NOB HILL VILLA
180 WALLACE ROAD
NASHVILLE, TENNESSEE
Market Value -Fee Simple Estate
As of May 5, 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 LOGO]
[AMERICAN APPRAISAL ASSOCIATES LOGO]
[AMERICAN APPRAISAL ASSOCIATES 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: NOB HILL VILLA
180 WALLACE ROAD
NASHVILLE, DAVIDSON COUNTY, TENNESSEE
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 472 units with a
total of 378,800 square feet of rentable area. The improvements were built in
1971. The improvements are situated on 18.02 acres. Overall, the improvements
are in average condition. As of the date of this appraisal, the subject property
is 93% 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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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 5, 2003 is:
($12,400,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
/s/ Frank Fehribach
July 2, 2003 Frank Fehribach, MAI
#053272 Managing Principal, Real Estate Group
Tennessee Temporary Practice Permit #00053573
Report By:
Daniel Salcedo
Tennessee Temporary Practice Permit #00053558
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
NOB HILL VILLA, NASHVILLE, TENNESSEE
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: Nob Hill Villa
LOCATION: 180 Wallace Road
Nashville, Tennessee
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 5, 2003
DATE OF REPORT: July 2, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 18.02 acres, or 784,951 square feet
Assessor Parcel No.: 134-130-239
Floodplain: Community Panel No. 47037C3054F (April 20, 2001)
Flood Zone X, an area outside the floodplain.
Zoning: RM-20 (Medium to High Density Apartment District)
BUILDING:
No. of Units: 472 Units
Total NRA: 378,800 Square Feet
Average Unit Size: 803 Square Feet
Apartment Density: 26.2 units per acre
Year Built: 1971
UNIT MIX AND MARKET RENT:
GROSS RENTAL INCOME PROJECTION
Square Market Rent Monthly Annual
Unit Type Feet Per Unit Per SF Income Income
1Br/1Ba -1A10 650 $420 $0.65 $97,440 $1,169,280
2Br/2Ba -2A20 950 $530 $0.56 $127,200 $1,526,400
Total $224,640 $2,695,680
OCCUPANCY: 93%
ECONOMIC LIFE: 45 Years
EFFECTIVE AGE: 25 Years
REMAINING ECONOMIC LIFE: 20 Years
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
NOB HILL VILLA, NASHVILLE, TENNESSEE
SUBJECT PHOTOGRAPHS
[PICTURE OF UNIT TYPE FACADE] [PICTURE OF UNIT TYPE]
[MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
NOB HILL VILLA, NASHVILLE, TENNESSEE
[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
NOB HILL VILLA, NASHVILLE, TENNESSEE
PART TWO - ECONOMIC INDICATORS
INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION AMOUNT $/UNIT
- --------------------- ------ ------
Potential Rental Income $ 2,695,680 $ 5,711
Effective Gross Income $ 2,765,952 $ 5,860
Operating Expenses $ 1,490,578 $ 3,158 53.9% of EGI
Net Operating Income: $ 1,157,374 $ 2,452
Capitalization Rate 9.50%
DIRECT CAPITALIZATION VALUE $ 12,200,000 * $25,847 / 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 $ 12,400,000 * $26,271 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $ 12,400,000 $26,271 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $ 26,844 to $69,167
Range of Sales $/Unit (Adjusted) $ 23,045 to $27,667
VALUE INDICATION - PRICE PER UNIT $ 12,300,000 * $26,059 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 4.82 to 6.60
Selected EGIM for Subject 4.50
Subject's Projected EGI $ 2,765,952
EGIM ANALYSIS CONCLUSION $12,400,000 * $26,271 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $12,700,000 * $26,907 / UNIT
RECONCILED SALES COMPARISON VALUE $12,400,000 $26,271 / 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
NOB HILL VILLA, NASHVILLE, TENNESSEE
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $12,300,000
NOI Per Unit $12,700,000
EGIM Multiplier $12,400,000
INDICATED VALUE BY SALES COMPARISON $12,400,000 $26,271 / Unit
INCOME APPROACH:
Direct Capitalization Method: $12,200,000
Discounted Cash Flow Method: $12,400,000
INDICATED VALUE BY THE INCOME APPROACH $12,400,000 $26,271 / Unit
RECONCILED OVERALL VALUE CONCLUSION: $12,400,000 $26,271 / Unit
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
NOB HILL VILLA, NASHVILLE, TENNESSEE
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 180 Wallace Road, Nashville, Davidson County,
Tennessee. Nashville identifies it as 134-130-239.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by Daniel Salcedo on
May 5, 2003. Frank Fehribach, MAI has not made a personal inspection of the
subject property. Daniel Salcedo performed the research, valuation analysis and
wrote the report. Frank Fehribach, MAI reviewed the report and concurs with the
value. Frank Fehribach, MAI and Daniel Salcedo 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 5, 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 & Income Approaches), subject to the existing short-term leases. A Fee
Simple Estate is
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10
NOB HILL VILLA, NASHVILLE, TENNESSEE
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 4. 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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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 Nashville, Tennessee. Overall, the
neighborhood is characterized as a suburban setting with the predominant land
use being residential. The subject's neighborhood is generally defined by the
following boundaries.
