VILLAGE GREEN APARTMENT HOMES 112 ESSEX AVENUE ALTAMONTE SPRINGS, FLORIDA MARKET VALUE - FEE SIMPLE ESTATE AS OF MAY 28, 2003 PREPARED FOR: APARTMENT INVESTMENT AND MANAGEMENT COMPANY (AIMCO) C/O LINER YANKELEVITZ SUNSHINE & REGENSTREIF LLP & LIEFF CABRASER HEIMANN & BERNSTEIN ON BEHALF OF NUANES, ET. AL. [AMERICAN APPRAISAL ASSOCIATES(R) LOGO] [AMERICAN APPRAISAL ASSOCIATES(R) LOGO] [AMERICAN APPRAISAL ASSOCIATES(R) LETTERHEAD] JULY 9, 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: VILLAGE GREEN APARTMENT HOMES 112 ESSEX AVENUE ALTAMONTE SPRINGS, SEMINOLE COUNTY, FLORIDA 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 164 units with a total of 128,180 square feet of rentable area. The improvements were built in 1970. The improvements are situated on 7.254315886 acres. Overall, the improvements are in average condition. As of the date of this appraisal, the subject property is 99% occupied. It is our understanding the appraisal will be used by the clients to assist the San Mateo Superior Court in the settlement of litigation between the above mentioned clients. The appraisal is intended to conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") as promulgated by the Appraisal Standards Board of the Appraisal Foundation and the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. The appraisal is presented in a summary report, and the Departure Provision of USPAP has not been invoked in this appraisal. It is entirely inappropriate to use this value conclusion or the report for any purpose other than the one stated. AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 2 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA The opinions expressed in this appraisal cover letter can only be completely understood by reading the narrative report, addenda, and other data, which is attached. The appraisal is subject to the attached general assumptions and limiting conditions and general service conditions. As a result of our investigation, it is our opinion that the fee simple market value of the subject, effective May 28, 2003 is: ($6,000,000) Respectfully submitted, AMERICAN APPRAISAL ASSOCIATES, INC. -s- Alice MacQueen ----------------------------------------------- July 9, 2003 Alice MacQueen #053272 Vice President, Real Estate Group Florida Certified General Real Estate Appraiser #RZ0002202 Assisted By: Michael L. Kersten AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA EXECUTIVE SUMMARY PART ONE - PROPERTY DESCRIPTION PROPERTY NAME: Village Green Apartment Homes LOCATION: 112 Essex Avenue Altamonte Springs, Florida INTENDED USE OF ASSIGNMENT: Court Settlement PURPOSE OF APPRAISAL: "As Is" Market Value of the Fee Simple Estate INTEREST APPRAISED: Fee simple estate DATE OF VALUE: May 28, 2003 DATE OF REPORT: July 9, 2003 PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS: SITE: Size: 7.25431588613407 acres, or 315,998 square feet Assessor Parcel No.: 12-21-29-5BE-0000-6110 Floodplain: Community Panel No. 12117C0120E (April 17, 1995) Flood Zone X, an area outside the floodplain. Zoning: MOR-2 (Limited Residential and Office District) BUILDING: No. of Units: 164 Units Total NRA: 128,180 Square Feet Average Unit Size: 782 Square Feet Apartment Density: 22.6 units per acre Year Built: 1970 UNIT MIX AND MARKET RENT: GROSS RENTAL INCOME PROJECTION Market Rent Square -------------------------- Monthly Annual Unit Type Feet Per Unit Per SF Income Income - ----------------------------------------------------------------------------------------------------------------- 1Br/1Ba 590 $575 $0.97 $ 32,200 $ 386,400 1Br/1Ba 740 $570 $0.77 $ 36,480 $ 437,760 2Br/1Ba 950 $650 $0.68 $ 10,400 $ 124,800 2Br/2Ba 1,010 $700 $0.69 $ 5,600 $ 67,200 3Br/2Ba 1,225 $800 $0.65 $ 16,000 $ 192,000 Total $100,680 $1,208,160 OCCUPANCY: 99% ECONOMIC LIFE: 45 Years EFFECTIVE AGE: 20 Years REMAINING ECONOMIC LIFE: 25 Years AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA SUBJECT PHOTOGRAPHS AND LOCATION MAP: SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] EXTERIOR - COMMUNITY CENTER & OFFICE EXTERIOR - VIEW FROM ESSEX AVENUE AREA MAP [MAP] AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA NEIGHBORHOOD MAP [MAP] HIGHEST AND BEST USE: As Vacant: Hold for future multi-family development As Improved: Continuation as its current use METHOD OF VALUATION: In this instance, the Sales Comparison and Income Approaches to value were utilized. AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 7 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA PART TWO - ECONOMIC INDICATORS INCOME CAPITALIZATION APPROACH DIRECT CAPITALIZATION Amount $/Unit - --------------------- ------ ------ Potential Rental Income $1,208,160 $ 7,367 Effective Gross Income $1,193,124 $ 7,275 Operating Expenses $ 595,116 $ 3,629 49.9% of EGI Net Operating Income: $ 565,208 $ 3,446 Capitalization Rate 9.50% DIRECT CAPITALIZATION VALUE $5,900,000 * $35,976 / UNIT DISCOUNTED CASH FLOW ANALYSIS: Holding Period 10 years 2002 Economic Vacancy 11% Stabilized Vacancy & Collection Loss: 10% Lease-up / Stabilization Period N/A Terminal Capitalization Rate 10.50% Discount Rate 12.00% Selling Costs 2.00% Growth Rates: Income 3.00% Expenses: 3.00% DISCOUNTED CASH FLOW VALUE $6,000,000 * $36,585 / UNIT RECONCILED INCOME CAPITALIZATION VALUE $5,900,000 $35,976 / UNIT SALES COMPARISON APPROACH PRICE PER UNIT: Range of Sales $/Unit (Unadjusted) $34,797 to $62,500 Range of Sales $/Unit (Adjusted) $36,219 to $37,500 VALUE INDICATION - PRICE PER UNIT $6,000,000 * $36,585 / UNIT EGIM ANALYSIS Range of EGIMs from Improved Sales 5.27 to 7.05 Selected EGIM for Subject 5.00 Subject's Projected EGI $1,193,124 EGIM ANALYSIS CONCLUSION $5,900,000 * $35,976 / UNIT NOI PER UNIT ANALYSIS CONCLUSION $5,800,000 * $35,366 / UNIT RECONCILED SALES COMPARISON VALUE $6,000,000 $36,585 / 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA PART THREE - SUMMARY OF VALUE CONCLUSIONS SALES COMPARISON APPROACH: Price Per Unit $6,000,000 NOI Per Unit $5,800,000 EGIM Multiplier $5,900,000 INDICATED VALUE BY SALES COMPARISON $6,000,000 $36,585 / UNIT INCOME APPROACH: Direct Capitalization Method: $5,900,000 Discounted Cash Flow Method: $6,000,000 INDICATED VALUE BY THE INCOME APPROACH $5,900,000 $35,976 / UNIT RECONCILED OVERALL VALUE CONCLUSION: $6,000,000 $36,585 / UNIT AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA INTRODUCTION IDENTIFICATION OF THE SUBJECT The subject property is located at 112 Essex Avenue, Altamonte Springs, Seminole County, Florida. Altamonte Springs identifies it as 12-21-29-5BE-0000-6110. SCOPE OF THE ASSIGNMENT The property, neighborhood, and comparables were inspected by Michael L. Kersten on May 28, 2003. Alice MacQueen has not made a personal inspection of the subject property. Michael L. Kersten assisted Alice MacQueen with the research, valuation analysis and writing the report. Alice MacQueen reviewed the report and concurs with the value. Alice MacQueen and Michael L. Kersten have extensive experience in appraising similar properties and meet the USPAP competency provision. The scope of this investigation comprises the inspection of the property and the collection, verification, and analysis of general and specific data pertinent to the subject property. We have researched current improved sales and leases of similar properties, analyzing them as to their comparability, and adjusting them accordingly. We completed the Sales Comparison and Income Capitalization Approaches to value. From these approaches to value, a concluded overall value was made. DATE OF VALUE AND REPORT This appraisal was made to express the opinion of value as of May 28, 2003. The date of the report is July 9, 2003. PURPOSE AND USE OF APPRAISAL The purpose of the appraisal is to estimate the market value of the fee simple interest in the subject property. It is understood that the appraisal is intended to assist the clients in litigation settlement proceedings. The appraisal was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. PROPERTY RIGHTS APPRAISED We have appraised the Fee Simple Estate in the subject property (as applied in the Sales & Income Approaches), subject to the existing short-term leases. A Fee Simple Estate is AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 CCP 3. 