment Index 1Q03
Occupancy trends in the subject's market are decreasing. Historically speaking,
the subject's submarket has outperformed the overall market. The Raleigh-Durham
apartment as a whole is reporting a high vacancy rate of 12.6% for 1Q03. Vacancy
rates in the Triangle (Raleigh, Durham, Chapel Hill) area have steadily been
steadily rising since 1996, according to REAL DATA Real Estate Information
Services Apartment Index 1Q03. In comparison, the Raleigh-Northwest Submarket is
posting vacancy rates of 8.5%.
Market rents in the subject's market have been following a decreasing trend. The
following table illustrates historical rental rates for the subject's market.
HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change
==============================================================================
1Q01 $746 - $786 -
- ------------------------------------------------------------------------------
3Q01 $763 2.3% $803 2.2%
- ------------------------------------------------------------------------------
1Q02 $764 0.1% $795 -1.0%
- ------------------------------------------------------------------------------
3Q02 $761 -0.4% $775 -2.5%
- ------------------------------------------------------------------------------
1Q03 $758 -0.4% $763 -1.5%
- ------------------------------------------------------------------------------
Source : REAL DATA Real Estate Information Services, Apartment Index 1Q03
The following table illustrates a summary of the subject's competitive set.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
THE LANDMARK, RALEIGH, NORTH CAROLINA
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
===============================================================================================================
R-1 Lexington Farms 188 97% 1987 1.25 miles north of the subject Pro
- ---------------------------------------------------------------------------------------------------------------
R-2 Princeton Mill 352 92% 1996 0.80 mile northwest of the subject
- ---------------------------------------------------------------------------------------------------------------
R-3 Summit Highland 172 98% 1986 1.30 miles northwest of the subject
- ---------------------------------------------------------------------------------------------------------------
R-4 Meredith Village 297 86% 1968 0.25 mile east of the subject
- ---------------------------------------------------------------------------------------------------------------
R-5 Palms 212 82% 1967 0.50 mile southeast of the subject
- ---------------------------------------------------------------------------------------------------------------
Subject The Landmark 292 89% 1972
- ---------------------------------------------------------------------------------------------------------------
The Raleigh-Central submarket as well as the Triangle as a whole has experienced
declining apartment rental rates over the past two years. This is due in part to
the economic slowdown of the national economy and low interest rates currently
being offered. As of 1Q03, the average rental rate for the Northwest Submarket
was $763, which is $5 above the Region at $758. However, rates are currently
stabilizing and remain at these levels in the short-term. As the national
economy improves so should contract rental rates.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
THE LANDMARK, RALEIGH, NORTH CAROLINA
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 34.29 acres, or 1,493,672 square feet
Shape Irregular
Topography Rolling
Utilities All necessary utilities are available to the site.
Soil Conditions Stable
Easements Affecting Site None other than typical utility easements
Overall Site Appeal Average
Flood Zone:
Community Panel 37183C0336E, dated March 3, 1992
Flood Zone Zone X
Zoning R-10, 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
===============================================================================================================
785932086 $2,336,000 $11,422,958 $13,758,958 0.00991 $136,413
===============================================================================================================
IMPROVEMENT ANALYSIS
Year Built 1972
Number of Units 292
Net Rentable Area 326,150 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,
volleyball court, tennis court, gym room,
laundry room, and parking area.
Unit Amenities Individual unit amenities include a balcony, 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
THE LANDMARK, RALEIGH, NORTH CAROLINA
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
================================================
1A10 18 600
- ------------------------------------------------
1A15 115 1,100
- ------------------------------------------------
2A10 18 1,075
- ------------------------------------------------
2A15 69 1,100
- ------------------------------------------------
2A20 35 1,300
- ------------------------------------------------
3A20 37 1,300
================================================
Overall Condition Average
Effective Age 25 years
Economic Life 45 years
Remaining Economic Life 20 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
1972 and consist of a 292-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
THE LANDMARK, RALEIGH, NORTH 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
THE LANDMARK, RALEIGH, NORTH 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
THE LANDMARK, RALEIGH, NORTH 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
THE LANDMARK, RALEIGH, NORTH CAROLINA
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- ----------------------------------------------------------------------------------------------------------------------
Property Name The Landmark West Millbrook Calibre Chase
LOCATION:
Address 2412 Landmark Drive 4001 Jamie Court and 6093 231 Calibre Chase Drive
Shadetree Lane
City, State Raleigh, North Carolina Raleigh, NC Raleigh, NC
County Wake Wake Wake
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 326,150 323,736 171,312
Year Built 1972 1985 1988
Number of Units 292 368 192
Unit Mix: Type Total Type Total Type Total
1A10 18 1Br/1Ba 170 1Br/1Ba 120
1A15 115 2Br/2Ba 198 2Br/2Ba 72
2A10 18
2A15 69
2A20 35
3A20 37
Average Unit Size (SF) 1,117 880 892
Land Area (Acre) 34,2900 21,0400 27,4000
Density (Units/Acre) 8.5 17.5 7.0
Parking Ratio (Spaces/Unit) 2.00 N/A N/A
Parking Type (Gr., Cov., etc.) Garage, Open Covered Open Open
CONDITION: 0 Average Good
APPEAL: 0 Average Good
AMENITIES:
Pool/Spa Yes/No Yes/Yes Yes/No
Gym Room Yes Yes Yes
Laundry Room Yes Yes No
Secured Parking No No No
Sport Courts No Yes Yes
Washer/Dryer Connection Yes Yes Yes
Fireplace Yes Yes
Other
OCCUPANCY: 89% 92% 98%
TRANSACTION DATA:
Sale Date November, 2001 November, 2001
Sale Price ($) $20,775,000 $11,755,000
Grantor SCA North Carolina Limited SWA Acquisitions Ltd.
Partnership
Grantee BES Millbrook Fund I, LLC Wilson Investment Properties
and BES Millbrook Fund II, Inc.