NEIGHBORHOOD BOUNDARIES
East - I-24
West - SR-31
South - Haywood Lane
North - Harding Road
MAJOR EMPLOYERS
Major employers in the subject's area include ComPlus, Concetra, Saturn
Corporation, Gaylord Entertainment, Nissan Motor Manufacturing Corporation,
Kroger Company, Reemay, Inc. United Parcel Service, First American National
Bank, Shoney's Inc., Bell South, Inter-City Pro Corporation, NationsBank, and
Bridgestone/Firestone. 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
NOB HILL VILLA, NASHVILLE, TENNESSEE
NEIGHBORHOOD DEMOGRAPHICS
AREA
CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA
- ------------------------------------------------------------------------------------------------
POPULATION TRENDS
Current Population 13,093 79,100 155,323 1,275,686
5-Year Population 13,834 82,500 166,987 1,391,452
% Change CY-5Y 5.7% 4.3% 7.5% 9.1%
Annual Change CY-5Y 1.1% 0.9% 1.5% 1.8%
HOUSEHOLDS
Current Households 5,218 32,590 66,267 499,284
5-Year Projected Households 5,492 34,105 71,459 550,820
% Change CY - 5Y 5.3% 4.6% 7.8% 10.3%
Annual Change CY-5Y 1.1% 0.9% 1.6% 2.1%
INCOME TRENDS
Median Household Income $ 30,139 $ 35,573 $ 37,725 $ 45,328
Per Capita Income $ 16,197 $ 19,158 $ 22,059 $ 23,901
Average Household Income $ 40,571 $ 46,247 $ 51,628 $ 61,067
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 54.19% 47.20% 47.35% 31.23%
5-Year Projected % Renting 54.75% 46.89% 46.79% 30.53%
% of Households Owning 31.73% 43.05% 42.91% 61.72%
5-Year Projected % Owning 31.99% 43.72% 43.97% 62.91%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
NOB HILL VILLA, NASHVILLE, TENNESSEE
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Linbar Drive
South - Wallace Road
East - Retail
West - Residential
CONCLUSIONS
The subject is well located within the city of Nashville. 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
NOB HILL VILLA, NASHVILLE, TENNESSEE
MARKET ANALYSIS
The subject property is located in the city of Nashville in Davidson County. The
overall pace of development in the subject's market is more or less decreasing.
Based on our site inspection of the market area, there was no evidence of
additional development for multifamily use. The following table illustrates
historical vacancy rates for the subject's market.
HISTORICAL VACANCY RATE
Period Region Submarket
- --------------------------------------------------------------------------
1997 5.5% 5.0%
1998 6.7% 6.0%
1999 5.9% 5.8%
2000 5.9% 6.0%
2001 8.3% 7.7%
2002 8.0% 8.0%
Source: Greater Nashville Apartment Association
Occupancy trends in the subject's market are stable. Historically speaking, the
subject's submarket has equated the overall market. Occupancy in the subject's
market area is expected to be around 92.0% in average. Any expected changes are
caused by the short time fluctuations derived from the current economic
situation affecting the local, regional and national markets.
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
- ---------------------------------------------------------------------------------
1996 $583 - $512 -
1997 $604 3.6% $530 3.5%
1998 $634 5.0% $551 4.0%
1999 $647 2.1% $564 2.4%
2000 $667 3.1% $582 3.2%
2001 $677 1.5% $573 -1.5%
2002 $685 1.2% $570 -0.5%
Source: Greater Nashville Apartment Association
The following table illustrates a summary of the subject's competitive set.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
NOB HILL VILLA, NASHVILLE, TENNESSEE
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
- -------------------------------------------------------------------------------------------------
R-1 South Brook 239 94% 1973 Approx. 0.6 miles east of subject
R-2 Welch Bend 478 94% 1976 Approx. .8 miles west of subject
R-3 Dominion House 200 99% 1973 Approx. 0.61 miles east of subject
R-4 Sunrise 200 92% 1974 Less than 0.2 miles south of subject
R-5 380 Harding 160 96% 1974 Approx. 0.7 miles northwest of subject
Subject Nob Hill Villa 472 93% 1971
Rental rates are expected to stabilize.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
NOB HILL VILLA, NASHVILLE, TENNESSEE
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 18.02 acres, or 784,951 square feet
Shape Irregular
Topography Slightly slope
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 47037C3054F, dated April 20, 2001
Flood Zone Zone X
Zoning RM-20, 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
134-130-239 $294,400 $2,204,840 $2,499,240 0.04580 $114,465
IMPROVEMENT ANALYSIS
Year Built 1971
Number of Units 472
Net Rentable Area 378,800 Square Feet
Construction:
Foundation Concrete block wall
Frame Heavy or light wood
Exterior Walls Brick or masonry
Roof Composition shingle over a wood truss structure
Project Amenities Amenities at the subject include a swimming pool,
spa/jacuzzi, tennis court, gym room, barbeque
equipment, meeting hall, laundry room, business
office, and parking area.
Unit Amenities Individual unit amenities include a balcony,
fireplace, cable TV connection, and washer dryer
connection. Appliances available in each unit
include a refrigerator, stove, microwave
dishwasher, water heater, garbage disposal, and
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17
NOB HILL VILLA, NASHVILLE, TENNESSEE
oven.
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
- ----------------------------------------------------------
1Br/lBa -1A10 232 650
2Br/2Ba -2A20 240 950
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
1971 and consist of a 472-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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- ---------------------------------------------------------------------------------------------------------------------------------