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 Altamonte Springs, Florida. Overall, the neighborhood is characterized as a suburban setting with the predominant land use being residential. The subject's neighborhood is generally defined by the following boundaries. NEIGHBORHOOD BOUNDARIES East - Maitland Avenue West - Interstate Highway 4 South - Maitland Boulevard North - Altamonte Drive MAJOR EMPLOYERS Major employers in the subject's area include Walt Disney Company (55,000), Florida Hospital (12,808), Universal Orlando (12,000), Orlando Regional Healthcare (12,000), Lockheed Martin (5,053), Central Florida Investments (5,000), University of Central Florida (4,808), Darden Restaurants (4,675), Sprint (4,295), and SeaWorld (4,000). 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA NEIGHBORHOOD DEMOGRAPHICS AREA ---------------------------------------- CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA - --------------------------------------------------------------------------------------- POPULATION TRENDS Current Population 14,679 87,220 224,819 1,721,904 5-Year Population 15,237 89,999 232,460 1,921,950 % Change CY-5Y 3.8% 3.2% 3.4% 11.6% Annual Change CY-5Y 0.8% 0.6% 0.7% 2.3% HOUSEHOLDS Current Households 7,323 37,562 92,644 655,258 5-Year Projected Households 7,757 39,609 97,558 731,362 % Change CY - 5Y 5.9% 5.4% 5.3% 11.6% Annual Change CY-5Y 1.2% 1.1% 1.1% 2.3% INCOME TRENDS Median Household Income $38,931 $44,112 $ 46,291 $ 40,114 Per Capita Income $24,439 $26,204 $ 26,038 $ 21,799 Average Household Income $51,807 $61,347 $ 63,724 $ 57,283 Source: Demographics Now The subject neighborhood's population is expected to show increases below that of the region. The immediate market offers inferior income levels as compared to the broader market. The following table illustrates the housing statistics in the subject's immediate area, as well as the MSA region. HOUSING TRENDS AREA ---------------------------------------- CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA - --------------------------------------------------------------------------------------- HOUSING TRENDS % of Households Renting 47.42% 40.50% 35.02% 30.55% 5-Year Projected % Renting 47.30% 41.42% 35.20% 30.11% % of Households Owning 43.66% 51.44% 57.52% 60.90% 5-Year Projected % Owning 44.20% 50.86% 57.58% 61.87% Source: Demographics Now AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA SURROUNDING IMPROVEMENTS The following uses surround the subject property: North - Gateway Country, Picadilly Cafeteria,and a small retail center South - Orange Drive and Altamonte Bay Club apartments. East - Apartment complex West - Essex Avenue and Escondido Residential Condominiums CONCLUSIONS The subject is well located within the city of Altamonte Springs. 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA MARKET ANALYSIS The subject property is located in the city of Altamonte Springs in Seminole County. The overall pace of development in the subject's market is more or less stable. New construction in the subject neighborhood has been limited to several smaller retail projects. None of the apartment complexes in the area appear to be newer than 15 years old. With the exception of several 4- to 8-unit condominium complexes, there appears to have been no recent multifamily residential construction occurring in the subject neighborhood. The following table illustrates historical vacancy rates for the subject's market. HISTORICAL VACANCY RATE Period Region Submarket - ----------------------------------------------------- 1Q03 9.3% 8.8% 4Q02 8.9% 6.3% 2002 7.6% 5.9% 3Q02 N/A 5.7% 2Q02 N/A 6.4% 1Q02 N/A 7.3% 4Q01 N/A 5.5% 3Q01 N/A 4.3% 2Q01 N/A 3.8% Source: REIS Occupancy trends in the subject's market are decreasing. Historically speaking, the subject's submarket has outperformed the overall market. As illustrated above, vacancy rates for region and submarket are increasing. Market rents in the subject's market have been following a stable trend. The following table illustrates historical rental rates for the subject's market. HISTORICAL AVERAGE RENT Period Region % Change Submarket % Change - --------------------------------------------------------------- 2Q01 N/A - $678 - 3Q01 N/A N/A $680 0.3% 4Q01 N/A N/A $656 -3.5% 1Q02 N/A N/A $657 0.2% 2Q02 N/A N/A $646 -1.7% 3Q02 N/A N/A $641 -0.8% 4Q02 N/A N/A $639 -0.3% 1Q03 N/A N/A $646 1.1% AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA The following table illustrates a summary of the subject's competitive set. COMPETITIVE PROPERTIES No. Property Name Units Ocpy. Year Built Proximity to subject - --------------------------------------------------------------------------------------------------------------------- R-1 LakePointe Apartments 502 88% 1986 I block south of the subject R-2 Altamonte Bay Club 224 93% 1987 Across Orange Drive from the subject R-3 Tiffany Oaks 288 96% 1985 0.5 mile west of the subject R-4 Lakeside North 360 89% 1987 0.5 mile north of the subject R-5 Willow Park on Lake Adelaide 185 96% 1973 0.5 mile northeast of the subject Subject Village Green Apartment Homes 164 99% 1970 Many complexes are offering concessions on one-bedroom apartment units. There appears to be a dearth of three-bedroom units in the market area. AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA PROPERTY DESCRIPTION SITE ANALYSIS Site Area 7.25431588613407 acres, or 315,998 square feet Shape Irregular Topography Level Utilities All necessary utilities are available to the site. Soil Conditions Stable Easements Affecting Site None other than typical utility easements Overall Site Appeal Good Flood Zone: Community Panel 12117C0120E, dated April 17, 1995 Flood Zone Zone X Zoning MOR-2, the subject improvements represent a legal conforming use of the site. REAL ESTATE TAXES ASSESSED VALUE - 2003 ------------------------------------ TAX RATE / PROPERTY PARCEL NUMBER LAND BUILDING TOTAL MILL RATE TAXES - --------------------------------------------------------------------------------------------- 12-21-29-5BE-0000-6110 NA $4,118,790 $4,118,790 0.01962 $80,809 IMPROVEMENT ANALYSIS Year Built 1970 Number of Units 164 Net Rentable Area 128,180 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, gym room, car wash, barbeque equipment, laundry room, clubhouse, playground, 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA Unit Mix: Unit Area Unit Type Number of Units (Sq. Ft.) - --------------------------------------------------------- 1Br/1Ba 56 590 1Br/1Ba 64 740 2Br/1Ba 16 950 2Br/2Ba 8 1,010 3Br/2Ba 20 1,225 Overall Condition Average Effective Age 20 years Economic Life 45 years Remaining Economic Life 25 years Deferred Maintenance None HIGHEST AND BEST USE ANALYSIS In accordance with the definition of highest and best use, an analysis of the site relating to its legal uses, physical possibilities, and financial feasibility