Sale Documentation Book 09150 Page 0964 Book 09142 Page 2745
Verification Wake County Records Wake County Records
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $3,215,664 $8,738 $9.93 $1,890,720 $9,848 $11.04
Vacancy/Credit Loss $ 160,783 $ 437 $0.50 $ 75,629 $ 394 $ 0.44
Effective Gross Income $3,054,881 $8,301 $9.44 $1,815,091 $9,454 $10.60
Operating Expenses $1,221,952 $3,321 $3.77 $ 705,889 $3,677 $ 4.12
Net Operating Income $1,832,929 $4,981 $5.66 $1,109,202 $5,777 $ 6.47
NOTES:
PRICE PER UNIT $56,454 $61,224
PRICE PER SQUARE FOOT $ 64.17 $ 68.62
EXPENSE RATIO 40.0% 38.9%
EGIM 6.80 6.48
OVERALL CAP RATE 8.82% 9.44%
Cap Rate based on Pro Forma or Actual Income? Pro Forma Actual
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- ------------------------------------------------------------------------------------------------------------------------------------
Property Name Crabtree Valley Meredith Village Apartments Sedgewood Green
LOCATION:
Address 4601 Baymar Drive 2406 Wycliff Road 3920 Knickerbocker Parkway
City, State Raleigh, NC Raleigh, NC Raleigh, NC
County Wake Wake Wake
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 265,634 314,655 230,196
Year Built 1987 1968 1990
Number of Units 268 297 228
Unit Mix: Type Total Type Total Type Total
1Br/1Ba 168 1Br/1Ba 65 1Br/1Ba 108
2Br/2Ba 100 2Br/2Ba 191 2Br/2Ba 60
3Br/2Ba 41 3Br/2Ba 60
Average Unit Size (SF) 991 1,059 1,010
Land Area (Acre) 28,7300 26,4800 22,8400
Density (Units/Acre) 9.3 11.2 10.0
Parking Ratio (Spaces/Unit) N/A N/A N/A
Parking Type (Gr., Cov., etc.) Open Open Open, Garage, Carport
CONDITION: Average Average Good
APPEAL: Average Average Good
AMENITIES:
Pool/Spa Yes/No Yes/No Yes/No
Gym Room No Yes Yes
Laundry Room No Yes Yes
Secured Parking No No No
Sport Courts No Yes Yes
Washer/Dryer Connection Yes No Yes
Fireplace Yes No Yes
Other
OCCUPANCY: 95% 90% 92%
TRANSACTION DATA:
Sale Date November, 2001 October, 2001 November, 2000
Sale Price ($) $16,000,000 $14,000,000 $14,350,000
Grantor SCA NC T Limited Partnership KF Meredith LLC ERI NC Inc.
Grantee BES Crabtree Fund I LLC and Meredith Village Limited Sedgewood Apartments LLC
BES Crabtree Fund II LLC Partnership
Sale Documentation Book 09148 Page 2318 Book 09137 Page 001 Book 08746 Page 0269
Verification Wake County Records Wake County Records Wake County Records
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $2,343,024 $8,743 $8.82 $2,558,196 $8,613 $ 8.13 $1,979,381 $8,681 $ 8.60
Vacancy/Credit Loss $ 117,151 $ 437 $0.44 $ 255,819 $ 861 $ 0.81 $ 59,381 $ 260 $ 0.26
Effective Gross Income $2,225,873 $8,305 $8.38 $2,302,377 $7,752 $ 7.32 $1,920,000 $8,421 $ 8.34
Operating Expenses $ 890,349 $3,322 $3.35 $1,036,070 $3,488 $ 3.29 $ 729,600 $3,200 $ 3.17
Net Operating Income $1,335,524 $4,983 $5.03 $1,266,307 $4,264 $ 4.02 $1,190,400 $5,221 $ 5.17
NOTES:
PRICE PER UNIT $59,701 $47,138 $62,939
PRICE PER SQUARE FOOT $ 60.23 $ 44.49 $ 62.34
EXPENSE RATIO 40.0% 45.0% 38.0%
EGIM 7.19 6.08 7.47
OVERALL CAP RATE 8.35% 9.05% 8.30%
Cap Rate based on Pro Forma or Actual Income? Pro Forma Pro Forma Actual
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
THE LANDMARK, RALEIGH, NORTH CAROLINA
IMPROVED SALES MAP
[IMPROVED SALES MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $47,138 to $62,939 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 $39,796 to $47,986 per unit with a mean or average adjusted price
of $43,178 per unit. The median adjusted price is $42,424 per unit. Based on the
following analysis, we have concluded to a value of $42,000 per unit, which
results in an "as is" value of $12,200,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
THE LANDMARK, RALEIGH, NORTH CAROLINA
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- -------------------------------------------------------------------------------------------------------------------
Property Name The Landmark West Millbrook Calibre Chase
Address 2412 Landmark Drive 4001 Jamie Court and 6093 231 Calibre Chase Drive
Shadetree Lane
City Raleigh, North Carolina Raleigh, NC Raleigh, NC
Sale Date November, 2001 November, 2001
Sale Price ($) $20,775,000 $11,755,000
Net Rentable Area (SF) 326,150 323,736 171,312
Number of Units 292 368 192
Price Per Unit $56,454 $61,224
Year Built 1972 1985 1988
Land Area (Acre) 34.2900 21.0400 27.4000
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 11-2001 0% 11-2001 0%
VALUE AFTER TRANS ADJUST ($/UNIT) $56,454 $61,224
Location Superior -20% Superior -5%
Number of Units 292 368 5% 192 -10%
Quality / Appeal Average Comparable 0% Superior -10%
Age / Condition 1972 1985 / Average -5% 1988 / Good -15%
Occupancy at Sale 89% 92% 0% 98% 0%
Amenities Average Comparable 0% Comparable 0%
