FOOTHILL PLACE
2260 SOUTH FOOTHILL DRIVE
SALT LAKE CITY, UTAH
MARKET VALUE -
FEE SIMPLE ESTATE
AS OF MAY 2, 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 10, 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: FOOTHILL PLACE
2260 SOUTH FOOTHILL DRIVE
SALT LAKE CITY, SALT LAKE COUNTY, UTAH
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 450 units with a
total of 415,254 square feet of rentable area. The improvements were built in
1973. The improvements are situated on 18.93 acres. Overall, the improvements
are in average condition. As of the date of this appraisal, the subject property
is 82% 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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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 2, 2003 is:
($21,500,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
-s- Jude Flynn
--------------------
July 10, 2003 Jude Flynn, MAI, SRA
#053272 Managing Principal, Real Estate Group
Utah Temporary Practice Permit #CG021105
Report By:
Jude T. Flynn, MAI, SRA
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
FOOTHILL PLACE, SALT LAKE CITY, UTAH
TABLE OF CONTENTS
Cover
Letter of Transmittal
Table of Contents
APPRAISAL DATA
Executive Summary .................................................. 4
Introduction ....................................................... 9
Area Analysis ...................................................... 11
Market Analysis .................................................... 14
Site Analysis ...................................................... 16
Improvement Analysis ............................................... 16
Highest and Best Use ............................................... 17
VALUATION
Valuation Procedure ................................................ 18
Sales Comparison Approach .......................................... 20
Income Capitalization Approach ..................................... 26
Reconciliation and Conclusion ...................................... 38
ADDENDA
Exhibit A - Photographs of Subject Property
Exhibit B - Summary of Rent Comparables and Photograph of Comparables
Exhibit C - Assumptions and Limiting Conditions
Exhibit D - Certificate of Appraiser
Exhibit E - Qualifications
General Service Conditions
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 4
FOOTHILL PLACE, SALT LAKE CITY, UTAH
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: Foothill Place
LOCATION: 2260 South Foothill Drive
Salt Lake City, Utah
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 2, 2003
DATE OF REPORT: July 10, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 18.93 acres, or 824,591 square feet
Assessor Parcel No.: 16-23-101-004
Floodplain: Community Panel No. 49990106-0001D (September
30, 1994)
Flood Zone X, an area outside the floodplain.
Zoning: RMF-35 (Medium to High Density Multi-Family
Development)
BUILDING:
No. of Units: 450 Units
Total NRA: 415,254 Square Feet
Average Unit Size: 923 Square Feet
Apartment Density: 23.8 units per acre
Year Built: 1973
UNIT MIX AND MARKET RENT:
GROSS RENTAL INCOME PROJECTION
MARKET RENT
------------------
UNIT TYPE NUMBER OF UNITS SQUARE FEET PER UNIT PER SF MONTHLY INCOME ANNUAL INCOME
- -------------- --------------- ----------- -------- ------ -------------- -------------
1Br/1Ba - A1 73 695 $ 550 $ 0.79 $ 40,150 $ 481,800
2Br/1Ba - A2 143 775 $ 600 $ 0.77 $ 85,800 $ 1,029,600
2Br/1Ba - A3 84 991 $ 705 $ 0.71 $ 59,220 $ 710,640
2Br/1.5Ba - A4 68 1,150 $ 725 $ 0.63 $ 49,300 $ 591,600
2Br/2Ba - A5 82 1,125 $ 710 $ 0.63 $ 58,220 $ 698,640
-------------------------------
Totals $ 292,690 $ 3,512,280
===============================
OCCUPANCY: 82%
ECONOMIC LIFE: 45 Years
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
FOOTHILL PLACE, SALT LAKE CITY, UTAH
EFFECTIVE AGE: 18 Years
REMAINING ECONOMIC LIFE: 27 Years
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
PARKING AREA EXTERIOR - REAR VIEW
AREA MAP
[MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
PART TWO - ECONOMIC INDICATORS
Amount $/Unit
------------------ --------------
INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION
Potential Rental Income $3,512,280 $7,805
Effective Gross Income $3,428,306 $7,618
Operating Expenses $1,306,599 $2,904 38.1% of EGI