is appropriate. The highest and best use as vacant is to hold for future multi-family development. The subject improvements were constructed in 1970 and consist of a 164-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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA SUMMARY OF COMPARABLE SALES -IMPROVED COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 - ------------------------------------------------------------------------------------------------------------------------------ Property Name Village Green Apartment Courtyard at Winter Park La Aloma Apartments Homes LOCATION: Address 112 Essex Avenue 1695 Lee Road 3040 Aloma Avenue City, State Altamonte Springs, Florida Winter Park, Florida Winter Park, Florida County Seminole Orange Orange PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 128,180 143,360 176,800 Year Built 1970 1966 1967 Number of Units 164 160 164 Unit Mix: Type Total Type Total Type Total 1Br/1Ba 56 1Br/1Ba 40 1Br/1Ba N/A 1Br/1Ba 64 2Br/2Ba 80 2Br/2Ba N/A 2Br/1Ba 16 3Br/2Ba 40 3Br/2Ba N/A 2Br/2Ba 8 3Br/2Ba 20 Average Unit Size (SF) 782 896 1,078 Land Area (Acre) 7.2543 9.5528 9.1000 Density (Units/Acre) 22.6 16.7 18.0 Parking Ratio (Spaces/Unit) 1.68 1.33 1.77 Parking Type (Gr., Cov., etc.) Garage, Open Covered Open Open CONDITION: Good Average Average APPEAL: Average Average Fair AMENITIES: Pool/Spa Yes/No Yes/No Yes/No Gym Room Yes Yes Yes Laundry Room Yes Yes No Secured Parking No No No Sport Courts No No Yes Washer/Dryer Connection Yes No No OCCUPANCY: 99% 90% 85% TRANSACTION DATA: Sale Date May, 2001 September, 2002 Sale Price ($) $6,100,000 $6,750,000 Grantor Miles-Courtyard-WP, LLC Veard-Winter Park, Ltd. Grantee PRG/Winter Park, LP Florida Investment Properties, LLC Sale Documentation Book 6258, Page 4812 Book 6629, Page 8177 Verification Comps, Inc. Comps, Inc. Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $ 1,286,400 $8,040 $8.97 $1,385,280 $8,447 $7.84 Vacancy/Credit Loss $ 128,640 $ 804 $0.90 $ 207,792 $1,267 $1.18 Effective Gross Income $ 1,157,760 $7,236 $8.08 $1,177,488 $7,180 $6.66 Operating Expenses $ 500,000 $3,125 $3.49 $ 533,600 $3,254 $3.02 Net Operating Income $ 657,760 $4,111 $4.59 $ 643,888 $3,926 $3.64 NOTES: This project is now Since, the sale, occupancy known as Legacy of has risen to 96%. Winter Park. PRICE PER UNIT $38,125 $41,159 PRICE PER SQUARE FOOT $ 42.55 $ 38.18 EXPENSE RATIO 43.2% 45.3% EGIM 5.27 5.73 OVERALL CAP RATE 10.78% 9.54% Cap Rate Based on Pro Forma or Actual Income? ACTUAL ACTUAL COMPARABLE COMPARABLE COMPARABLE DESCRIPTION I - 3 I - 4 I - 5 - ------------------------------------------------------------------------------------------------------------------------------ Property Name Sedgefield Apartments Kingston Village The Ashley of Spring Valley LOCATION: Address 110 Sedgefield Circle 940 Douglas Avenue 693 South Wymore Road City, State Winter Park, Florida Altamonte Springs, FL Altamonte Springs, FL County Seminole Seminole Seminole PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 93,800 129,468 280,000 Year Built 1973 1982 1974 Number of Units 111 120 260 Unit Mix: Type Total Type Total Type Total Efficiency 21 1Br/1Ba 36 1Br/1Ba N/A 1 Bedroom 10 2Br/2Ba 72 2Br/2Ba N/A 2 Bedroom 75 2Br/2Ba Twn 12 3Br/2Ba N/A 3 Bedroom 5 Average Unit Size (SF) 845 1,079 1,077 Land Area (Acre) 8.7000 15.0000 15.8713 Density (Units/Acre) 12.8 8.0 16.4 Parking Ratio (Spaces/Unit) 1.98 2.00 4.80 Parking Type (Gr., Cov., etc.) Open Garage, Open Open CONDITION: Average Very Good Good APPEAL: Average Good Good AMENITIES: Pool/Spa Yes/No Yes/Yes Yes/Yes Gym Room No Yes Yes Laundry Room Yes Yes No Secured Parking No Yes Yes Sport Courts No Yes Yes Washer/Dryer Connection No Yes Yes OCCUPANCY: 90% 90% 92% TRANSACTION DATA: Sa le Date November, 2002 October, 2001 August, 2001 Sale Price ($) $3,862,500 $7,500,000 $11,180,000 Grantor Sedgefield Associates, Ltd. Archstone Communities Grantee S&L Enterprises, LLC Kingston Village, LLC Altamonte Ashley, LLC Sale Documentation Book 4611, Page 1975 Book 4198, Page 0924 Book 4160, Page 0027 Verification Comps, Inc. Comps, Inc. & Seminole Seminole County Prop. Telephone Number County Property Appr Tax Appraiser's Off ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $806,460 $7,265 $8.60 $1,181,520 $9,846 $9.13 $2,100,000 $8,077 $7.50 Vacancy/Credit Loss $ 80,646 $ 727 $0.86 $ 118,152 $ 985 $0.91 $ 105,000 $ 404 $0.38 Effective Gross Income $725,814 $6,539 $7.74 $1,063,368 $8,861 $8.21 $1,995,000 $7,673 $7.13 Operating Expenses $355,200 $3,200 $3.79 $ 360,000 $3,000 $2.78 $ 900,000 $3,462 $3.21 Net Operating Income $370,614 $3,339 $3.95 $ 703,368 $5,861 $5.43 $1,095,000 $4,212 $3.91 NOTES: This projects comprises None None 12 one-story buildings. PRICE PER UNIT $34,797 $62,500 $43,000 PRICE PER SQUARE FOOT $ 41.18 $ 57.93 $ 39.93 EXPENSE RATIO 48.9% 33.9% 45.1% EGIM 5.32 7.05 5.60 OVERALL CAP RATE 9.60% 9.38% 9.79% Cap Rate based on Pro Forma or Actual Income? ACTUAL ACTUAL PRO FORMA AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA IMPROVED SALES MAP [MAP] IMPROVED SALES ANALYSIS The improved sales indicate a sales price range from $34,797 to $62,500 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 $36,219 to $37,500 per unit with a mean or average adjusted price of $36,770 per unit. The median adjusted price is $36,550 per unit. Based on the following analysis, we have concluded to a value of $37,000 per unit, which results in an "as is" value of $6,000,000 (rounded after necessary adjustment, if any). AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA SALES ADJUSTMENT GRID COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 - ----------------------------------------------------------------------------------------------------------------------------- Property Name Village Green Apartment Courtyard at Winter Park La Aloma Apartments Homes Address 112 Essex Avenue 1695 Lee Road 3040 Aloma Avenue City Altamonte Springs, Florida Winter Park, Florida Winter Park, Florida Sale Date May, 2001 September, 2002 Sale Price ($) $6,100,000 $6,750,000 Net Rentable Area (SF) 128,180 143,360 176,800 Number of Units 164 160 164 Price Per Unit $38,125 $41,159 Year Built 1970 1966 1967 Land Area (Acre) 7.2543 9.5528 9.1000 VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Date of Sale (Time) 05-2001 0% 09-2002 0% VALUE AFTER TRANS. ADJUST. ($/UNIT) $38,125 $41,159 Location Comparable 0% Comparable 0% Number of Units 164 160 0% 164 0% Quality / Appeal Good Superior -5% Superior -5% Age / Condition 1970 1966 / Average 0% 1967 / Average 0% Occupancy at Sale 99% 90% 0% 85% 0% Amenities Good Comparable 0% Comparable 0% Average Unit Size (SF) 782 896 0% 1,078 -5% PHYSICAL ADJUSTMENT -5% -10% FINAL ADJUSTED VALUE ($/UNIT) $36,219 $37,043 COMPARABLE COMPARABLE COMPARABLE DESCRIPTION I - 3 I - 4 I - 5 - ----------------------------------------------------------------------------------------------------------------------------- Property Name Sedgefield Apartments Kingston Village The Ashley of Spring Valley Address 110 Sedgefield Circle 940 Douglas Avenue 693 South Wymore Road City Winter Park, Florida Altamonte Springs, FL Altamonte Springs, FL Sale Date November, 2002 October, 2001 August, 2001 Sale Price ($) $3,862,500 $7,500,000 $11,180,000 Net Rentable Area (SF) 93,800 129,468 280,000 Number of Units 111 120 260 Price Per Unit $34,797 $62,500 $43,000 Year Built 1973 1982 1974 Land Area (Acre) 8.7000 15.0000 15.8713 VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0% Date of Sale (Time) 11-2002 0% 10-2001 0% 08-2001 