Property Name Nob Hill Villa Prestige Pointe Brentwood Oaks
Location:
Address 180 Wallace Road 200 Paragon Place 100 Belle Valley Drive
City, State Nashville, Tennessee Nashville, TN Nashville, TN
County Davidson Davidson Davidson
Physical Charateristics:
Net Rentable Area (SF) 378,800 181,327 222,176
Year Built 1971 1968 1986
Number of Units 472 179 262
Unit Mix: Type Total Type Total Type Total
1Br/1Ba -1A10 232 1Br/1Ba 52 1Br/1Ba 130
2Br/2Ba -2A20 240 2Br/1Ba 96 2Br/2Ba 116
3Br/2.5Ba 30 3Br/2.5Ba 16
2Br/2Ba 60
3Br/2Ba 52
Average Unit Size (SF) 803 1,013 848
Land Area (Acre) 18.0200 11.4900 51.6800
Density (Units/Acre) 26.2 15.6 5.1
Parking Ratio (Spaces/Unit) 2.20 2.00 2.40
Parking Type (Gr., Cov., etc.) Open Open Open
Condition: Good Average Good
Appeal: Average Good Good
Amenities:
Pool/Spa Yes/Yes Yes/No Yes/No
Gym Room Yes No Yes
Laundry Room Yes Yes No
Secured Parking No No Yes
Sport Courts Yes Yes No
Washer/Dryer Connection Yes Yes No
Occupancy: 93% 94% 93%
Transaction Data:
Sale Date May, 2001 August, 2001
Sale Price ($) $5,500,000 $13,885,700
Grantor N/A N/A
Grantee Paragon Place-GEAC LLC Brentwood Oaks Apt LLC
Sale Documentation Deed-20010531-0056399 Deed- 20010829-0093580
Verification Gayner McKenzie Abby Wittenmeier
Telephone Number 615.834.1380 615.834.6257
Estimated Pro-Forma: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $912,369 $5,097 $5.03 $3,098,858 $11,828 $13.95
Vacancy/Credit Loss $ 54,742 $ 306 $0.30 $ 216,920 $ 828 $ 0.98
Effective Gross Income $857,627 $4,791 $4.73 $2,881,938 $11,000 $12.97
Operating Expenses $396,377 $2,214 $2.19 $1,420,011 $ 5,420 $ 6.39
Net Operating Income $461,250 $2,577 $2.54 $1,461,927 $ 5,580 $ 6.58
Notes: Overall, slightly inferior Overall, superior to subject
to subject
Price Per Unit $30,726 $52,999
Price Per Square Foot $ 30.33 $ 62.50
Expense Ratio 46.2% 49.3%
EGIM 6.41 4.82
Overall Cap Rate 8.39% 10.53%
Cap Rate based on Pro Forma or
Actual Income? Pro Forma Pro Forma
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- ---------------------------------------------------------------------------------------------------------------------------------
Property Name Keystone Farms Preserve at Brentwood Berkley Ridge
Location:
Address 5360 Edmonson Pike 370 Oakley Drive 308 Plus Park Blvd
City, State Nashville, TN Nashville, TN Nashville, TN
County Davidson Davidson Davidson
Physical Charateristics:
Net Rentable Area (SF) 102,510 357,120 227,408
Year Built 1998 1997 1972
Number of Units 90 360 244
Unit Mix: Type Total Type Total Type Total
2Br/2Ba 58 1Br/1Ba 132 1Br/1Ba 90
3Br/2.5Ba 32 2Br/1Ba 180 2Br/1Ba 130
3Br/2Ba 48 3Br/2.5Ba 24
Average Unit Size (SF) 1,139 992 932
Land Area (Acre) 9.7100 26.3600 18.1100
Density (Units/Acre) 9.3 13.7 13.5
Parking Ratio (Spaces/Unit) 2.40 2.20 2.80
Parking Type (Gr., Cov., etc.) Open Open,Carport/Garage Open
Condition: Good Very Good Good
Appeal: Average Good Average
Amenities:
Pool/Spa Yes/No Yes/No Yes/No
Gym Room Yes Yes Yes
Laundry Room No Yes Yes
Secured Parking Yes Yes No
Sport Courts No Yes No
Washer/Dryer Connection Yes Yes Yes
Occupancy: 92% 90% 91%
Transaction Data:
Sale Date December, 2001 September, 2002 June, 2002
Sale Price ($) $5,510,000 $24,900,000 $6,550,000
Grantor N/A The Morgan Group N/A
Grantee Keystone Farms LLC Invesco Realty Advisers RCP Summittree LLC
Sale Documentation Deed-20011220-0140573 Deed-20020910-0109883 Dee-20010619-0064950
Verification Monica M. Waltman Elizabeth Sanchez Heather Simpson
Telephone Number 615.837.8776 615.837.1911 615.361.6793
Estimated Pro-Forma: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $958,261 $10,647 $9.35 $4,194,624 $11,652 $11.75 $1,154,130 $4,730 $5.08
Vacancy/Credit Loss $ 76,661 $ 852 $0.75 $ 419,463 $ 1,165 $ 1.17 $ 103,871 $ 426 $0.46
Effective Gross Income $881,600 $ 9,796 $8.60 $3,775,161 $10,487 $10.57 $1,050,259 $4,304 $4.62
Operating Expenses $375,140 $ 4,168 $3.66 $1,524,561 $ 4,235 $ 4.27 $ 502,109 $2,058 $2.21
Net Operating Income $506,460 $ 5,627 $4.94 $2,250,600 $ 6,252 $ 6.30 $ 548,150 $2,247 $2.41
Notes: Overall, slightly superior Overall, superior to subject Overall, comparable to
to subject to subject
Price Per Unit $61,222 $69,167 $26,844
Price Per Square Foot $ 53.75 $ 69.72 $ 28.80
Expense Ratio 42.6% 40.4% 47.8%
EGIM 6.25 6.60 6.24
Overall Cap Rate 9.19% 9.04% 8.37%
Cap Rate based on Pro Forma or
Actual Income? Pro Forma Pro Forma Pro Forma
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
NOB HILL VILLA, NASHVILLE, TENNESSEE
[MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $26,844 to $69,167 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 $23,045 to $27,667 per unit with a mean or average adjusted price
of $25,784 per unit. The median adjusted price is $26,499 per unit. Based on the
following analysis, we have concluded to a value of $26,000 per unit, which
results in an "as is" value of $12,300,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
NOB HILL VILLA, NASHVILLE, TENNESSEE
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- -----------------------------------------------------------------------------------------------------------------
Property Name Nob Hill Villa Prestige Pointe Brentwood Oaks
Address 180 Wallace Road 200 Paragon Place 100 Belle Valley
Drive
City Nashville, Tennessee Nashville, TN Nashville, TN
Sale Date May, 2001 August, 2001
Sale Price ($) $5,500,000 $13,885,700
Net Rentable Area (SF) 378,800 181,327 222,176
Number of Units 472 179 262
Price Per Unit $30,726 $52,999
Year Built 1971 1968 1986
Land Area (Acre) 18.0200 11.4900 51.6800