Average Unit Size (SF) 1,117 880 5% 892 5%
PHYSICAL ADJUSTMENT -15% -35%
FINAL ADJUSTED VALUE ($/UNIT) $47,986 $39,796
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- -----------------------------------------------------------------------------------------------------------------------
Property Name Crabtree Valley Meredith Village Apartments Sedgewood Green
Address 4601 Baymar Drive 2406 Wycliff Road 3920 Knickerbocker Parkway
City Raleigh, NC Raleigh, NC Raleigh, NC
Sale Date November, 2001 October, 2001 November, 2000
Sale Price ($) $16,000,000 $14,000,000 $14,350,000
Net Rentable Area (SF) 265,634 314,655 230,196
Number of Units 268 297 228
Price Per Unit $59,701 $47,138 $62,939
Year Built 1987 1968 1990
Land Area (Acre) 28.7300 26.4800 22.8400
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 11-2001 0% 10-2001 0% 11-2000 0%
VALUE AFTER TRANS ADJUST ($/UNIT) $59,701 $47,138 $62,939
Location Superior -5% Comparable 0% Superior -5%
Number of Units 268 0% 297 0% 228 -5%
Quality / Appeal Superior -15% Superior -5% Superior -10%
Age / Condition 1987 / Average -10% 1968 / Average -5% 1990 / Good -15%
Occupancy at Sale 95% 0% 90% 0% 92% 0%
Amenities Comparable 0% Comparable 0% Comparable 0%
Average Unit Size (SF) 991 5% 1,059 0% 1,010 0%
PHYSICAL ADJUSTMENT -25% -10% -35%
FINAL ADJUSTED VALUE ($/UNIT) $44,776 $42,424 $40,910
SUMMARY
VALUE RANGE (PER UNIT) $39,796 TO $47,986
MEAN (PER UNIT) $43,178
MEDIAN (PER UNIT) $42,424
VALUE CONCLUSION (PER UNIT) $42,000
VALUE OF IMPROVEMENT & MAIN SITE $12,264,000
PV OF CONCESSIONS -$ 63,000
VALUE INDICATED BY SALES COMPARISON APPROACH $12,201,000
ROUNDED $12,200,000
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
THE LANDMARK, RALEIGH, NORTH CAROLINA
NOI PER UNIT COMPARISON
SALE PRICE NOI/ SUBJECT NOI
COMPARABLE NO. OF ---------- -------------------------- ADJUSTMENT INDICATED
No. UNITS PRICE/UNIT OAR NOI/UNIT SUBJ. NOI/UNIT FACTOR VALUE/UNIT
- ------------------------------------------------------------------------------------------
I-1 368 $20,775,000 8.82% $1,832,929 $1,170,500 0.805 $45,434
$ 56,454 $ 4,981 $ 4,009
I-2 192 $11,755,000 9.44% $1,109,202 $1,170,500 0.694 $42,482
$ 61,224 $ 5,777 $ 4,009
I-3 268 $16,000,000 8.35% $1,335,524 $1,170,500 0.804 $48,024
$ 59,701 $ 4,983 $ 4,009
I-4 297 $14,000,000 9.05% $1,266,307 $1,170,500 0.940 $44,318
$ 47,138 $ 4,264 $ 4,009
I-5 228 $14,350,000 8.30% $1,190,400 $1,170,500 0.768 $48,322
$ 62,939 $ 5,221 $ 4,009
PRICE/UNIT VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
Low High Average Median Estimated Price Per Unit $ 42,000
$42,482 $48,322 $45,716 $45,434 Number of Units 292
Value $12,264,000
PV of Concessions -$ 63,000
-----------
Value Based on NOI Analysis $12,201,000
Rounded $12,200,000
The adjusted sales indicate a range of value between $42,482 and $48,322 per
unit, with an average of $45,716 per unit. Based on the subject's competitive
position within the improved sales, a value of $42,000 per unit is estimated.
This indicates an "as is" market value of $12,200,000 (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
THE LANDMARK, RALEIGH, NORTH CAROLINA
EFFECTIVE GROSS INCOME MULTIPLIER COMPARISON
SALE PRICE
COMPARABLE NO. OF ---------- EFFECTIVE OPERATING SUBJECT
NO. UNITS PRICE/UNIT GROSS INCOME EXPENSE OER PROJECTED OER EGIM
- --------------------------------------------------------------------------------------
I-1 368 $20,775,000 $3,054,881 $1,221,952 40.00% 6.80
$ 56,454
I-2 192 $11,755,000 $1,815,091 $ 705,889 38.89% 6.48
$ 61,224
I-3 268 $16,000,000 $2,225,873 $ 890,349 40.00% 44.87% 7.19
$ 59,701
I-4 297 $14,000,000 $2,302,377 $1,036,070 45.00% 6.08
$ 47,138
I-5 228 $14,350,000 $1,920,000 $ 729,600 38.00% 7.47
$ 62,939
EGIM VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
Low High Average Median Estimate EGIM 5.50
6.08 7.47 6.80 6.80 Subject EGI $ 2,255,642
Value $12,406,033
PV of Concessions -$ 63,000
-----------
Value Based on EGIM Analysis $12,343,033
Rounded $12,300,000
Value Per Unit $ 42,123
There is an inverse relationship, which generally holds among EGIMs and
operating expenses. Properties, which have higher expense ratios, typically sell
for relatively less and therefore produce a lower EGIM. As will be illustrated
in the Income Capitalization Approach of this report, the subject's operating
expense ratio (OER) is estimated at 44.87% before reserves. The comparable sales
indicate a range of expense ratios from 38.00% to 45.00%, while their EGIMs
range from 6.08 to 7.47. Overall, we conclude to an EGIM of 5.50, which results
in an "as is" value estimate in the EGIM Analysis of $12,300,000.
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 $12,200,000.