0% VALUE AFTER TRANS. ADJUST. ($/UNIT) $34,797 $62,500 $43,000 Location Comparable 0% Comparable 0% Comparable 0% Number of Units 111 -5% 120 -5% 260 5% Quality / Appeal Comparable 0% Superior -5% Superior -5% Age / Condition 1973 / Average 10% 1982 / Very Good -15% 1974 / Good 0% Occupancy at Sale 90% 0% 90% 0% 92% 0% Amenities Comparable 0% Superior -10% Superior -10% Average Unit Size (SF) 845 0% 1,079 -5% 1,077 -5% PHYSICAL ADJUSTMENT 5% -40% -15% FINAL ADJUSTED VALUE ($/UNIT) $36,537 $37,500 $36,550 SUMMARY VALUE RANGE (PER UNIT) $36,219 TO $ 37,500 MEAN (PER UNIT) $36,770 MEDIAN (PER UNIT) $36,550 VALUE CONCLUSION (PER UNIT) $37,000 VALUE OF IMPROVEMENT & MAIN SITE $6,068,000 PV OF CONCESSIONS -$ 64,000 VALUE INDICATED BY SALES COMPARISON APPROACH $6,004,000 ROUNDED $6,000,000 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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-1 160 $ 6,100,000 10.78% $ 657,760 $565,208 0.838 $31,961 $ 38,125 $ 4,111 $ 3,446 I-2 164 $ 6,750,000 9.54% $ 643,888 $565,208 0.878 $36,129 $ 41,159 $ 3,926 $ 3,446 I-3 111 $ 3,862,500 9.60% $ 370,614 $565,208 1.032 $35,918 $ 34,797 $ 3,339 $ 3,446 I-4 120 $ 7,500,000 9.38% $ 703,368 $565,208 0.588 $36,749 $ 62,500 $ 5,861 $ 3,446 I-5 260 $11,180,000 9.79% $1,095,000 $565,208 0.818 $35,188 $ 43,000 $ 4,212 $ 3,446 PRICE/UNIT Low High Average Median $31,961 $36,749 $35,189 $35,918 VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT Estimated Price Per Unit $ 36,000 ----------- Number of Units 164 Value $5,904,000 PV of Concessions -$ 64,000 ----------- Value Based on NOI Analysis $5,840,000 Rounded $5,800,000 The adjusted sales indicate a range of value between $31,961 and $36,749 per unit, with an average of $35,189 per unit. Based on the subject's competitive position within the improved sales, a value of $36,000 per unit is estimated. This indicates an "as is" market value of $5,800,000 (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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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-1 160 $ 6,100,000 $1,157,760 $500,000 43.19% 5.27 $ 38,125 I-2 164 $ 6,750,000 $1,177,488 $533,600 45.32% 5.73 $ 41,159 I-3 111 $ 3,862,500 $ 725,814 $355,200 48.94% 5.32 49.88% $ 34,797 I-4 120 $ 7,500,000 $1,063,368 $360,000 33.85% 7.05 $ 62,500 I-5 260 $11,180,000 $1,995,000 $900,000 45.11% 5.60 $ 43,000 EGIM Low High Average Median - ------------------------------ 5.27 7.05 5.80 5.60 VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES Estimate EGIM 5.00 Subject EGI $1,193,124 Value $5,965,620 PV of Concessions -$ 64,000 ----------- Value Based on EGIM Analysis $5,901,620 Rounded $5,900,000 Value Per Unit $ 35,976 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 49.88% before reserves. The comparable sales indicate a range of expense ratios from 33.85% to 48.94%, while their EGIMs range from 5.27 to 7.05. Overall, we conclude to an EGIM of 5.00, which results in an "as is" value estimate in the EGIM Analysis of $5,900,000. 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 $6,000,000. Price Per Unit $6,000,000 NOI Per Unit $5,800,000 EGIM Analysis $5,900,000 Sales Comparison Conclusion $6,000,000 AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA INCOME CAPITALIZATION APPROACH The income capitalization approach is based on the premise that value is created by the expectation of future benefits. We estimated the present value of those benefits to derive an indication of the amount that a prudent, informed purchaser-investor would pay for the right to receive them as of the date of value. This approach requires an estimate of the NOI of a property. The estimated NOI is then converted to a value indication by use of either the direct capitalization or the discounted cash flow analysis (yield capitalization). Direct capitalization uses a single year's stabilized NOI as a basis for a value indication by dividing the income by a capitalization rate. The rate chosen accounts for a recapture of the investment by the investor and should reflect all factors that influence the value of the property, such as tenant quality, property condition, neighborhood change, market trends, interest rates, and inflation. The rate may be extracted from local market transactions or, when transaction evidence is lacking, obtained from trade sources. A discounted cash flow analysis focuses on the operating cash flows expected from the property and the proceeds of a hypothetical sale at the end of a holding period (the reversion). The cash flows and reversion are discounted to their present values using a market-derived discount rate and are added together to obtain a value indication. Because benefits to be received in the future are worth less than the same benefits received in the present, this method weights income in the early years more heavily than the income and the sale proceeds to be received later. The strength of the discounted cash flow method is its ability to recognize variations in projected net income, such as those caused by inflation, stepped leases, neighborhood change, or tenant turnover. Its weakness is that it requires many judgments regarding the actions of likely buyers and sellers of the property in the future. In some situations, both methods yield a similar result. The discounted cash flow method is typically more appropriate for the analysis of investment properties with multiple or long-term leases, particularly leases with cancellation clauses or renewal options. It is especially useful for multi-tenant properties in volatile markets. The direct capitalization AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 27 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA method is normally more appropriate for properties with relatively stable operating histories and expectations. A pro forma analysis for the first year of the investment is made to estimate a reasonable potential net operating income for the Subject Property. Such an analysis entails an estimate of the gross income the property should command in the marketplace. From this total gross income must be deducted an allowance for vacancy/collection loss and operating expenses as dictated by general market conditions and the overall character of the subject's tenancy and leased income to arrive at a projected estimate of net operating income. Conversion of the net operating income to an indication of value is accomplished by the process of capitalization, as derived primarily from market data. MARKET RENT ANALYSIS In order to determine a market rental rate for the subject, a survey of competing apartment communities was performed. This survey was displayed previously in the market analysis section of the report. Detailed information pertaining to each of the comparable rental communities, along with photographs, is presented in the Addenda of this report. The following charts display the subject's current asking and actual rent rates as well as a comparison with the previous referenced comparable rental properties. SUMMARY OF ACTUAL AVERAGE RENTS Average Unit Area ------------------- Unit Type (Sq. Ft.) Per Unit Per SF %Occupied - ---------------------------------------------------------------- 1Br/1Ba 590 $528 $0.89 100.0% 1Br/1Ba 740 $536 $0.72 96.4% 2Br/1Ba 950 $603 $0.63 100.0% 2Br/2Ba 1010 $658 $0.65 100.0% 3Br/2Ba 1225 $776 $0.63 100.0% AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA RENT ANALYSIS COMPARABLE RENTS ----------------------------------------------------- R-1 R-2 R-3 R-4 R-5 ----------------------------------------------------- Willow