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 05-2001 0% 08-2001 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $30,726 $52,999
Location Comparable 0% Comparable 0%
Number of Units 472 179 -15% 262 -10%
Quality / Appeal Good Superior -15% Superior -15%
Age / Condition 1971 1968 / Average 0% 1986 / Good -25%
Occupancy at Sale 93% 94% 0% 93% 0%
Amenities Good Comparable 0% Comparable 0%
Average Unit Size (SF) 803 1,013 5% 848 0%
PHYSICAL ADJUSTMENT -25% -50%
FINAL ADJUSTED VALUE ($/UNIT) $23,045 $26,499
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- ------------------------------------------------------------------------------------------------------------------------
Property Name Keystone Farms Preserve at Berkley Ridge
Brentwood
Address 5360 Edmonson 370 Oakley Drive 308 Plus Park
Pike Blvd
City Nashville, TN Nashville, TN Nashville, TN
Sale Date December, 2001 September, 2002 June, 2002
Sale Price ($) $5,510,000 $24,900,000 $6,550,000
Net Rentable Area (SF) 102,510 357,120 227,408
Number of Units 90 360 244
Price Per Unit $61,222 $69,167 $26,844
Year Built 1998 1997 1972
Land Area (Acre) 9.7100 26.3600 18.1100
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 12-2001 0% 09-2002 0% 06-2002 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $61,222 $69,167 $26,844
Location Comparable 0% Comparable 0% Comparable 0%
Number of Units 90 -20% 360 -5% 244 -10%
Quality / Appeal Superior -15% Superior -10% Comparable 0%
Age / Condition 1998 / Good -25% 1997 / Very Good -45% 1972 / Good 0%
Occupancy at Sale 92% 0% 90% 0% 91% 0%
Amenities Comparable 0% Comparable 0% Comparable 0%
Average Unit Size (SF) 1,139 5% 992 0% 932 0%
PHYSICAL ADJUSTMENT -55% -60% -10%
FINAL ADJUSTED VALUE ($/UNIT) $27,550 $27,667 $24,160
VALUE RANGE (PER UNIT) $23,045 TO $27,667
MEAN (PER UNIT) $25,784
MEDIAN (PER UNIT) $26,499
VALUE CONCLUSION (PER UNIT) $26,000
VALUE INDICATED BY SALES COMPARISON APPROACH $12,272,000
ROUNDED $12,300,000
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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-1 179 $ 5,500,000 8.39% $ 461,250 $1,157,374 0.952 $29,239
$ 30,726 $ 2,577 $ 2,452
I-2 262 $13,885,700 10.53% $1,461,927 $1,157,374 0.439 $23,290
$ 52,999 $ 5,580 $ 2,452
I-3 90 $ 5,510,000 9.19% $ 506,460 $1,157,374 0.436 $26,677
$ 61,222 $ 5,627 $ 2,452
I-4 360 $24,900,000 9.04% $2,250,600 $1,157,374 0.392 $27,129
$ 69,167 $ 6,252 $ 2,452
I-5 244 $ 6,550,000 8.37% $ 548,150 $1,157,374 1.091 $29,300
$ 26,844 $ 2,247 $ 2,452
PRICE/UNIT
Low High Average Median
$23,290 $29,300 $27,127 $27,129
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
Estimated Price Per Unit $ 27,000
Number of Units 472
Value Based on NOI Analysis $12,744,000
Rounded $12,700,000
The adjusted sales indicate a range of value between $23,290 and $29,300 per
unit, with an average of $27,127 per unit. Based on the subject's competitive
position within the improved sales, a value of $27,000 per unit is estimated.
This indicates an "as is" market value of $12,700,000 (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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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-1 179 $ 5,500,000 $ 857,627 $ 396,377 46.22% 6.41
$ 30,726
I-2 262 $13,885,700 $ 2,881,938 $1,420,011 49.27% 4.82
$ 52,999
I-3 90 $ 5,510,000 $ 881,600 $ 375,140 42.55% 6.25
$ 61,222 53.89%
I-4 360 $24,900,000 $ 3,775,161 $1,524,561 40.38% 6.60
$ 69,167
I-5 244 $ 6,550,000 $ 1,050,259 $ 502,109 47.81% 6.24
$ 26,844
EGIM
Low High Average Median
4.82 6.60 6.06 6.25
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
Estimate EGIM 4.50
Subject EGI $ 2,765,952
Value Based on EGIM Analysis $12,446,784
Rounded $12,400,000
Value Per Unit $ 26,271
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 53.89% before reserves. The comparable sales
indicate a range of expense ratios from 40.38% to 49.27%, while their EGIMs
range from 4.82 to 6.60. Overall, we conclude to an EGIM of 4.50, which results
in an "as is" value estimate in the EGIM Analysis of $12,400,000.
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 $12,400,000.
Price Per Unit $12,300,000
NOI Per Unit $12,700,000
EGIM Analysis $12,400,000
Sales Comparison Conclusion $12,400,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
NOB HILL VILLA, NASHVILLE, TENNESSEE
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
method is normally more appropriate for properties with relatively stable
operating histories and expectations.
A pro forma analysis for the first year of the investment is made to estimate a
reasonable potential net operating income for the Subject Property. Such an
analysis entails an estimate of the gross income the property should command in
the marketplace. From this total gross income must be deducted an allowance for
vacancy/collection loss and operating expenses as dictated by general market
conditions and the overall character of the subject's tenancy and leased income
to arrive at a projected estimate of net operating income. Conversion of the net
operating income to an indication of value is accomplished by the process of
capitalization, as derived primarily from market data.
MARKET RENT ANALYSIS
In order to determine a market rental rate for the subject, a survey of
competing apartment communities was performed. This survey was displayed
previously in the market analysis section of the report. Detailed information
pertaining to each of the comparable rental communities, along with photographs,
is presented in the Addenda of this report.
The following charts display the subject's current asking and actual rent rates
as well as a comparison with the previous referenced comparable rental
properties.