Net Operating Income: $1,964,207 $4,365
Capitalization Rate 9.00%
DIRECT CAPITALIZATION VALUE $21,300,000 * $47,333 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 16%
Stabilized Vacancy & Collection Loss: 12%
Lease-up / Stabilization Period 12 months
Terminal Capitalization Rate 9.75%
Discount Rate 11.50%
Selling Costs 2.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $21,800,000 * $48,444 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $21,500,000 $47,778 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $47,533 to $77,703
Range of Sales $/Unit (Adjusted) $45,156 to $47,783
VALUE INDICATION - PRICE PER UNIT $20,600,000 * $45,778 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 6.36 to 8.13
Selected EGIM for Subject 6.50
Subject's Projected EGI $3,428,306
EGIM ANALYSIS CONCLUSION $21,700,000 * $48,222 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $21,000,000 * $46,667 / UNIT
RECONCILED SALES COMPARISON VALUE $21,000,000 $46,667 / 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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $20,600,000
NOI Per Unit $21,000,000
EGIM Multiplier $21,700,000
INDICATED VALUE BY SALES COMPARISON $21,000,000 $46,667 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $21,300,000
Discounted Cash Flow Method: $21,800,000
INDICATED VALUE BY THE INCOME APPROACH $21,500,000 $47,778 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $21,500,000 $47,778 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
FOOTHILL PLACE, SALT LAKE CITY, UTAH
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 2260 South Foothill Drive, Salt Lake City,
Salt Lake County, Utah. Salt Lake City identifies it as 16-23-101-004.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by Jude T. Flynn,
MAI, SRA on May 2, 2003. Jude T. Flynn, MAI, SRA performed the research,
valuation analysis and wrote the report. Jude T. Flynn, MAI, SRA has extensive
experience in appraising similar properties and meets 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 2, 2003. The
date of the report is July 10, 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 defined in The Dictionary of Real Estate Appraisal, 3rd ed.
(Chicago: Appraisal Institute, 1993), as:
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10
FOOTHILL PLACE, SALT LAKE CITY, UTAH
"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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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 Salt Lake City, Utah. Overall, the
neighborhood is characterized as a suburban setting with the predominant land
use being various. The subject's neighborhood is generally defined by the
following boundaries.
NEIGHBORHOOD BOUNDARIES
East - Wasatch Mountains
West - Route 181
South - Interstate 80
North - East 2100 Street
MAJOR EMPLOYERS
Major employers in the subject's area include the State of Utah, Intermountain
Health Care, University of Utah, Brigham Young University, Hill Air Force Base,
Wal-Mart Stores, Convergys, Utah State University, Smith's Food King, U.S.
Postal Service and Novus (Discover Card). 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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
NEIGHBORHOOD DEMOGRAPHICS
AREA
--------------------------------------------
CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA
- --------------------------- ------------ ------------ ------------ ---------
POPULATION TRENDS
Current Population 9,478 88,038 217,526 1,380,958
5-Year Population 9,705 88,713 223,109 1,503,822
% Change CY-5Y 2.4% 0.8% 2.6% 8.9%
Annual Change CY-5Y 0.5% 0.2% 0.5% 1.8%
HOUSEHOLDS
Current Households 3,661 34,432 88,976 447,829
5-Year Projected Households 3,735 34,967 91,436 488,239
% Change CY - 5Y 2.0% 1.6% 2.8% 9.0%
Annual Change CY-5Y 0.4% 0.3% 0.6% 1.8%
INCOME TRENDS
Median Household Income $ 68,321 $ 58,590 $ 39,499 $ 55,128
Per Capita Income $ 34,265 $ 27,992 $ 24,951 $ 20,663
Average Household Income $ 87,195 $ 71,672 $ 61,023 $ 63,717
Source: Demographics Now
The subject neighborhood's population is expected to show increases below that
of the region. The immediate market offers superior income levels as compared to
the broader market.
The following table illustrates the housing statistics in the subject's
immediate area, as well as the MSA region.