Park LakePointe Altamonte Tiffany Lakeside on Lake Apartments Bay Club Oaks North Adelaide ----------------------------------------------------- COMPARISON TO SUBJECT SUBJECT SUBJECT ----------------------------------------------------- SUBJECT UNIT ACTUAL ASKING Slightly Slightly DESCRIPTION TYPE RENT RENT Superior Superior Superior Superior Similar - ------------------------------------------------------------------------------------------------------------------ Monthly Rent 1Br/1Ba $ 528 $ 559 $ 630 $ 589 $ 585 $ 489 Unit Area (SF) 590 590 650 608 570 478 Monthly Rent Per Sq. Ft. $ 0.89 $ 0.95 $ 0.97 $ 0.97 $ 1.03 $ 1.02 Monthly Rent 1Br/1Ba $ 536 $ 569 $ 660 $ 650 $ 667 $ 580 $ 589 Unit Area (SF) 740 740 750 891 816 760 708 Monthly Rent Per Sq. Ft. $ 0.72 $ 0.77 $ 0.88 $ 0.73 $ 0.82 $ 0.76 $ 0.83 Monthly Rent 2Br/1Ba $ 603 $ 649 $ 755 $ 705 $ 669 Unit Area (SF) 950 950 900 980 900 Monthly Rent Per Sq. Ft. $ 0.63 $ 0.68 $ 0.84 $ 0.72 $ 0.74 Monthly Rent 2Br/2Ba $ 658 $ 709 $ 820 $ 775 $ 775 $ 739 Unit Area (SF) 1,010 1,010 1,000 1,016 1,046 1,035 Monthly Rent Per Sq. Ft. $ 0.65 $ 0.70 $ 0.82 $ 0.76 $ 0.74 $ 0.71 Monthly Rent 3Br/2Ba $ 776 $ 799 $ 825 $ 799 Unit Area (SF) 1,225 1,225 1,080 1,178 Monthly Rent Per Sq. Ft. $ 0.63 $ 0.65 $ 0.76 $ 0.68 DESCRIPTION MIN MAX MEDIAN AVERAGE - ----------------------------------------------------------------- Monthly Rent $ 489 $ 630 $ 587 $ 573 Unit Area (SF) 478 650 589 577 Monthly Rent Per Sq. Ft. $ 0.97 $ 1.03 $ 1.00 $ 1.00 Monthly Rent $ 580 $ 667 $ 650 $ 629 Unit Area (SF) 708 891 760 785 Monthly Rent Per Sq. Ft. $ 0.73 $ 0.88 $ 0.82 $ 0.80 Monthly Rent $ 669 $ 755 $ 705 $ 710 Unit Area (SF) 900 980 900 927 Monthly Rent Per Sq. Ft. $ 0.72 $ 0.84 $ 0.74 $ 0.77 Monthly Rent $ 739 $ 820 $ 775 $ 777 Unit Area (SF) 1,000 1,046 1,026 1,024 Monthly Rent Per Sq. Ft. $ 0.71 $ 0.82 $ 0.75 $ 0.76 Monthly Rent $ 799 $ 825 $ 812 $ 812 Unit Area (SF) 1,080 1,178 1,129 1,129 Monthly Rent Per Sq. Ft. $ 0.68 $ 0.76 $ 0.72 $ 0.72 CONCLUDED MARKET RENTAL RATES AND TERMS Based on this analysis above, the subject's concluded market rental rates and gross rental income is calculated as follows: GROSS RENTAL INCOME PROJECTION Market Rent Unit Area ----------------- Monthly Annual Unit Type Number of Units (Sq. Ft.) Per Unit Per SF Income Income - -------------------------------------------------------------------------------------- 1Br/1Ba 56 590 $575 $0.97 $ 32,200 $ 386,400 1Br/1Ba 64 740 $570 $0.77 $ 36,480 $ 437,760 2Br/1Ba 16 950 $650 $0.68 $ 10,400 $ 124,800 2Br/2Ba 8 1,010 $700 $0.69 $ 5,600 $ 67,200 3Br/2Ba 20 1,225 $800 $0.65 $ 16,000 $ 192,000 ----------------------------------- Total $ 100,680 $1,208,160 =================================== 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA SUMMARY OF HISTORICAL INCOME & EXPENSES FISCAL YEAR 2000 FISCAL YEAR 2001 FISCAL YEAR 2002 FISCAL YEAR 2003 ----------------------- ----------------------- ----------------------- ----------------------- ACTUAL ACTUAL ACTUAL MANAGEMENT BUDGET ----------------------- ----------------------- ----------------------- ----------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT - ------------------------------------------------------------------------------------------------------------------------------------ Revenues Rental Income $1,171,174 $ 7,141 $1,223,905 $ 7,463 $1,199,007 $ 7,311 $1,208,154 $ 7,367 Vacancy $ 81,651 $ 498 $ 85,343 $ 520 $ 81,351 $ 496 $ 69,582 $ 424 Credit Loss/Concessions $ 28,682 $ 175 $ 50,257 $ 306 $ 52,288 $ 319 $ 48,828 $ 298 ----------------------------------------------------------------------------------------------------- Subtotal $ 110,333 $ 673 $ 135,600 $ 827 $ 133,639 $ 815 $ 118,410 $ 722 Laundry Income $ 10,265 $ 63 $ 10,252 $ 63 $ 9,242 $ 56 $ 13,800 $ 84 Garage Revenue $ 45 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 61,175 $ 373 $ 75,010 $ 457 $ 86,652 $ 528 $ 74,460 $ 454 ----------------------------------------------------------------------------------------------------- Subtotal Other Income $ 71,485 $ 436 $ 85,262 $ 520 $ 95,894 $ 585 $ 88,260 $ 538 ----------------------------------------------------------------------------------------------------- Effective Gross Income $1,132,326 $ 6,904 $1,173,567 $ 7,156 $1,161,262 $ 7,081 $1,178,004 $ 7,183 Operating Expenses Taxes $ 75,406 $ 460 $ 82,938 $ 506 $ 80,498 $ 491 $ 82,613 $ 504 Insurance $ 11,906 $ 73 $ 52,559 $ 320 $ 41,911 $ 256 $ 41,111 $ 251 Utilities $ 94,061 $ 574 $ 92,297 $ 563 $ 90,296 $ 551 $ 92,460 $ 564 Repair & Maintenance $ 97,662 $ 596 $ 97,325 $ 593 $ 138,538 $ 845 $ 131,060 $ 799 Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 28,736 $ 175 $ 30,901 $ 188 $ 36,381 $ 222 $ 38,748 $ 236 General Administrative $ 187,380 $ 1,143 $ 192,097 $ 1,171 $ 133,215 $ 812 $ 203,964 $ 1,244 Management $ 57,280 $ 349 $ 62,964 $ 384 $ 57,798 $ 352 $ 59,577 $ 363 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------- Total Operating Expenses $ 552,431 $ 3,368 $ 611,081 $ 3,726 $ 578,637 $ 3,528 $ 649,533 $ 3,961 Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------- Net Income $ 579,895 $ 3,536 $ 562,486 $ 3,430 $ 582,625 $ 3,553 $ 528,471 $ 3,222 ANNUALIZED 2003 ----------------------- PROJECTION AAA PROJECTION ----------------------- -------------------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT % - -------------------------------------------------------------------------------------- Revenues Rental Income $1,172,564 $ 7,150 $1,208,160 $ 7,367 100.0% Vacancy $ 62,468 $ 381 $ 72,490 $ 442 6.0% Credit Loss/Concessions $ 49,628 $ 303 $ 48,326 $ 295 4.0% --------------------------------------------------------- Subtotal $ 112,096 $ 684 $ 120,816 $ 737 10.0% Laundry Income $ 11,152 $ 68 $ 11,480 $ 70 1.0% Garage Revenue $ 0 $ 0 $ 0 $ 0 0.0% Other Misc. Revenue $ 96,648 $ 589 $ 94,300 $ 575 7.8% --------------------------------------------------------- Subtotal Other Income $ 107,800 $ 657 $ 105,780 $ 645 8.8% --------------------------------------------------------- Effective Gross Income $1,168,268 $ 7,124 $1,193,124 $ 7,275 100.0% Operating Expenses Taxes $ 82,520 $ 503 $ 92,660 $ 565 7.8% Insurance $ 40,512 $ 247 $ 41,000 $ 250 3.4% Utilities $ 95,848 $ 584 $ 94,300 $ 575 7.9% Repair & Maintenance $ 137,376 $ 838 $ 131,200 $ 800 11.0% Cleaning $ 0 $ 0 $ 0 $ 0 0.0% Landscaping $ 0 $ 0 $ 0 $ 0 0.0% Security $ 0 $ 0 $ 0 $ 0 0.0% Marketing & Leasing $ 31,992 $ 195 $ 36,900 $ 225 3.1% General Administrative $ 144,580 $ 882 $ 139,400 $ 850 11.7% Management $ 56,608 $ 345 $ 59,656 $ 364 5.0% Miscellaneous $ 0 $ 0 $ 0 $ 0 0.0% --------------------------------------------------------- Total Operating Expenses $ 589,436 $ 3,594 $ 595,116 $ 3,629 49.9% Reserves $ 0 $ 0 $ 32,800 $ 200 5.5% --------------------------------------------------------- Net Income $ 578,832 $ 3,529 $ 565,208 $ 3,446 47.4% 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 $200 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 $200 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA SUMMARY OF OVERALL CAPITALIZATION RATES COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR - ------------------------------------------------------- I-1 May-01 90% $38,125 10.78% I-2 Sep-02 85% $41,159 9.54% I-3 Nov-02 90% $34,797 9.60% I-4 Oct-01 90% $62,500 9.38% I-5 Aug-01 92% $43,000 9.79% High 10.78% Low 9.38% Average 9.82% 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 10.50%. Finally, the subject's discount rate or yield rate is estimated based on the previous investor survey and an examination of