SUMMARY OF ACTUAL AVERAGE RENTS
Average
Unit Area ------------------------
Unit Type (Sq. Ft.) Per Unit Per SF %Occupied
1Br/1Ba -1A10 650 $426 $0.66 97.0%
2Br/2Ba -2A20 950 $540 $0.57 88.3%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
NOB HILL VILLA, NASHVILLE, TENNESSEE
COMPARABLE RENTS
----------------------------------------------
R-1 R-2 R-3 R-4 R-5
----------------------------------------------
South Welch Dominion
Brook Bend House Sunrise 380 Harding
----------------------------------------------
COMPARISON TO SUBJECT
SUBJECT SUBJECT ----------------------------------------------
SUBJECT UNIT ACTUAL ASKING Slightly Slightly
DESCRIPTION TYPE RENT RENT Inferior Similar Superior Inferior Similar MIN MAX MEDIAN AVERAGE
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Rent 1Br/1Ba -1A10 $ 426 $ 410 $ 447 $ 416 $ 475 $ 442 $ 460 $ 416 $ 475 $ 447 $ 448
Unit Area (SF) 650 650 650 660 678 594 656 594 678 656 648
Monthly Rent Per Sq. Ft. $ 0.66 $ 0.63 $ 0.69 $0.63 $ 0.70 $0.74 $ 0.70 $0.63 $ 0.74 $ 0.70 $ 0.69
Monthly Rent 2Br/2Ba -2A20 $ 540 $ 499 $ 518 $ 556 $ 575 $ 603 $ 518 $ 603 $ 566 $ 563
Unit Area (SF) 950 950 925 916 936 1,051 916 1,051 931 957
Monthly Rent Per Sq. Ft. $ 0.57 $ 0.53 $ 0.56 $0.61 $ 0.61 $ 0.57 $0.56 $ 0.61 $ 0.59 $ 0.59
CONCLUDED MARKET RENTAL RATES AND TERMS
Based on this analysis above, the subject's concluded market rental rates and
gross rental income is calculated as follows:
GROSS RENTAL INCOME PROJECTION
Market Rent
Unit Area ----------------------- Monthly Annual
Unit Type Number of Units (Sq. Ft.) Per Unit Per SF Income Income
- -------------------------------------------------------------------------------------------------------
1Br/1Ba -1A10 232 650 $420 $0.65 $ 97,440 $1,169,280
2Br/2Ba -2A20 240 950 $530 $0.56 $127,200 $1,526,400
Total $224,640 $2,695,680
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
SUMMARY OF HISTORICAL INCOME & EXPENSES
FISCAL FISCAL FISCAL
YEAR 2000 YEAR 2001 YEAR 2002
-------------------- -------------------- --------------------
DESCRIPTION ACTUAL ACTUAL ACTUAL
-------------------- -------------------- --------------------
TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT
- ---------------------------------------------------------------------------------------------
Revenues
Rental Income $2,968,588 $ 6,289 $3,030,079 $ 6,420 $2,821,823 $ 5,978
Vacancy $ 173,776 $ 368 $ 260,870 $ 553 $ 259,134 $ 549
Credit Loss/Concessions $ 64,309 $ 136 $ 142,061 $ 301 $ 39,774 $ 84
Subtotal $ 238,085 $ 504 $ 402,931 $ 854 $ 298,908 $ 633
Laundry Income $ 52,699 $ 112 $ 77,583 $ 164 $ 56,300 $ 119
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 120,712 $ 256 $ 113,358 $ 240 $ 290,811 $ 616
Subtotal Other Income $ 173,411 $ 367 $ 190,941 $ 405 $ 347,111 $ 735
Effective Gross Income $2,903,914 $ 6,152 $2,818,089 $ 5,971 $2,870,026 $ 6,081
Operating Expenses
Taxes $ 204,648 $ 434 $ 222,121 $ 471 $ 224,697 $ 476
Insurance $ 49,391 $ 105 $ 75,976 $ 161 $ 83,783 $ 178
Utilities $ 316,579 $ 671 $ 300,073 $ 636 $ 362,071 $ 767
Repair & Maintenance $ 144,408 $ 306 $ 174,070 $ 369 $ 140,056 $ 297
Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Landscaping $ 76,752 $ 163 $ 94,539 $ 200 $ 91,314 $ 193
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 28,755 $ 61 $ 30,078 $ 64 $ 28,457 $ 60
General Administrative $ 318,329 $ 674 $ 393,973 $ 835 $ 329,838 $ 699
Management $ 147,565 $ 313 $ 151,550 $ 321 $ 137,626 $ 292
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Total Operating Expenses $1,286,427 $ 2,725 $1,442,380 $ 3,056 $1,397,842 $ 2,962
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Net Income $1,617,487 $ 3,427 $1,375,709 $ 2,915 $1,472,184 $ 3,119
FISCAL
YEAR 2003 ANNUALIZED 2003
-------------------- --------------------
DESCRIPTION MANAGEMENT BUDGET PROJECTION AAA PROJECTION
-------------------- -------------------- ------------------------------
TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT %
- ------------------------------------------------------------------------------------------------------
Revenues
Rental Income $2,709,206 $ 5,740 $2,692,512 $ 5,704 $2,695,680 $ 5,711 100.0%
Vacancy $ 151,068 $ 320 $ 329,452 $ 698 $ 215,654 $ 457 8.0%
Credit Loss/Concessions $ 12,100 $ 26 $ 134,868 $ 286 $ 53,914 $ 114 2.0%
Subtotal $ 163,168 $ 346 $ 464,320 $ 984 $ 269,568 $ 571 10.0%
Laundry Income $ 56,384 $ 119 $ 58,608 $ 124 $ 56,640 $ 120 2.1%
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 303,200 $ 642 $ 405,136 $ 858 $ 283,200 $ 600 10.5%
Subtotal Other Income $ 359,584 $ 762 $ 463,744 $ 983 $ 339,840 $ 720 12.6%
Effective Gross Income $2,905,622 $ 6,156 $2,691,936 $ 5,703 $2,765,952 $ 5,860 100.0%
Operating Expenses
Taxes $ 224,696 $ 476 $ 224,696 $ 476 $ 224,200 $ 475 8.1%
Insurance $ 92,592 $ 196 $ 103,548 $ 219 $ 94,400 $ 200 3.4%
Utilities $ 345,880 $ 733 $ 385,940 $ 818 $ 365,800 $ 775 13.2%
Repair & Maintenance $ 154,460 $ 327 $ 282,060 $ 598 $ 188,800 $ 400 6.8%
Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Landscaping $ 98,364 $ 208 $ 143,508 $ 304 $ 94,400 $ 200 3.4%
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Marketing & Leasing $ 28,622 $ 61 $ 43,928 $ 93 $ 30,680 $ 65 1.1%
General Administrative $ 326,394 $ 692 $ 430,856 $ 913 $ 354,000 $ 750 12.8%
Management $ 136,921 $ 290 $ 121,768 $ 258 $ 138,298 $ 293 5.0%
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Total Operating Expenses $1,407,929 $ 2,983 $1,736,304 $ 3,679 $1,490,578 $ 3,158 53.9%
Reserves $ 0 $ 0 $ 0 $ 0 $ 118,000 $ 250 7.9%
Net Income $1,497,693 $ 3,173 $ 955,632 $ 2,025 $1,157,374 $ 2,452 41.8%
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
SUMMARY OF OVERALL
CAPITALIZATION RATES
Comp. No. Sale Date Occup. Price/Unit OAR
- ------------------------------------------------------