HOUSING TRENDS
AREA
--------------------------------------------
CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA
- --------------------------- ------------ ------------ ------------ ---------
HOUSING TRENDS
% of Households Renting 28.87% 28.19% 40.49% 26.58%
5-Year Projected % Renting 27.82% 27.35% 38.87% 25.40%
% of Households Owning 66.22% 66.91% 51.60% 68.01%
5-Year Projected % Owning 67.30% 67.80% 53.40% 69.56%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
FOOTHILL PLACE, SALT LAKE CITY, UTAH
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Residential
South - Commercial
East - Commercial
West - Commercial
CONCLUSIONS
The subject is well located within the city of Salt Lake City. 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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
MARKET ANALYSIS
The subject property is located in the city of Salt Lake City in Salt Lake
County. The overall pace of development in the subject's market is more or less
stable. Overall, new development of apartment units subsided after the 2002
Winter Olympics. There are an estimated 106,000 apartment units total. There is
currently 765 units scheduled to be completed by September, 2003. The bulk of
new construction is on the West side of the city. The following table
illustrates historical vacancy rates for the subject's market.
HISTORICAL VACANCY RATE
Period Region Submarket
- ------ ------ ---------
1993 2.8% N/A
1994 3.1% N/A
1995 3.5% N/A
1996 4.3% N/A
1997 5.3% 4.8%
1998 6.8% 6.6%
1999 7.7% 8.2%
2000 6.3% 5.9%
2001 7.1% 7.1%
2002 10.9% 10.3%
Source: Equimark Properties - January 2003 Market Surve
Occupancy trends in the subject's market are decreasing. Historically speaking,
the subject's submarket has equated the overall market.
Market rents in the subject's market have been following a decreasing trend. The
following table illustrates historical rental rates for the subject's market.
HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change
- ------ ------ -------- --------- --------
4Q01 $ 649 - $ 613 -
2Q02 $ 649 0.0% $ 605 -1.3%
4Q02 $ 649 0.0% $ 599 -1.0%
Source: Equimark Properties - January 2003 Market Survey
The following table illustrates a summary of the subject's competitive set.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
FOOTHILL PLACE, SALT LAKE CITY, UTAH
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
- ------- ------------------- ----- ----- ----------- -------------------------
R-1 The Palladio 245 97% 1996 & 1997 4-mile from the subject
R-2 The Covey 75 96% 1909 4-mile from the subject
R-3 Santa Fe 492 93% 15 6-mile from the subject
R-4 Irving School House 232 93% 100 1.5-mile from the subject
R-5 Pinnacle Highland 522 90% 8 2-mile from the subject
Subject Foothill Place 450 82% 1973
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
FOOTHILL PLACE, SALT LAKE CITY, UTAH
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 18.93 acres, or 824,591 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 49990106-0001D, dated September 30, 1994
Flood Zone Zone X
Zoning RMF-35, 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
- ------------- ----------- ------------ ------------ --------- ---------
16-23-101-004 $4,617,700 $16,483,600 $21,101,300 0.01483 $303,093
(2001)
IMPROVEMENT ANALYSIS
Year Built 1973
Number of Units 450
Net Rentable Area 415,254 Square Feet
Construction:
Foundation Reinforced concrete slab
Frame Heavy or light wood
Exterior Walls Brick or masonry
Roof Composition shingle over a wood truss structure
Project Amenities Amenities at the subject include a swimming pool,
spa/jacuzzi, volleyball court, sand volleyball,
gym room, laundry room, and parking area.
Unit Amenities Individual unit amenities include a garage,
balcony, fireplace, cable TV connection, and
washer dryer connection. Appliances available in
each unit include a refrigerator, stove,
dishwasher, garbage disposal, and oven.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17
FOOTHILL PLACE, SALT LAKE CITY, UTAH
Unit Mix:
Number of Unit Area
Unit Type Units (Sq. Ft.)