Price Per Unit $12,200,000
NOI Per Unit $12,200,000
EGIM Analysis $12,300,000
Sales Comparison Conclusion $12,200,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
THE LANDMARK, RALEIGH, NORTH 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 a nd 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
THE LANDMARK, RALEIGH, NORTH 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 Area ----------------
Unit Type (Sq. Ft.) Per Unit Per SF %Occupied
- --------------------------------------------------
1A10 600 $504 $0.84 88.9%
1A15 1100 $605 $0.55 96.5%
2A10 1075 $578 $0.54 55.6%
2A15 1100 $624 $0.57 87.0%
2A20 1300 $799 $0.61 91.4%
3A20 1300 $822 $0.63 81.1%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
THE LANDMARK, RALEIGH, NORTH CAROLINA
RENT ANALYSIS
COMPARABLE RENTS
------------------------------------------------
R-1 R-2 R-3 R-4 R-5
------------------------------------------------
Lexington Princeton Summit Meredith
Farms Mill Highland Village Palms
-------------------------------------------------
SUBJECT SUBJECT COMPARISON TO SUBJECT
SUBJECT UNIT ACTUAL ASKING -------------------------------------------------
DESCRIPTION TYPE RENT RENT Superior Superior Similar Similar Similar
- -----------------------------------------------------------------------------------------------------------
Monthly Rent 1A10 $ 504 $ 549 $ 720 $ 795 $ 735 $ 595 $ 610
Unit Area (SF) 600 600 776 750 824 925 850
Monthly Rent Per Sq. Ft. $ 0.84 $ 0.92 $0.93 $ 1.06 $ 0.89 $ 0.64 $ 0.72
Monthly Rent 1A15 $ 605 $ 657 $ 965 $ 814 $ 630
Unit Area (SF) 1,100 1,100 1,082 990 970
Monthly Rent Per Sq. Ft. $ 0.55 $ 0.60 $ 0.89 $ 0.82 $ 0.65
Monthly Rent 2A10 $ 578 $ 649 $ 985 $ 595 $ 635
Unit Area (SF) 1,075 1,075 1,111 1,050 950
Monthly Rent Per Sq. Ft. $ 0.54 $ 0.60 $ 0.89 $ 0.57 $ 0.67
Monthly Rent 2A15 $ 624 $ 669 $ 960 $ 945 $ 645 $ 660
Unit Area (SF) 1,100 1,100 1,140 1,139 1,075 1,005
Monthly Rent Per Sq. Ft. $ 0.57 $ 0.61 $ 0.84 $ 0.83 $ 0.60 $ 0.66
Monthly Rent 2A20 $ 799 $ 829 $1,113 $ 675
Unit Area (SF) 1,300 1,300 1,280 1,095
Monthly Rent Per Sq. Ft. $ 0.61 $ 0.64 $ 0.87 $ 0.62
Monthly Rent 3A20 $ 822 $ 859 $1,450 $ 795 $ 760
Unit Area (SF) 1,300 1,300 1,450 1,185 1,180
Monthly Rent Per Sq. Ft. $ 0.63 $ 0.66 $ 1.00 $ 0.67 $ 0.64
DESCRIPTION MIN MAX MEDIAN AVERAGE
- -----------------------------------------------------------------------
Monthly Rent $ 595 $ 795 $ 720 $ 691
Unit Area (SF) 750 925 824 825
Monthly Rent Per Sq. Ft. $ 0.64 $ 1.06 $ 0.89 $ 0.85
Monthly Rent $ 630 $ 965 $ 814 $ 803
Unit Area (SF) 970 1,082 990 1,014
Monthly Rent Per Sq. Ft. $ 0.65 $ 0.89 $ 0.82 $ 0.79
Monthly Rent $ 595 $ 985 $ 635 $ 738
Unit Area (SF) 950 1,111 1,050 1,037
Monthly Rent Per Sq. Ft. $ 0.57 $ 0.89 $ 0.67 $ 0.71
Monthly Rent $ 645 $ 960 $ 803 $ 803
Unit Area (SF) 1,005 1,140 1,107 1,090
Monthly Rent Per Sq. Ft. $ 0.60 $ 0.84 $ 0.74 $ 0.73
Monthly Rent $ 675 $ 1,113 $ 894 $ 894
Unit Area (SF) 1,095 1,280 1,188 1,188
Monthly Rent Per Sq. Ft. $ 0.62 $ 0.87 $ 0.74 $ 0.74
Monthly Rent $ 760 $ 1,450 $ 795 $ 1,002
Unit Area (SF) 1,180 1,450 1,185 1,272
Monthly Rent Per Sq. Ft. $ 0.64 $ 1.00 $ 0.67 $ 0.77
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
- -----------------------------------------------------------------------------
1A10 18 600 $549 $0.92 $ 9,882 $ 118,584
1A15 115 1,100 $657 $0.60 $ 75,555 $ 906,660
2A10 18 1,075 $599 $0.56 $ 10,782 $ 129,384
2A15 69 1,100 $669 $0.61 $ 46,161 $ 553,932
2A20 35 1,300 $829 $0.64 $ 29,015 $ 348,180
3A20 37 1,300 $859 $0.66 $ 31,783 $ 381,396
Total $203,178 $2,438,136
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
THE LANDMARK, RALEIGH, NORTH CAROLINA
SUMMARY OF HISTORICAL INCOME & EXPENSES
FISCAL YEAR 2000 FISCAL YEAR 2001 FISCAL YEAR 2002
---------------------------------------------------------------------------
ACTUAL ACTUAL ACTUAL
---------------------------------------------------------------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT
- -------------------------------------------------------------------------------------------------------
Revenues