returns available on alternative investments in the market. Based on this analysis, the subject's discount rate is estimated to be 12.00%. HOLDING PERIOD The survey of investors indicates that most investors are completing either 10-year cash flows or extending the analysis to the end of the lease if it is more than 10-years. A 10-year period has been used in the analysis of the subject with the eleventh year stabilized NOI used to determine the reversion. SELLING COSTS Sales of similar size properties are typically accomplished with the aid of a broker and will also incur legal and other transaction related cost. Based on our survey of brokers and a review of institutional investor projections, an allowance of 2.00% of the sale amount is applied. DISCOUNTED CASH FLOW CONCLUSION Discounting the annual cash flows and the equity reversion at the selected rate of 12.00% indicates a value of $6,000,000. In this instance, the reversion figure contributes AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA approximately 38% 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA DISCOUNTED CASH FLOW ANALYSIS VILLAGE GREEN APARTMENT HOMES YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009 FISCAL YEAR 1 2 3 4 5 6 - ------------------------------------------------------------------------------------------------------------------------- REVENUE Base Rent $1,208,160 $1,244,405 $1,281,737 $1,320,189 $1,359,795 $1,400,589 Vacancy $ 72,490 $ 74,664 $ 76,904 $ 79,211 $ 81,588 $ 84,035 Credit Loss $ 48,326 $ 49,776 $ 51,269 $ 52,808 $ 54,392 $ 56,024 Concessions $ 60,408 $ 12,444 $ 0 $ 0 $ 0 $ 0 ---------------------------------------------------------------------------------- Subtotal $ 181,224 $ 136,885 $ 128,174 $ 132,019 $ 135,979 $ 140,059 Laundry Income $ 11,480 $ 11,824 $ 12,179 $ 12,545 $ 12,921 $ 13,308 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 94,300 $ 97,129 $ 100,043 $ 103,044 $ 106,135 $ 109,320 ---------------------------------------------------------------------------------- Subtotal Other Income $ 105,780 $ 108,953 $ 112,222 $ 115,589 $ 119,056 $ 122,628 ---------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME $1,132,716 $1,216,474 $1,265,785 $1,303,759 $1,342,872 $1,383,158 OPERATING EXPENSES: Taxes $ 92,660 $ 95,440 $ 98,303 $ 101,252 $ 104,290 $ 107,418 Insurance $ 41,000 $ 42,230 $ 43,497 $ 44,802 $ 46,146 $ 47,530 Utilities $ 94,300 $ 97,129 $ 100,043 $ 103,044 $ 106,135 $ 109,320 Repair & Maintenance $ 131,200 $ 135,136 $ 139,190 $ 143,366 $ 147,667 $ 152,097 Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 36,900 $ 38,007 $ 39,147 $ 40,322 $ 41,531 $ 42,777 General Administrative $ 139,400 $ 143,582 $ 147,889 $ 152,326 $ 156,896 $ 161,603 Management $ 56,636 $ 60,824 $ 63,289 $ 65,188 $ 67,144 $ 69,158 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ---------------------------------------------------------------------------------- TOTAL OPERATING EXPENSES $ 592,096 $ 612,347 $ 631,359 $ 650,300 $ 669,809 $ 689,903 Reserves $ 32,800 $ 33,784 $ 34,798 $ 35,841 $ 36,917 $ 38,024 ---------------------------------------------------------------------------------- NET OPERATING INCOME $ 507,820 $ 570,342 $ 599,629 $ 617,618 $ 636,146 $ 655,231 Operating Expense Ratio (% of EGI) 52.3% 50.3% 49.9% 49.9% 49.9% 49.9% Operating Expense Per Unit $ 3,610 $ 3,734 $ 3,850 $ 3,965 $ 4,084 $ 4,207 YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014 FISCAL YEAR 7 8 9 10 11 - ---------------------------------------------------------------------------------------------------------- REVENUE Base Rent $1,442,606 $1,485,884 $1,530,461 $1,576,375 $1,623,666 Vacancy $ 86,556 $ 89,153 $ 91,828 $ 94,582 $ 97,420 Credit Loss $ 57,704 $ 59,435 $ 61,218 $ 63,055 $ 64,947 Concessions $ 0 $ 0 $ 0 $ 0 $ 0 ------------------------------------------------------------------ Subtotal $ 144,261 $ 148,588 $ 153,046 $ 157,637 $ 162,367 Laundry Income $ 13,708 $ 14,119 $ 14,543 $ 14,979 $ 15,428 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 112,599 $ 115,977 $ 119,456 $ 123,040 $ 126,731 ------------------------------------------------------------------ Subtotal Other Income $ 126,307 $ 130,096 $ 133,999 $ 138,019 $ 142,159 ------------------------------------------------------------------ EFFECTIVE GROSS INCOME $1,424,652 $1,467,392 $1,511,414 $1,556,756 $1,603,459 OPERATING EXPENSES: Taxes $ 110,641 $ 113,960 $ 117,379 $ 120,900 $ 124,527 Insurance $ 48,956 $ 50,425 $ 51,938 $ 53,496 $ 55,101 Utilities $ 112,599 $ 115,977 $ 119,456 $ 123,040 $ 126,731 Repair & Maintenance $ 156,660 $ 161,359 $ 166,200 $ 171,186 $ 176,322 Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 Security $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 44,061 $ 45,382 $ 46,744 $ 48,146 $ 49,591 General Administrative $ 166,451 $ 171,444 $ 176,588 $ 181,885 $ 187,342 Management $ 71,233 $ 73,370 $ 75,571 $ 77,838 $ 80,173 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 ------------------------------------------------------------------ TOTAL OPERATING EXPENSES $ 710,600 $ 731,918 $ 753,875 $ 776,492 $ 799,786 Reserves $ 39,165 $ 40,340 $ 41,550 $ 42,797 $ 44,080 ------------------------------------------------------------------ NET OPERATING INCOME $ 674,888 $ 695,134 $ 715,988 $ 737,468 $ 759,592 Operating Expense Ratio (% of EGI) 49.9% 49.9% 49.9% 49.9% 49.9% Operating Expense Per Unit $ 4,333 $ 4,463 $ 4,597 $ 4,735 $ 4,877 Estimated Stabilized NOI $565,208 Sales Expense Rate 2.00% Months to Stabilized 1 Discount Rate 12.00% Stabilized Occupancy 94.0% Terminal Cap Rate 10.50% Gross Residual Sale Price $7,234,210 Deferred Maintenance $ 0 Less: Sales Expense $ 144,684 Add: Excess Land $ 0 ---------- Net Residual Sale Price $7,089,526 Other Adjustments $ 0 ---------- PV of Reversion $2,282,637 Value Indicated By "DCF" $6,003,000 Add: NPV of NOI $3,720,362 Rounded $6,000,000 ---------- PV Total $6,003,000 "DCF" VALUE SENSITIVITY TABLE DISCOUNT RATE -------------------------------------------------------------------------- TOTAL VALUE 11.50% 11.75% 12.00% 12.25% 12.50% - --------------------------------------------------------------------------------------------------------------- 10.00% $6,315,414 $6,215,199 $6,117,132 $6,021,160 $5,927,232 10.25% $6,254,282 $6,155,420 $6,058,674 $5,963,991 $5,871,321 TERMINAL CAP RATE 10.50% $6,196,060 $6,098,488 $6,003,000 $5,909,545 $5,818,072 10.75% $6,140,546 $6,044,203 $5,949,915 $5,857,631 $5,767,300 11.00% $6,087,556 $5,992,387 $5,899,244 $5,808,076 $5,718,836 AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 $64,000 (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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA VILLAGE GREEN APARTMENT HOMES TOTAL PER SQ. FT. PER UNIT %OF EGI - --------------------------------------------------------------------------------------------------- REVENUE Base Rent $ 1,208,160 $ 9.43 $ 7,367 Less: Vacancy & Collection Loss 10.00% $ 120,816 $ 0.94 $ 737 Plus: Other Income Laundry Income $ 11,480 $ 0.09 $ 70 0.96% Garage Revenue $ 0 $ 0.00 $ 0 0.00% Other Misc. Revenue $ 94,300 $ 0.74 $ 575 7.90% --------------------------------------------- Subtotal Other Income $ 105,780 $ 0.83 $ 645 8.87% EFFECTIVE GROSS INCOME $ 1,193,124 $ 9.31 $ 7,275 OPERATING EXPENSES: Taxes $ 92,660 $ 0.72 $ 565 7.77% Insurance $ 41,000 $ 0.32 $ 250 3.44% Utilities $ 94,300 $ 0.74 $ 575 7.90% Repair & Maintenance $ 131,200 $ 1.02 $ 800 11.00% Cleaning $ 0 $ 0.00 $ 0 0.00% Landscaping $ 0 $ 0.00 $ 0 0.00% Security $ 0 $ 0.00 $ 0 0.00% Marketing & Leasing $ 36,900 $ 0.29 $ 225 