- -------------- --------- ---------
1Br/1Ba - A1 73 695
2Br/1Ba - A2 143 775
2Br/1Ba - A3 84 991
2Br/1.5Ba - A4 68 1,150
2Br/2Ba - A5 82 1,125
Overall Condition Average
Effective Age 18 years
Economic Life 45 years
Remaining Economic Life 27 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
1973 and consist of a 450-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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- -----------------------------------------------------------------------------------------------------------------------------
Property Name Foothill Place Brighton Place Mountain Shadows
LOCATION:
Address 2260 South Foothill Drive 6900 South 135 West 3825 South 700 West
City, State Salt Lake City, Utah Midlvale, Utah Salt Lake City, Utah
County Salt Lake County Salt Lake County Salt Lake County
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 415,254 305,232 213,930
Year Built 1973 1982 1985
Number of Units 450 336 262
Unit Mix: Type Total Type Total Type Total
1Br/1Ba - A1 73 1BR/1BA 132 1BR/1BA 80
2Br/1Ba - A2 143 2BR/1BA 156 2BR/1BA 132
2Br/1Ba - A3 84 3BR/2BA 48 3BR/2BA 50
2Br/1.5Ba - A4 68
2Br/2Ba - A5 82
Average Unit Size (SF) 923 908 817
Land Area (Acre) 18.9300 21.6600 12.3000
Density (Units/Acre) 23.8 15.5 21.3
Parking Ratio (Spaces/Unit) 2.00 1.49 1.50
Parking Type (Gr., Cov., etc.) Garage, Open Covered Covered, Open Covered, Open
CONDITION: Average Average Average
APPEAL: Average Average Average
AMENITIES:
Pool/Spa Yes/Yes Yes/No Yes/No
Gym Room Yes Yes Yes
Laundry Room Yes No No
Secured Parking No No No
Sport Courts No Yes Yes
OCCUPANCY: 82% 90% 92%
TRANSACTION DATA:
Sale Date April, 2001 July, 2001
Sale Price ($) $16,900,000 $12,500,000
Grantor Archstone C.A. Archstone C.A.
Grantee Wasatach Management CDS Investments SLC
Sale Documentation N/A N/A
Verification David Anderson, App. David Anderson, App.
Telephone Number 801-281-4600 801-281-4600
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
- ---------------------------------------------------------------------------------------------------------------------------
Potential Gross Income $2,805,545 $8,350 $9.19 $2,108,876 $8,049 $9.86
Vacancy/Credit Loss $ 202,781 $ 604 $0.66 $ 142,380 $ 543 $0.67
--------------------------------------------------------
Effective Gross Income $2,602,764 $7,746 $8.53 $1,966,496 $7,506 $9.19
Operating Expenses $1,076,004 $3,202 $3.53 $ 824,951 $3,149 $3.86
--------------------------------------------------------
Net Operating Income $1,526,760 $4,544 $5.00 $1,141,545 $4,357 $5.34
- ---------------------------------------------------------------------------------------------------------------------------
NOTES:
PRICE PER UNIT $50,298 $47,710
PRICE PER SQUARE FOOT $ 55.37 $ 58.43
EXPENSE RATIO 41.3% 42.0%
EGIM 6.49 6.36
OVERALL CAP RATE 9.03% 9.13%
Cap Rate based on Pro Forma or Actual Income?
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- -----------------------------------------------------------------------------------------------------------------------------
Property Name Riverbend Raintree Apartments Alpine Meadows
LOCATION:
Address 845 West River Hollow Road 870 North 900 West 845 East 9000 South
City, State Salt Lake City, Utah Salt Lake City, Utah Sandy, Utah
County Salt Lake County Salt Lake County Salt Lake County
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 143,000 110,740 205,638
Year Built 1985 1984 1996
Number of Units 156 152 222
Unit Mix: Type Total Type Total Type Total
1BR/1BA 156 1BR/1BA 152 1BR/1BA 112
2BR/1BA 44 2BR/1BA 44 2BR/1BA 32
2BR/2BA 56
3BR/2 BA 22
Average Unit Size (SF) 917 729 926
Land Area (Acre) 8.4300 7.6200 14.4900
Density (Units/Acre) 18.5 19.9 15.3
Parking Ratio (Spaces/Unit) 1.50 1.50 1.50
Parking Type (Gr., Cov., etc.) Covered, Open Covered, Open Garage, Open
CONDITION: Average Average Excellent
APPEAL: Average Average Excellent
AMENITIES:
Pool/Spa Yes/No Yes/No Yes/No
Gym Room Yes Yes Yes
Laundry Room No No No
Secured Parking No No Yes
Sport Courts Yes Yes Yes
OCCUPANCY: 87% 89% 93%
TRANSACTION DATA:
Sale Date December, 2001 December, 2001 April, 2002
Sale Price ($) $9,800,000 $7,225,000 $17,250,000
Grantor Archstone Smith Operating Archstone Smith Operating Aquiport Alpine Meadows, Inc.