Rental Income $2,521,954 $ 8,637 $2,513,070 $ 8,606 $2,341,992 $ 8,021
Vacancy $ 264,004 $ 904 $ 238,570 $ 817 $ 269,033 $ 921
Credit Loss/Concessions $ 88,855 $ 304 $ 115,118 $ 394 $ 39,091 $ 134
Subtotal $ 352,859 $ 1,208 $ 353,688 $ 1,211 $ 308,124 $ 1,055
Laundry Income $ 21,248 $ 73 $ 21,828 $ 75 $ 28,702 $ 98
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 45,312 $ 155 $ 20,441 $ 70 $ 42,125 $ 144
Subtotal Other Income $ 66,560 $ 228 $ 42,269 $ 145 $ 70,827 $ 243
Effective Gross Income $2,235,655 $ 7,656 $2,201,651 $ 7,540 $2,104,695 $ 7,208
Operating Expenses
Taxes $ 142,928 $ 489 $ 68,781 $ 236 $ 210,615 $ 721
Insurance $ 31,056 $ 106 $ 58,014 $ 199 $ 52,105 $ 178
Utilities $ 127,739 $ 437 $ 133,966 $ 459 $ 132,458 $ 454
Repair & Maintenance $ 230,204 $ 788 $ 184,075 $ 630 $ 248,719 $ 852
Cleaning $ 0 $ 0 $ 6,121 $ 21 $ 0 $ 0
Landscaping $ 33,408 $ 114 $ 26,046 $ 89 $ 37,905 $ 130
Security $ 2,400 $ 8 $ 4,813 $ 16 $ 3,613 $ 12
Marketing & Leasing $ 36,645 $ 125 $ 32,802 $ 112 $ 40,199 $ 138
General Administrative $ 282,193 $ 966 $ 289,021 $ 990 $ 281,935 $ 966
Management $ 115,451 $ 395 $ 119,741 $ 410 $ 109,750 $ 376
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Total Operating Expenses $1,002,024 $ 3,432 $ 923,380 $ 3,162 $1,117,299 $ 3,826
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Net Income $1,233,631 $ 4,225 $1,278,271 $ 4,378 $ 987,396 $ 3,381
FISCAL YEAR 2003 ANNUALIZED 2003
-------------------------------------------------
MANAGEMENT BUDGET PROJECTION AAA PROJECTION
------------------------------------------------------------------------------------
TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT %
- ----------------------------------------------------------------------------------------------------------------
Revenues
Rental Income $2,344,003 $ 8,027 $2,276,600 $ 7,797 $2,438,136 $ 8,350 100.0%
Vacancy $ 191,784 $ 657 $ 441,780 $ 1,513 $ 207,242 $ 710 8.5%
Credit Loss/Concessions $ 37,200 $ 127 $ 117,344 $ 402 $ 36,572 $ 125 1.5%
Subtotal $ 228,984 $ 784 $ 559,124 $ 1,915 $ 243,814 $ 835 10.0%
Laundry Income $ 34,476 $ 118 $ 28,484 $ 98 $ 29,200 $ 100 1.2%
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 29,211 $ 100 $ 34,276 $ 117 $ 32,120 $ 110 1.3%
Subtotal Other Income $ 63,687 $ 218 $ 62,760 $ 215 $ 61,320 $ 210 2.5%
Effective Gross Income $2,178,706 $ 7,461 $1,780,236 $ 6,097 $2,255,642 $ 7,725 100.0%
Operating Expenses
Taxes $ 149,856 $ 513 $ 146,936 $ 503 $ 137,240 $ 470 6.1%
Insurance $ 55,489 $ 190 $ 102,852 $ 352 $ 52,560 $ 180 2.3%
Utilities $ 120,432 $ 412 $ 216,928 $ 743 $ 132,860 $ 455 5.9%
Repair & Maintenance $ 191,712 $ 657 $ 191,264 $ 655 $ 205,860 $ 705 9.1%
Cleaning $ 0 $ 0 $ 4,000 $ 14 $ 2,920 $ 10 0.1%
Landscaping $ 63,648 $ 218 $ 38,188 $ 131 $ 37,960 $ 130 1.7%
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Marketing & Leasing $ 38,760 $ 133 $ 65,488 $ 224 $ 39,420 $ 135 1.7%
General Administrative $ 249,307 $ 854 $ 289,952 $ 993 $ 290,540 $ 995 12.9%
Management $ 128,820 $ 441 $ 86,728 $ 297 $ 112,782 $ 386 5.0%
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Total Operating Expenses $ 998,024 $ 3,418 $1,142,336 $ 3,912 $1,012,142 $ 3,466 44.9%
Reserves $ 0 $ 0 $ 0 $ 0 $ 73,000 $ 250 7.2%
Net Income $1,180,682 $ 4,043 $ 637,900 $ 2,185 $1,170,500 $ 4,009 51.9%
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 10% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30
THE LANDMARK, RALEIGH, NORTH 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
THE LANDMARK, RALEIGH, NORTH CAROLINA
SUMMARY OF OVERALL
CAPITALIZATION RATES
- --------------------------------------------------------------------------------
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
I-1 Nov-01 92% $56,454 8.82%
I-2 Nov-01 98% $61,224 9.44%
I-3 Nov-01 95% $59,701 8.35%
I-4 Oct-01 90% $47,138 9.05%
I-5 Nov-00 92% $62,939 8.30%
High 9.44%
Low 8.30%
Average 8.79%
Based on this information, we have concluded the subject's overall
capitalization rate should be 9.50%. 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 11.50%.