3.09% General Administrative $ 139,400 $ 1.09 $ 850 11.68% Management 5.00% $ 59,656 $ 0.47 $ 364 5.00% Miscellaneous $ 0 $ 0.00 $ 0 0.00% TOTAL OPERATING EXPENSES $ 595,116 $ 4.64 $ 3,629 49.88% Reserves $ 32,800 $ 0.26 $ 200 2.75% --------------------------------------------- NET OPERATING INCOME $ 565,208 $ 4.41 $ 3,446 47.37% "GOING IN" CAPITALIZATION RATE 9.50% VALUE INDICATION $ 5,949,556 $46.42 $ 36,278 PV OF CONCESSIONS ($ 64,000) "AS IS" VALUE INDICATION (DIRECT CAPITALIZATION APPROACH) $ 5,885,556 ROUNDED $ 5,900,000 $46.03 $ 35,976 AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE CAP RATE VALUE ROUNDED $/UNIT $/SF - --------------------------------------------------------------------- 8.75% $6,395,518 $6,400,000 $39,024 $49.93 9.00% $6,216,087 $6,200,000 $37,805 $48.37 9.25% $6,046,355 $6,000,000 $36,585 $46.81 9.50% $5,885,556 $5,900,000 $35,976 $46.03 9.75% $5,733,003 $5,700,000 $34,756 $44.47 10.00% $5,588,078 $5,600,000 $34,146 $43.69 10.25% $5,450,222 $5,500,000 $33,537 $42.91 CONCLUSION BY THE DIRECT CAPITALIZATION METHOD Applying the capitalization rate to our estimated NOI results in an estimated value of $5,900,000. CORRELATION AND CONCLUSION BY THE INCOME APPROACH The two methods used to estimate the market value of the subject property by the income approach resulted in the following indications of value: Discounted Cash Flow Analysis $6,000,000 Direct Capitalization Method $5,900,000 Giving consideration to the indicated values provided by both techniques, we have concluded the estimated value by the income capitalization approach to be $5,900,000. AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 $6,000,000 Income Approach $5,900,000 Reconciled Value $6,000,000 The Income Capitalization Method is considered a reliable indicator of value. Income and expenses were estimated and projected based on historical operating statements and market oriented expenses. This method is primarily used by investors in their underwriting analysis. Furthermore, there was good support for an overall rate in the 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 28, 2003 the market value of the fee simple estate in the property is: $6,000,000 AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA ADDENDA AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA EXHIBIT A SUBJECT PHOTOGRAPHS AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] EXTERIOR - COMMUNITY CENTER & OFFICE EXTERIOR - VIEW FROM ESSEX AVENUE [PICTURE] [PICTURE] EXTERIOR - APARTMENT BUILDING EXTERIOR - APARTMENT BUILDING [PICTURE] [PICTURE] EXTERIOR - PARKING AND DRIVEWAYS EXTERIOR - SWIMMING POOL (1 OF 2) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] INTERIOR - MODEL INTERIOR - MODEL [PICTURE] [PICTURE] INTERIOR - APARTMENT UNIT INTERIOR - APARTMENT UNIT [PICTURE] [PICTURE] INTERIOR - OFFICE VIEW SOUTH ALONG ESSEX AVENUE AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA EXHIBIT B SUMMARY OF RENT COMPARABLES AND PHOTOGRAPH OF COMPARABLES AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3 COURTYARD AT WINTER PARK LA ALOMA APARTMENTS SEDGEFIELD APARTMENTS 1695 Lee Road 3040 Aloma Avenue 110 Sedgefield Circle Winter Park, Florida Winter Park, Florida Winter Park, Florida [PICTURE] [PICTURE] [PICTURE] COMPARABLE I-4 COMPARABLE I-5 KINGSTON VILLAGE THE ASHLEY OF SPRING VALLEY 940 Douglas Avenue 693 South Wymore Road Altamonte Springs, FL Altamonte Springs, FL [PICTURE] [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA SUMMARY OF COMPARABLE RENTAL PROPERTIES COMPARABLE DESCRIPTION SUBJECT R - 1 ----------- ------- ----- Property Name Village Green Apartment Homes LakePointe Apartments Management Company AIMCO Realty Investment Co. LOCATION: Address 112 Essex Avenue 250 LakePointe Drive City, State Altamonte Springs, Florida Altamonte Springs. Florida County Seminole Seminole Proximity to Subject I block south of the subject PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 128,180 N/A Year Built 1970 1986 Effective Age 20 10 Building Structure Type Brick exterior walls; asphalt shingle roof Siding exterior walls; asphalt shingle roof Parking Type (Gr., Cov., etc.) Open Open Number of Units 164 502 Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo. 1 1Br/1Ba 590 56 $528 1 1Br/1Ba - Jib 650 N/A $630 2 1Br/1Ba 740 64 $536 1 1Br/1Ba - Schooner 750 N/A $660 3 2Br/1Ba 950 16 $603 3 2Br/1Ba - Catamaran 900 N/A $755 4 2Br/2Ba 1,010 8 $658 4 2Br/2Ba - Twinkeel 1,000 N/A $820 5 3Br/2Ba 1,225 20 $776 Average Unit Size (SF) 782 Unit Breakdown: Efficiency 34% 2-Bedroom 15% Efficiency N/A 2-Bedroom N/A 1-Bedroom 39% 3-Bedroom 12% 1-Bedroom N/A 3-Bedroom N/A CONDITION: Average Good APPEAL: Average Good AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage X Vaulted Ceiling X Balcony W/D Connect. X Balcony X W/D Connect. Fireplace Other X Fireplace X Other X Cable TV Ready X Cable TV Ready Boat Parking Project Amenities X Swimming Pool X Swimming Pool Spa/Jacuzzi X Car Wash X Spa/Jacuzzi X Car Wash Basketball Court X BBQ Equipment Basketball Court X BBQ Equipment Volleyball Court Theater Room X Volleyball Court Theater Room Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall 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 Clubhouse X Gym Room Clubhouse X Playground Playground OCCUPANCY: 99% 88% LEASING DATA: Available Leasing Terms 7 to 12 Months 7 to 15 Months Concessions 1 Month Free on 1Br Approximately 15% off Select Units Pet Deposit $150, plus $20 per month $250 Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas Water Trash Water Trash Confirmation May 28, 2003; Pamela Ruscitti (Community Manager) May 28, 2003; Leasing Agent Telephone Number (407) 831-4848 (407) 260-0808 NOTES: None COMPARISON TO SUBJECT: Superior COMPARABLE COMPARABLE DESCRIPTION R - 2 R - 3 ----------- ----- ----- Property Name Altamonte Bay Club Tiffany Oaks Management Company Berkshire Realty Holdings Mid-America Apartment Communities LOCATION: Address 210 Altamonte Bay Club Circle 351 S. Northlake Boulevard City, State Altamonte Springs. Florida Altamonte Springs. Florida County Seminole Seminole Proximity to Subject Across Orange Drive from the subject 0.5 mile west of the subject PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) N/A 373,000 Year Built 1987 1985 Effective Age 20 10 Building Structure Type Stucco exterior; asphalt shingle roof Brick & Siding walls; asphalt shingle roof Parking Type (Gr., Cov., etc.) Open Open Number of Units 224 288 Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo. 2 1Br/1Ba - Skiff 827 N/A $630 1 1Br/1Ba - Barclay 608 40 $589 2 1Br/1Ba - Ketch 955 N/A $670 2 1Br/1Ba - Claremont 776 88 $650 4 2Br/2Ba - Sloop 1,016 N/A $775 2 1Br/1Ba - Sandhurst 888 48 $699 4 2Br/2Ba - Stratford 1,046 64 $775 Average Unit Size (SF) 842 Unit Breakdown: Efficiency N/A 2-Bedroom N/A Efficiency 14% 2-Bedroom 22% 1-Bedroom N/A 3-Bedroom N/A 1-Bedroom 47% 3-Bedroom 0% CONDITION: Good Good APPEAL: Good Good AMENITIES: Unit Amenities Attach. Garage X Vaulted Ceiling Attach. Garage Vaulted Ceiling X Balcony X W/D Connect. X Balcony X W/D Connect. X Fireplace X Other Fireplace X Other X Cable TV Ready Boat Parking X Cable TV Ready Covered Parking Project Amenities X Swimming Pool X Swimming Pool Spa/Jacuzzi X Car Wash X Spa/Jacuzzi X Car Wash Basketball Court X 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 Secured Parking X Tennis Court Secured Parking Racquet Ball X Laundry Room X Racquet Ball X Laundry Room X Jogging Track X Business Office Jogging Track Business Office X Gym Room Clubhouse X Gym Room X Clubhouse Playground