1-1 May-01 94% $30,726 8.39%
1-2 Aug-01 93% $52,999 10.53%
1-3 Dec-01 92% $61,222 9.19%
1-4 Sep-02 90% $69,167 9.04%
1-5 Jun-02 91% $26,844 8.37%
High 10.53%
Low 8.37%
Average 9.10%
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 $12,400,000. In this instance, the reversion
figure contributes
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
NOB HILL VILLA, NASHVILLE, TENNESSEE
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
NOB HILL VILLA
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009
FISCAL YEAR 1 2 3 4 5 6
- -----------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $2,695,680 $2,776,550 $2,859,847 $2,945,642 $3,034,012 $3,125,032
Vacancy $ 215,654 $ 222,124 $ 228,788 $ 235,651 $ 242,721 $ 250,003
Credit Loss $ 53,914 $ 55,531 $ 57,197 $ 58,913 $ 60,680 $ 62,501
Concessions $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------
Subtotal $ 269,568 $ 277,655 $ 285,985 $ 294,564 $ 303,401 $ 312,503
Laundry Income $ 56,640 $ 58,339 $ 60,089 $ 61,892 $ 63,749 $ 65,661
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 283,200 $ 291,696 $ 300,447 $ 309,460 $ 318,744 $ 328,306
--------------------------------------------------------------------------------
Subtotal Other Income $ 339,840 $ 350,035 $ 360,536 $ 371,352 $ 382,493 $ 393,968
--------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME $2,765,952 $2,848,931 $2,934,398 $3,022,430 $3,113,103 $3,206,496
OPERATING EXPENSES:
Taxes $ 224,200 $ 230,926 $ 237,854 $ 244,989 $ 252,339 $ 259,909
Insurance $ 94,400 $ 97,232 $ 100,149 $ 103,153 $ 106,248 $ 109,435
Utilities $ 365,800 $ 376,774 $ 388,077 $ 399,720 $ 411,711 $ 424,062
Repair & Maintenance $ 188,800 $ 194,464 $ 200,298 $ 206,307 $ 212,496 $ 218,871
Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Landscaping $ 94,400 $ 97,232 $ 100,149 $ 103,153 $ 106,248 $ 109,435
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 30,680 $ 31,600 $ 32,548 $ 33,525 $ 34,531 $ 35,567
General Administrative $ 354,000 $ 364,620 $ 375,559 $ 386,825 $ 398,430 $ 410,383
Management $ 138,298 $ 142,447 $ 146,720 $ 151,122 $ 155,655 $ 160,325
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $1,490,578 $1,535,295 $1,581,354 $1,628,794 $1,677,658 $1,727,988
Reserves $ 118,000 $ 121,540 $ 125,186 $ 128,942 $ 132,810 $ 136,794
--------------------------------------------------------------------------------
NET OPERATING INCOME $1,157,374 $1,192,096 $1,227,859 $1,264,694 $1,302,635 $1,341,714
Operating Expense Ratio (% of EGI) 53.9% 53.9% 53.9% 53.9% 53.9% 53.9%
Operating Expense Per Unit $ 3,158 $ 3,253 $ 3,350 $ 3,451 $ 3,554 $ 3,661
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 7 8 9 10 11
- ---------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $3,218,783 $3,315,346 $3,414,807 $3,517,251 $3,622,769
Vacancy $ 257,503 $ 265,228 $ 273,185 $ 281,380 $ 289,821
Credit Loss $ 64,376 $ 66,307 $ 68,296 $ 70,345 $ 72,455
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------
Subtotal $ 321,878 $ 331,535 $ 341,481 $ 351,725 $ 362,277
Laundry Income $ 67,631 $ 69,660 $ 71,750 $ 73,902 $ 76,119
GarageRevenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 338,156 $ 348,300 $ 358,749 $ 369,512 $ 380,597
------------------------------------------------------------------
Subtotal Other Income $ 405,787 $ 417,960 $ 430,499 $ 443,414 $ 456,717
------------------------------------------------------------------
EFFECTIVE GROSS INCOME $3,302,691 $3,401,772 $3,503,825 $3,608,940 $3,717,208
OPERATING EXPENSES:
Taxes $ 267,707 $ 275,738 $ 284,010 $ 292,530 $ 301,306
Insurance $ 112,719 $ 116,100 $ 119,583 $ 123,171 $ 126,866
Utilities $ 436,784 $ 449,888 $ 463,384 $ 477,286 $ 491,605
Repair & Maintenance $ 225,437 $ 232,200 $ 239,166 $ 246,341 $ 253,731
Cleaning $ 0 $ 0 $ 0 $ 0 $ 0
Landscaping $ 112,719 $ 116,100 $ 119,583 $ 123,171 $ 126,866
Security $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 36,634 $ 37,733 $ 38,865 $ 40,030 $ 41,231
GeneralAdministrative $ 422,695 $ 435,375 $ 448,437 $ 461,890 $ 475,746
Management $ 165,135 $ 170,089 $ 175,191 $ 180,447 $ 185,860
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------
TOTAL OPERATING EXPENSES $1,779,828 $1,833,222 $1,888,219 $1,944,866 $2,003,212
Reserves $ 140,898 $ 145,125 $ 149,479 $ 153,963 $ 158,582
------------------------------------------------------------------
NET OPERATING INCOME $1,381,966 $1,423,425 $1,466,127 $1,510,111 $1,555,414
Operating Expense Ratio (% of EGI) 53.9% 53.9% 53.9% 53.9% 53.9%
Operating Expense Per Unit $ 3,771 $ 3,884 $ 4,000 $ 4,120 $ 4,244
Estimated Stabilized NOI $1,157,374 Sales Expense Rate 2.00%
Months to Stabilized 1 Discount Rate 12.00%
Stabilized Occupancy 92.0% Terminal Cap Rate 10.50%
"DCF" VALUE ANALYSIS
Gross Residual Sale Price $ 14,813,471 Deferred Maintenance $ 0
Less: Sales Expense $ 296,269 Add: Excess Land $ 0
------------
Net Residual Sale Price $ 14,517,201 Other Adjustments $ 0
-----------
PV of Reversion $ 4,674,150 Value Indicated By "DCF" $12,416,546
Add: NPV of NOI $ 7,742,395 Rounded $12,400,000
------------
PV Total $ 12,416,546
"DCF" VALUE SENSITIVITY TABLE
TOTAL VALUE DISCOUNT RATE
11.50% 11.75% 12.00% 12.25% 12.50%
10.00% $13,056,920 $12,851,386 $12,650,253 $12,453,413 $12,260,758
10.25% $12,931,739 $12,728,977 $12,530,549 $12,336,348 $12,146,269
10.50% $12,812,518 $12,612,397 $12,416,546 $12,224,859 $12,037,233
TERMINAL CAP RATE 10.75% $12,698,843 $12,501,239 $12,307,845 $12,118,554 $11,933,267
11.00% $12,590,335 $12,395,134 $12,204,084 $12,017,082 $11,834,027
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
NOB HILL VILLA, NASHVILLE, TENNESSEE
INCOME LOSS DURING LEASE-UP
The subject is currently near or at a stabilized condition. Therefore, there is
no income loss during lease-up at the subject property.