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 3.00% 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 $12,000,000. In this instance, the reversion
figure contributes
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
THE LANDMARK, RALEIGH, NORTH CAROLINA
approximately 39% 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
THE LANDMARK, RALEIGH, NORTH CAROLINA
DISCOUNTED CASH FLOW ANALYSIS
THE LANDMARK
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009
FISCAL YEAR 1 2 3 4 5 6
- ------------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $2,438,136 $2,438,136 $2,474,708 $2,524,202 $2,599,928 $2,677,926
Vacancy $ 207,242 $ 207,242 $ 210,350 $ 214,557 $ 220,994 $ 227,624
Credit Loss $ 36,572 $ 36,572 $ 37,121 $ 37,863 $ 38,999 $ 40,169
Concessions $ 48,763 $ 24,381 $ 0 $ 0 $ 0 $ 0
Subtotal $ 292,576 $ 268,195 $ 247,471 $ 252,420 $ 259,993 $ 267,793
Laundry Income $ 29,200 $ 29,200 $ 29,638 $ 30,231 $ 31,138 $ 32,072
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 32,120 $ 32,120 $ 32,602 $ 33,254 $ 34,251 $ 35,279
Subtotal Other Income $ 61,320 $ 61,320 $ 62,240 $ 63,485 $ 65,389 $ 67,351
EFFECTIVE GROSS INCOME $2,206,880 $2,231,261 $2,289,477 $2,335,267 $2,405,325 $2,477,484
OPERATING EXPENSES:
Taxes $ 137,240 $ 141,357 $ 145,598 $ 149,966 $ 154,465 $ 159,099
Insurance $ 52,560 $ 54,137 $ 55,761 $ 57,434 $ 59,157 $ 60,931
Utilities $ 132,860 $ 136,846 $ 140,951 $ 145,180 $ 149,535 $ 154,021
Repair & Maintenance $ 205,860 $ 212,036 $ 218,397 $ 224,949 $ 231,697 $ 238,648
Cleaning $ 2,920 $ 3,008 $ 3,098 $ 3,191 $ 3,286 $ 3,385
Landscaping $ 37,960 $ 39,099 $ 40,272 $ 41,480 $ 42,724 $ 44,006
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 39,420 $ 40,603 $ 41,821 $ 43,075 $ 44,368 $ 45,699
General Administrative $ 290,540 $ 299,256 $ 308,234 $ 317,481 $ 327,005 $ 336,815
Management $ 110,344 $ 111,563 $ 114,474 $ 116,763 $ 120,266 $ 123,874
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
TOTAL OPERATING EXPENSES $1,009,704 $1,037,904 $1,068,605 $1,099,518 $1,132,504 $1,166,479
Reserves $ 73,000 $ 75,190 $ 77,446 $ 79,769 $ 82,162 $ 84,627
NET OPERATING INCOME $1,124,176 $1,118,167 $1,143,426 $1,155,979 $1,190,659 $1,226,378
Operating Expense Ratio (% of EGI) 45.8% 46.5% 46.7% 47.1% 47.1% 47.1%
Operating Expense Per Unit $ 3,458 $ 3,554 $ 3,660 $ 3,765 $ 3,878 $ 3,995
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 7 8 9 10 11
- ----------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $2,758,264 $2,841,012 $2,926,242 $3,014,029 $3,104,450
Vacancy $ 234,452 $ 241,486 $ 248,731 $ 256,193 $ 263,878
Credit Loss $ 41,374 $ 42,615 $ 43,894 $ 45,210 $ 46,567
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
Subtotal $ 275,826 $ 284,101 $ 292,624 $ 301,403 $ 310,445
Laundry Income $ 33,034 $ 34,025 $ 35,046 $ 36,097 $ 37,180
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 36,337 $ 37,427 $ 38,550 $ 39,707 $ 40,898
Subtotal Other Income $ 69,371 $ 71,452 $ 73,596 $ 75,804 $ 78,078
EFFECTIVE GROSS INCOME $2,551,809 $2,628,363 $2,707,214 $2,788,430 $2,872,083
OPERATING EXPENSES:
Taxes $ 163,872 $ 168,788 $ 173,852 $ 179,067 $ 184,439
Insurance $ 62,759 $ 64,642 $ 66,581 $ 68,579 $ 70,636
Utilities $ 158,642 $ 163,401 $ 168,303 $ 173,352 $ 178,553
Repair & Maintenance $ 245,808 $ 253,182 $ 260,777 $ 268,601 $ 276,659
Cleaning $ 3,487 $ 3,591 $ 3,699 $ 3,810 $ 3,924
Landscaping $ 45,326 $ 46,686 $ 48,087 $ 49,529 $ 51,015
Security $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 47,070 $ 48,482 $ 49,936 $ 51,434 $ 52,977
General Administrative $ 346,920 $ 357,328 $ 368,047 $ 379,089 $ 390,461
Management $ 127,590 $ 131,418 $ 135,361 $ 139,422 $ 143,604
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0
TOTAL OPERATING EXPENSES $1,201,473 $1,237,518 $1,274,643 $1,312,882 $1,352,269
Reserves $ 87,166 $ 89,781 $ 92,474 $ 95,248 $ 98,106
NET OPERATING INCOME $1,263,170 $1,301,065 $1,340,097 $1,380,300 $1,421,709
Operating Expense Ratio (% of EGI) 47.1% 47.1% 47.1% 47.1% 47.1%
Operating Expense Per Unit $ 4,115 $ 4,238 $ 4,365 $ 4,496 $ 4,631
Gross Residual Sale Deferred
Price $14,217,086 Maintenance $ 0
Estimated Stabilized NOI $1,170,500 Sales Expense Rate 3.00% Less: Sales Expense $ 426,513 Add: Excess Land $ 0
-----------
Months to Stabilized 1 Discount Rate 11.50% Net Residual Sale Price $13,790,574 Other Adjustments $ 0
-----------
Stabilized Occupancy 91.5% Terminal Cap Rate 10.00% PV of Reversion $ 4,643,374 Value Indicated
Add: NPV of NOI $ 7,340,932 By "DCF" $11,984,306
-----------
PV Total $11,984,306 Rounded $12,000,000
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE
----------------------------------------------------------------
TOTAL VALUE 11.00% 11.25% 11.50% 11.75% 12.00%
- -------------------------------------------------------------------------------------------
9.50% $12,626,626 $12,425,487 $12,228,694 $12,036,138 $11,847,713
9.75% $12,495,538 $12,297,315 $12,103,367 $11,913,586 $11,727,870
10.00% $12,371,004 $12,175,551 $11,984,306 $11,797,162 $11,614,018
TERMINAL CAP RATE 10.25% $12,252,544 $12,059,727 $11,871,053 $11,686,418 $11,505,721
10.50% $12,139,726 $11,949,419 $11,763,193 $11,580,946 $11,402,580
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
THE LANDMARK, RALEIGH, NORTH 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
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
$63,000 (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.