Playground OCCUPANCY: 93% 96% LEASING DATA: Available Leasing Terms 7 to 12 Months 7 to 15 Months Concessions Approximately 10% off Select Units None. Pet Deposit Varies $300 Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas Water Trash Water Trash Confirmation May 28, 2003; Leasing Agent June 6, 2003; Leasing Agent Telephone Number (407) 260-2501 (407) 339-7899 NOTES: None None COMPARISON TO SUBJECT: Superior Slightly Superior COMPARABLE COMPARABLE DESCRIPTION R - 4 R - 5 ----------- ----- ----- Property Name Lakeside North Willow Park on Lake Adelaide Management Company United Dominion AIMCO LOCATION: Address 275 East Central Parkway 375 Palm Springs Drive City, State Altamonte Springs. Florida Altamonte Springs. Florida County Seminole Seminole Proximity to Subject 0.5 mile north of the subject 0.5 mile northeast of the subject PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) N/A 153,995 Year Built 1987 1973 Effective Age 10 20 Building Structure Type Stucco exterior walls; asphalt shingle roof Stucco exterior walls; asphalt shingle roof Parking Type (Gr., Cov., etc.) Open Open Number of Units 360 185 Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo. 1 1Br/1Ba - 1A 570 N/A $585 1 Studio - Palm 478 15 $489 2 1Br/1Ba - 1B 760 N/A $580 1 Studio - Sabal Palm 478 10 $489 3 1Br/1Ba - 1C 980 N/A $685 2 1Br/1Ba - Willow 708 58 $589 3 2Br/1Ba - 2A 980 N/A $725 3 2Br/1Ba - Elm 900 52 $669 5 2Br/2Ba - 2B 1,080 N/A $825 4 2Br/2Ba - Pine 1,035 33 $739 5 3Br/3Ba - oak 1,178 17 $799 Average Unit Size (SF) 832 Unit Breakdown: Efficiency N/A 2-Bedroom N/A Efficiency 12% 2-Bedroom 46% 1-Bedroom N/A 3-Bedroom N/A 1-Bedroom 32% 3-Bedroom 9% CONDITION: Average Average APPEAL: Average Average AMENITIES: Unit Amenities Attach. Garage X Vaulted Ceiling Attach. Garage X Vaulted Ceiling X Balcony X W/D Connect. X Balcony X W/D Connect. X Fireplace Other Fireplace X Other X Cable TV Ready X Cable TV Ready Lake & Pier Project Amenities X Swimming Pool X Swimming Pool Spa/Jacuzzi X Car Wash Spa/Jacuzzi X Car Wash X Basketball Court X BBQ Equipment Basketball Court X BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room X Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall X Tennis Court Secured Parking X Tennis Court Secured Parking Racquet Ball X Laundry Room Racquet Ball X Laundry Room Jogging Track Business Office Jogging Track Business Office X Gym Room X Clubhouse X Gym Room X Clubhouse X Playground X Playground OCCUPANCY: 89% 96% LEASING DATA: Available Leasing Terms 6 to 24 Months 7 to 12 Months Concessions None 1 Month Free on 1 Br Pet Deposit $300 $150, plus $20 per month Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas Water Trash Water Trash Confirmation May 28, 2003; Property Manager May 28, 2003; Community Manager Telephone Number (407) 834-8731 (407) 834-2442 NOTES: None None COMPARISON TO SUBJECT: Slightly Superior Similar AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3 LAKEPOINTE APARTMENTS ALTAMONTE BAY CLUB TIFFANY OAKS 250 LakePointe Drive 210 Altamonte Bay Club Circle 351 S. Northlake Drive Circle Boulevard Altamonte Springs. Altamonte Springs. Altamonte Springs. Florida Florida Florida [PICTURE] [PICTURE] [PICTURE] COMPARABLE R-4 COMPARABLE R-5 LAKESIDE NORTH WILLOW PARK ON LAKE ADELAIDE 275 East Central Parkway 375 Palm Springs Drive Altamonte Springs. Florida Altamonte Springs. Florida [PICTURE] [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA EXHIBIT C ASSUMPTIONS AND LIMITING CONDITIONS (3 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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 report analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and represent the impartial and 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 or bias with respect to the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. The engagement of American Appraisal Associates, Inc., and myself personally in this assignment and compensation for American Appraisal Associates, Inc., are not contingent on the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. The analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice and the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers. I personally did not inspect the subject property. Michael L. Kersten provided significant real property appraisal assistance in the preparation of this report. -s- Alice MacQueen ------------------ Alice MacQueen Vice President, Real Estate Group Florida Certified General Real Estate Appraiser #RZ0002202 AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA EXHIBIT E QUALIFICATIONS OF APPRAISER (2 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA ALICE MACQUEEN VICE PRESIDENT AND PRINCIPAL, REAL ESTATE GROUP POSITION Alice MacQueen serves as a Vice President and Principal for the Dallas Real Estate Group of American Appraisal Associates, Inc. ("AAA"). EXPERIENCE Valuation Ms. MacQueen specializes in the appraisal of investment real estate and is annually involved in the valuation of several billion dollars of real property. The purposes of these valuations include allocation of purchase price, charitable donation, financing, purchase, sale, and syndication. She has also been involved in land planning analyses for major mixed-use developments. She has appraised various types of real estate including congregate care facilities, industrial properties, manufacturing facilities, office buildings, recreational subdivisions and planned unit developments, single- and multifamily residential properties, and shopping centers. Special-purpose properties she has appraised include campgrounds, churches, country clubs, golf courses, historic landmarks, proprietary cemeteries, and schools. In addition to market value opinions, Ms. MacQueen has provided feasibility and highest and best use studies. She has also been involved in several research projects, providing background studies involving major property tax appeal cases. These studies included the impact of inflation, rate of return considerations, sales-assessment ratio analyses, and the applicability of income capitalization to commercial and industrial properties. American Appraisal Associates, Inc. EXHIBIT E Village Green Apartment Homes, Altamonte Springs, Florida Ms. MacQueen has appraised real estate in 46 U.S. states, Mexico, and Puerto Rico. Business Ms. MacQueen joined AAA in 1983. She served as Regional Real Estate Director for the southeastern United States from 1987 to 1992 and as National Director of the Real Estate Valuation Group from 1992 through 1995, when she assumed her current position. Before joining the firm, she was involved in property management for five years and spent an additional five years as an appraiser, consultant, and research analyst. EDUCATION Realtors Institute of Virginia Greenbrier College for Women - Liberal Arts STATE CERTIFICATIONS State of Arizona, Certified General Real Estate Appraiser, #30987 State of Florida, Certified General Appraiser, #RZ0002202 State of Georgia, Certified General Real Property Appraiser, #239776 State of Minnesota, Certified General Real Property Appraiser, #AP-20144872 State of New Mexico, General Certified Appraiser, #001626-G State of Utah, State Certified General Appraiser, #CG00057001 PROFESSIONAL American Society of Appraisers, Candidate AFFILIATIONS AMERICAN APPRAISAL ASSOCIATES, INC. VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA GENERAL SERVICE CONDITIONS AMERICAN APPRAISAL ASSOCIATES, INC. VILLAGE GREEN APARTMENT HOMES, ALTAMONTE SPRINGS, FLORIDA 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.