CONCESSIONS
Concessions have historically not been utilized at the subject property or in
the subject's market. Therefore, no adjustment was included for concessions.
DIRECT CAPITALIZATION METHOD
After having projected the income and expenses for the property, the next step
in the valuation process is to capitalize the net income into an estimate of
value. The selected overall capitalization rate ("OAR") covers both return on
and return of capital. It is the overall rate of return an investor expects.
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 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
NOB HILL VILLA, NASHVILLE, TENNESSEE
Nob Hill Villa
TOTAL PER SQ. FT. PER UNIT %OF EGI
- ---------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $ 2,695,680 $ 7.12 $ 5,711
Less: Vacancy & Collection 10.00% $ 269,568 $ 0.71 $ 571
Loss
Plus: Other Income
Laundry Income $ 56,640 $ 0.15 $ 120 2.05%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 283,200 $ 0.75 $ 600 10.24%
-----------------------------------------------------
Subtotal Other Income $ 339,840 $ 0.90 $ 720 12.29%
EFFECTIVE GROSS INCOME $ 2,765,952 $ 7.30 $ 5,860
OPERATING EXPENSES:
Taxes $ 224,200 $ 0.59 $ 475 8.11%
Insurance $ 94,400 $ 0.25 $ 200 3.41%
Utilities $ 365,800 $ 0.97 $ 775 13.23%
Repair & Maintenance $ 188,800 $ 0.50 $ 400 6.83%
Cleaning $ 0 $ 0.00 $ 0 0.00%
Landscaping $ 94,400 $ 0.25 $ 200 3.41%
Security $ 0 $ 0.00 $ 0 0.00%
Marketing & Leasing $ 30,680 $ 0.08 $ 65 1.11%
General Administrative 5.00% $ 354,000 $ 0.93 $ 750 12.80%
Management $ 138,298 $ 0.37 $ 293 5.00%
Miscellaneous $ 0 $ 0.00 $ 0 0.00%
TOTAL OPERATING EXPENSES $ 1,490,578 $ 3.93 $ 3,158 53.89%
RESERVES $ 118,000 $ 0.31 $ 250 4.27%
-----------------------------------------------------
NET OPERATING INCOME $ 1,157,374 $ 3.06 $ 2,452 41.84%
-----------------------------------------------------
"GOING IN" CAPITALIZATION RATE 9.50%
VALUE INDICATION $12,182,888 $ 32.16 $25,811
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $12,182,888
ROUNDED $12,200,000 $ 32.21 $25,847
-----------------------------------------------------
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
NOB HILL VILLA, NASHVILLE, TENNESSEE
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- ------------------------------------------------------------------------
8.75% $13,227,136 $13,200,000 $27,966 $34.85
9.00% $12,859,716 $12,900,000 $27,331 $34.05
9.25% $12,512,156 $12,500,000 $26,483 $33.00
9.50% $12,182,888 $12,200,000 $25,847 $32.21
9.75% $11,870,507 $11,900,000 $25,212 $31.41
10.00% $11,573,744 $11,600,000 $24,576 $30.62
10.25% $11,291,458 $11,300,000 $23,941 $29.83
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $12,200,000.
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 $12,400,000
Direct Capitalization Method $12,200,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$12,400,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37
NOB HILL VILLA, NASHVILLE, TENNESSEE
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 $12,400,000
Income Approach $12,400,000
Reconciled Value $12,400,000
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 5, 2003 the market value of the fee simple estate in the property is:
$12,400,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
NOB HILL VILLA, NASHVILLE, TENNESSEE
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
NOB HILL VILLA, NASHVILLE, TENNESSEE
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
NOB HILL VILLA, NASHVILLE, TENNESSEE
SUBJECT PHOTOGRAPHS
[PICTURE OF UNIT TYPE FACADE] [PICTURE OF UNIT TYPE]
[PICTURE OF BEDROOM] [PICTURE OF BEDROOM]
[PICTURE OF LIVING ROOM AREA] [PICTURE OF LIVING ROOM AREA]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
NOB HILL VILLA, NASHVILLE, TENNESSEE
SUBJECT PHOTOGRAPHS
[PICTURE OF POOL] [PICTURE OF FITNESS CENTER]
[PICTURE OF SITE IMPROVEMENTS] [PICTURE OF MAIN ENTRANCE]
[PICTURE OF WALLACE ROAD-SOUTH] [PICTURE OF WALLACE ROAD-NORTH]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
NOB HILL VILLA, NASHVILLE, TENNESSEE
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
NOB HILL VILLA, NASHVILLE, TENNESSEE
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-I COMPARABLE I-2 COMPARABLE I-3
PRESTIGE POINTE BRENTWOOD OAKS KEYSTONE FARMS
200 Paragon Place 100 Belle Valley Drive 5360 Edmonson Pike
Nashville, TN Nashville, TN Nashville, TN
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
PRESERVE AT BRENTWOOD BERKLEY RIDGE
370 Oakley Drive 308 Plus Park Blvd
Nashville, TN Nashville, TN
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
NOB HILL VILLA, NASHVILLE, TENNESSEE
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
Property Name Nob Hill Villa South Brook
Management Company AIMCO Volunteer Properties
LOCATION:
Address 180 Wallace Road 5101 Lindbar Drive
City, State Nashville, Tennessee Nashville, TN
County Davidson Davidson
Proximity to Subject Approx. 0.6 miles east of subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 378,800 181,640
Year Built 1971 1973
Effective Age 25 10
Building Structure Type Brick & wood siding walls; asphalt shingle Brick & wood siding walls; asphalt shingle
roof roof
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 472 239
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo. Rent
1 1Br/1Ba-1A10 650 232 $ 426 1 1Br/1Ba 650 143 $ 447
2 2Br/2Ba-2A20 950 240 $ 540 2 2 Br/2Ba 925 96 $ 518
Average Unit Size (SF) 803 760
Unit Breakdown: Efficiency 0% 2-Bedroom 39% Efficiency 0% 2-Bedroom 41%
1-Bedroom 61% 3-Bedroom 0% 1-Bedroom 59% 3-Bedroom 0%
CONDITION: Good Good
APPEAL: Average Fair
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony W/D Connection Balcony W/D Connection
X Fireplace Other Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
X Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court X BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall Sand Volley Ball X Meeting Hall
X Tennis Court Secured Parking Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track Business Office
X Gym Room Gym Room
OCCUPANCY: 93% 94%
LEASING DATA:
Available Leasing Terms 6 to 12 months 3 to 12 months
Concessions $99 deposit and no application fee $300 off first month
Pet Deposit $300/$20Mnth $300
Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas
X Water Trash Water Trash
Confirmation Tracy Crowe/Property Manager Tracy Thompson/Property Manager
Telephone Number 615.834.0694 615.834.8340
NOTES: Renovated in 1992
COMPARISON TO SUBJECT: INFERIOR
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
Property Name Welch Bend Dominion House
Management Company Freeman Webb First Management Services
LOCATION:
Address 100 Tanglewood Ct 5099 Linbar Drive
City, State Nashville, TN Nashville, TN
County Davidson Davidson
Proximity to Subject Approx. .8 miles west of subject Approx. 0.61 miles east of
subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 383,834 169,000
Year Built 1976 1973
Effective Age 27 25
Building Structure Type Brick & wood siding walls; asphalt shingle Brick & wood siding walls; asphalt shingle
roof roof
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 478 200
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1Br/1Ba 660 210 $416 1 1Br/1Ba 678 76 $475
2 2Br/2Ba 868 228 $533 2 2Br/2Ba 936 114 $575
2 2 Br/2.5Ba 1,188 40 $690 3Br/2Ba 1,081 10 $785
Average Unit Size (SF) 803 845
Unit Breakdown: Efficiency 0% 2-Bedroom 57% Efficiency 0% 2-Bedroom 57%
1-Bedroom 43% 3-Bedroom 0% 1-Bedroom 38% 3-Bedroom 5%
CONDITION: Good Good
APPEAL: Average Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
Balcony X W/D Connection X Balcony X W/D Connection
Fireplace Other X Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court X BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball X Meeting Hall
X 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
Gym Room X Gym Room
OCCUPANCY: 94% 99%
LEASING DATA:
Available Leasing Terms 6 to 12 months 6 to 12 months
Concessions 1 month None
Pet Deposit No Pets $250
Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas
X Water Trash Water Trash
Confirmation Cindy Myers/Property Manager Wayne Woodside/Property Manager
Telephone Number 615.833.5643 615.833.0218
NOTES: None None
Similar Slightly Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 4 R - 5
Property Name Sunrise 380 Harding
Management Company First Management Services Freeman Webb
LOCATION:
Address 189 Wallace Road 380 Harding Place
City, State Nashville, TN Nashville, TN
County Davidson Davidson
Proximity to Subject Less than 0.2 miles south of subject Approx. 0.7 miles northwest of subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 118,800 248,005
Year Built 1974 1974
Effective Age 10 18
Building Structure Type Brick & wood siding walls; asphalt shingle Brick & wood siding walls; asphalt shingle
roof roof
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 200 160
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1Br/1Ba 594 200 $442 1 1Br/1Ba 656 79 $460
2 2Br/2Ba 1,051 71 $603
3Br/2.5Ba 1,500 10 $740
Average Unit Size (SF) 594 884
Unit Breakdown: Efficiency 0% 2-Bedroom 0% Efficiency 0% 2-Bedroom 44%
1-Bedroom 100% 3-Bedroom 0% 1-Bedroom 49% 3-Bedroom 7%
CONDITION: Good Good
APPEAL: Average Average
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
Balcony W/D Connection Balcony X W/D Connection
X Fireplace Other X Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court X BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall Sand Volley Ball X 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: 92% 96%
LEASING DATA:
Available Leasing Terms 6 to 12 months 9 to 12 months
Concessions Reeduced rates for select units $100 off first month's rent
Pet Deposit $250 $250
Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas
Water Trash Water Trash
Confirmation Jim Crowson/Property Manager Ann Mead/Property Manager
Telephone Number 615.333.7733 615.832.6847
NOTES: None None
Slightly Inferior Similar
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
NOB HILL VILLA, NASHVILLE, TENNESSEE
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
SOUTH BROOK WELCH BEND DOMINION HOUSE
5101 Lindbar Drive 100 Tanglewood Ct 5099 Linbar Drive
Nashville, TN Nashville, TN Nashville, TN
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4 COMPARABLE R-5
SUNRISE 380 HARDING
189 Wallace Road 380 Harding Place
Nashville, TN Nashville, TN
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
NOB HILL VILLA, NASHVILLE, TENNESSEE
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 pages)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
NOB HILL VILLA, NASHVILLE, TENNESSEE
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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. Daniel Salcedo
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
Tennessee Temporary Practice Permit
#00053573
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
NOB HILL VILLA, NASHVILLE, TENNESSEE
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 pages)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
NOB HILL VILLA, NASHVILLE, TENNESSEE
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
NOB HILL VILLA, NASHVILLE, TENNESSEE
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 Candidate
AFFILIATIONS Member of the CCIM Institute pursuing Certified
Commercial Investment Member (CCIM) designation
PUBLICATIONS "An Analysis of the Determinants of Industrial Property
Valuation," Co-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.
NOB HILL VILLA, NASHVILLE, TENNESSEE
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
NOB HILL VILLA, NASHVILLE, TENNESSEE
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.