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 9.50% 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
THE LANDMARK, RALEIGH, NORTH CAROLINA
THE LANDMARK
TOTAL PER SQ. FT. PER UNIT %OF EGI
- ---------------------------------------------------------------------------------------------------
REVENUE
Base Rent $ 2,438,136 $ 7.48 $ 8,350
Less: Vacancy & Collection Loss 10.00% $ 243,814 $ 0.75 $ 835
Plus: Other Income
Laundry Income $ 29,200 $ 0.09 $ 100 1.29%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 32,120 $ 0.10 $ 110 1.42%
Subtotal Other Income $ 61,320 $ 0.19 $ 210 2.72%
EFFECTIVE GROSS INCOME $ 2,255,642 $ 6.92 $ 7,725
OPERATING EXPENSES:
Taxes $ 137,240 $ 0.42 $ 470 6.08%
Insurance $ 52,560 $ 0.16 $ 180 2.33%
Utilities $ 132,860 $ 0.41 $ 455 5.89%
Repair & Maintenance $ 205,860 $ 0.63 $ 705 9.13%
Cleaning $ 2,920 $ 0.01 $ 10 0.13%
Landscaping $ 37,960 $ 0.12 $ 130 1.68%
Security $ 0 $ 0.00 $ 0 0.00%
Marketing & Leasing $ 39,420 $ 0.12 $ 135 1.75%
General Administrative $ 290,540 $ 0.89 $ 995 12.88%
Management 5.00% $ 112,782 $ 0.35 $ 386 5.00%
Miscellaneous $ 0 $ 0.00 $ 0 0.00%
TOTAL OPERATING EXPENSES $ 1,012,142 $ 3.10 $ 3,466 44.87%
Reserves $ 73,000 $ 0.22 $ 250 3.24%
NET OPERATING INCOME $ 1,170,500 $ 3.59 $ 4,009 51.89%
"GOING IN" CAPITALIZATION RATE 9.50%
VALUE INDICATION $12,321,056 $37.78 $42,195
PV OF CONCESSIONS ($ 63,000)
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $12,258,056
ROUNDED $12,300,000 $37.71 $42,123
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
THE LANDMARK, RALEIGH, NORTH CAROLINA
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- -------------------------------------------------------------
8.75% $13,314,146 $13,300,000 $45,548 $40.78
9.00% $12,942,559 $12,900,000 $44,178 $39.55
9.25% $12,591,057 $12,600,000 $43,151 $38.63
9.50% $12,258,056 $12,300,000 $42,123 $37.71
9.75% $11,942,131 $11,900,000 $40,753 $36.49
10.00% $11,642,003 $11,600,000 $39,726 $35.57
10.25% $11,356,515 $11,400,000 $39,041 $34.95
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $12,300,000.
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 $12,000,000
Direct Capitalization Method $12,300,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$12,000,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37
THE LANDMARK, RALEIGH, NORTH 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 $12,200,000
Income Approach $12,000,000
Reconciled Value $12,000,000
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
May 13, 2003 the market value of the fee simple estate in the property is:
$12,000,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
THE LANDMARK, RALEIGH, NORTH CAROLINA
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
THE LANDMARK, RALEIGH, NORTH CAROLINA
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
THE LANDMARK, RALEIGH, NORTH CAROLINA
SUBJECT PHOTOGRAPHS
[PROPERTY - SIGN PICTURE] [EXTERIOR - OFFICE PICTURE]
[INTERIOR - OFFICE PICTURE] [INTERIOR - OFFICE PICTURE]
[EXTERIOR - APARTMENT UNIT PICTURE] [EXTERIOR - APARTMENT UNIT PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
THE LANDMARK, RALEIGH, NORTH CAROLINA
SUBJECT PHOTOGRAPHS
[EXTERIOR - APARTMENT UNIT PICTURE] [INTERIOR - TYPICAL UNIT PICTURE]
[INTERIOR - KITCHEN PICTURE] [EXTERIOR - VOLLEYBALL & TENNIS COURTS PICTURE]
[EXTERIOR - PLAYGROUND PICTURE] [EXTERIOR - SWIMMING POOL PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
THE LANDMARK, RALEIGH, NORTH CAROLINA
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
THE LANDMARK, RALEIGH, NORTH CAROLINA
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
WEST MILLBROOK CALIBRE CHASE CRABTREE VALLEY
4001 Jamie Court and 6093 Shadetree Lane 231 Calibre Chase Drive 4601 Baymar Drive
Raleigh, NC Raleigh, NC Raleigh, NC
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
MEREDITH VILLAGE APARTMENTS SEDGEWOOD GREEN
2406 Wycliff Road 3920 Knickerbocker Parkway
Raleigh, NC Raleigh, NC
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
THE LANDMARK, RALEIGH, NORTH CAROLINA
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
----------- ------- -----
Property Name The Landmark Lexington Farms
Management Company AIMCO Trammell Crow Residential
LOCATION:
Address 2412 Landmark Drive 3409 Mill Tree Road
City, State Raleigh, North Carolina Raleigh, NC
County Wake Wake
Proximity to Subject 1.25 miles north of the
subject property
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 326,150 170,440
Year Built 1972 1987
Effective Age 25 16
Building Structure Type Brick & wood/vinyl siding; composition shingle Brick & wood/vinyl siding; composition shingle
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 292 188
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1A10 600 18 $504 1 1 BR / 1 BTH 776 60 $720
2 1A15 1,100 115 $605 1 BR / 1 BTH 954 60 $825
3 2A10 1,075 18 $578 2 BR / 2 BTH 980 68 $875
4 2A15 1,100 69 $624
5 2A20 1,300 35 $799
6 3A20 1,300 37 $822
Average Unit Size (SF) 1,117 907
Unit Breakdown: Efficiency 2-Bedroom Efficiency 0% 2-Bedroom 36%
1-Bedroom 3-Bedroom 1-Bedroom 64% 3-Bedroom 0%
CONDITION: Average
APPEAL: Average
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage X Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
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 Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
X 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 X Laundry Room
Jogging Track Business Office Jogging Track Business Office
X Gym Room X Gym Room
OCCUPANCY: 89% 97%
LEASING DATA:
Available Leasing Terms 6 to 12 6-18 months
Concessions Free prorate and reduced rents of $50 to $100 off N/A
Pet Deposit $250 of which $150 is refundable up to $300 non-refundable
Utilities Paid by Tenant: X Electric Natural Gas X Electric X Natural Gas
Water Trash Water Trash
Confirmation Terry Jones Nancy
Telephone Number 919-787-7377 919-787-9270
NOTES:
Superior
COMPARISON TO SUBJECT:
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
----------- ----- -----
Property Name Princeton Mill Summit Highland
Management Company Clarion Realty Services Summit Management
LOCATION:
Address 3301 Cotton Mill Drive 4300 Furman Hall
City, State Raleigh, NC Raleigh, NC
County Wake Wake
Proximity to Subject 0.80 mile northwest of the subject 1.30 miles northwest of the subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 404,837 169,508
Year Built 1996 1986
Effective Age 7 17
Building Structure Type Wood/vinyl siding; composition shingle Wood/vinyl siding; composition shingle
Parking Type (Gr., Cov., etc.) Open, garage Open
Number of Units 352 172
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1 BR / 1 BTH 750 37 $795 1 1 BR / 1BTH 824 67 $735
1 BR / 1 BTH 785 5 $980 2 1 BR / 1BTH 990 15 $814
1 BR / 1 BTH 825 48 $883 1 BR / 1BTH 1,065 30 $845
2 1 BR / 1 BTH 1,082 4 $965 3 2 BR / 2 BTH 1,111 30 $985
4 2 BR / 2 BTH 1,140 99 $960 4 2BR / 2 BTH 1,139 30 $945
5 2 BR / 2 BTH 1,280 106 $1,113
2 BR / 2 BTH 1,425 4 $1,350
2 BR / 2 BTH 1,480 4 $1,370
2 BR / 2 BTH 1,553 4 $1,280
6 3 BR / 2 BTH 1,450 33 $1,450
3 BR / 2 BTH 1,930 4 $1,755
3 BR / 3 BTH 1,823 4 $1,730
Average Unit Size (SF) 1,150 986
Unit Breakdown: Efficiency 0% 2-Bedroom 62% Efficiency 0% 2-Bedroom 35%
1-Bedroom 27% 3-Bedroom 12% 1-Bedroom 65% 3-Bedroom 0%
CONDITION: Good Average
APPEAL: Good Average
AMENITIES:
Unit Amenities X Attach. Garage X Vaulted Ceiling 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 Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment X Basketball Court X BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court X 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: 92% 98%
LEASING DATA:
Available Leasing Terms 6-13 months 6 to 12 months
Concessions up to $150 off market rent Reduced rents of $150 to $200 off market
Pet Deposit $600 with $200 non-refundable $350
Utilities Paid by Tenant: X Electric X Natural Gas X Electric Natural Gas
Water X Trash Water Trash
Confirmation Leasing Agent Eddie
Telephone Number 919-510-8851 919-783-9377
NOTES:
Superior Similar
COMPARISON TO SUBJECT:
COMPARABLE COMPARABLE
DESCRIPTION R - 4 R - 5
----------- ----- -----
Property Name Meredith Village Palms
Management Company Drucker & Falk LLC Palms Associates
LOCATION:
Address 2453G Wycliff Road 3712 Horton Street
City, State Raleigh, NC Raleigh, NC
County Wake Wake
Proximity to Subject 0.25 mile east of the subject 0.50 mile southeast of the subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 314,655 195,795
Year Built 1968 1967
Effective Age 35 36
Building Structure Type Brick & wood/vinyl siding; composition shingle Brick
Parking Type (Gr., Cov.,etc.) Open Open
Number of Units 297 212
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1 BR / 1BTH 925 65 $595 1 1 BR / 1BTH 850 104 $610
3 2 BR / 1 BTH 1,050 8 $595 2 1 BR / 1BTH - Den 970 4 $630
4 2 BR / 1.5 BTH 1,075 142 $645 3 2 BR / 1 BTH 950 55 $635
5 2 BR / 2 BTH 1,095 41 $675 4 2 BR / 1 BTH 1,005 21 $660
6 3 BR / 2 BTH 1,185 41 $795 3 BR / 1.5 BTH 1,060 24 $750
6 3 BR / 1.5 BTH - Den 1,180 4 $760
Average Unit Size (SF) 1,059 924
Unit Breakdown: Efficiency 0% 2-Bedroom 64% Efficiency 0% 2-Bedroom 36%
1-Bedroom 22% 3-Bedroom 14% 1-Bedroom 51% 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 Fireplace
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 Meeting Hall Sand Volley Ball Meeting Hall
Tennis Court Secured Parking Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track Business Office Jogging Track Business Office
X Gym Room Gym Room
OCCUPANCY: 86% 82%
LEASING DATA:
Available Leasing Terms 6 through 12 month 6 to 12 months
Concessions Various by bedroom all include $300 off Reduced rents from $52 to $126 per month per
first month unit
Pet Deposit up to $350 with $150 refundable $200 with $100 non-refundable
Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas
Water Trash Water Trash
Confirmation Mary Ellie
Telephone Number 919-787-2800 919-782-2158
NOTES:
Similar Similar
COMPARISON TO SUBJECT:
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
THE LANDMARK, RALEIGH, NORTH CAROLINA
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
LEXINGTON FARMS PRINCETON MILL SUMMIT HIGHLAND
3409 Mill Tree Road 3301 Cotton Mill Drive 4300 Furman Hall
Raleigh, NC Raleigh, NC Raleigh, NC
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4 COMPARABLE R-5
MEREDITH VILLAGE PALMS
2453G Wycliff Road 3712 Horton Street
Raleigh, NC Raleigh, NC
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
THE LANDMARK, RALEIGH, NORTH CAROLINA
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
THE LANDMARK, RALEIGH, NORTH 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
THE LANDMARK, RALEIGH, NORTH 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
THE LANDMARK, RALEIGH, NORTH 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
THE LANDMARK, RALEIGH, NORTH 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. Jimmy Pat James, MAI
and J. Chad Walker 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
--------------------------
Frank Fehribach, MAI
Managing Principal, Real Estate Group
North Carolina Temporary Practice Permit
#2578
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
THE LANDMARK, RALEIGH, NORTH CAROLINA
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
THE LANDMARK, RALEIGH, NORTH 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
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
THE LANDMARK, RALEIGH, NORTH CAROLINA
STATE CERTIFICATIONS State of Arizona, 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
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.
THE LANDMARK, RALEIGH, NORTH CAROLINA
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
THE LANDMARK, RALEIGH, NORTH 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.