Trust Trust
Grantee Revierbend Matrix LLC Raintree Infinity LLC SSR Realty Advisors
Sale Documentation N/A N/A N/A
Verification David Anderson, App. David Anderson, App. David Anderson, App.
Telephone Number 801-281-4600 801-281-4600 801-281-4600
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF
- -----------------------------------------------------------------------------------------------------------------------------
Potential Gross Income $ 0 $ 0 $0.00 $ 0 $ 0 $0.00 $2,122,787 $9,562 $10.32
Vacancy/Credit Loss $ 0 $ 0 $0.00 $ 0 $ 0 $0.00 $ 0 $ 0 $ 0.00
------------------------------------------------------------------------------------------
Effective Gross Income $ 0 $ 0 $0.00 $ 0 $ 0 $0.00 $2,122,787 $9,562 $10.32
Operating Expenses $ 0 $ 0 $0.00 $ 0 $ 0 $0.00 $ 756,720 $3,409 $ 3.68
------------------------------------------------------------------------------------------
Net Operating Income $891,800 $5,717 $6.24 $625,000 $4,112 $5.64 $1,366,067 $6,153 $ 6.64
- -----------------------------------------------------------------------------------------------------------------------------
NOTES:
PRICE PER UNIT $62,821 $47,533 $77,703
PRICE PER SQUARE FOOT $68.53 $65.24 $83.89
EXPENSE RATIO N/A N/A 35.6%
EGIM N/A N/A 8.13
OVERALL CAP RATE 9.10% 8.65% 7.92%
Cap Rate based on Pro Forma or Actual Income?
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
FOOTHILL PLACE, SALT LAKE CITY, UTAH
IMPROVED SALES MAP
[MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $47,533 to $77,703 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 $45,156 to $47,783 per unit with a mean or average adjusted price
of $46,400 per unit. The median adjusted price is $46,622 per unit. Based on the
following analysis, we have concluded to a value of $47,000 per unit, which
results in an "as is" value of $20,600,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
FOOTHILL PLACE, SALT LAKE CITY, UTAH
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- -----------------------------------------------------------------------------------------------------------------------------
Property Name Foothill Place Brighton Place Mountain Shadows
Address 2260 South Foothill Drive 6900 South 135 West 3825 South 700 West
City Salt Lake City, Utah Midlvale, Utah Salt Lake City, Utah
Sale Date April, 2001 July, 2001
Sale Price ($) $16,900,000 $12,500,000
Net Rentable Area (SF) 415,254 305,232 213,930
Number of Units 450 336 262
Price Per Unit $50,298 $47,710
Year Built 1973 1982 1985
Land Area (Acre) 18.9300 21.6600 12.3000
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 04-2001 0% July, 2001 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $50,298 $47,710
Location Comparable 0% Comparable 0%
Number of Units 450 336 0% 262 0%
Quality / Appeal Average Comparable 0% Comparable 0%
Age / Condition 1973 1982 / Average 0% 1985 / Average 0%
Occupancy at Sale 82% 90% -5% 92% -5%
Amenities Good Comparable 0% Comparable 0%
Average Unit Size (SF) 923 908 0% 817 0%
PHYSICAL ADJUSTMENT -5% -5%
FINAL ADJUSTED VALUE ($/UNIT) $47,783 $45,324
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- -----------------------------------------------------------------------------------------------------------------------------
Property Name Riverbend Raintree Apartments Alpine Meadows
Address 845 West River Hollow Road 870 North 900 West 845 East 9000 South
City Salt Lake City, Utah Salt Lake City, Utah Sandy, Utah
Sale Date December, 2001 December, 2001 April, 2002
Sale Price ($) $9,800,000 $7,225,000 $17,250,000
Net Rentable Area (SF) 143,000 110,740 205,638
Number of Units 156 152 222
Price Per Unit $62,821 $47,533 $77,703
Year Built 1985 1984 1996
Land Area (Acre) 8.4300 7.6200 14.4900
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 12-2001 0% 12-2001 0% 04-2002 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $62,821 $47,533 $77,703
Location Comparable 0% Comparable 0% Comparable 0%
Number of Units 156 -5% 152 -5% 222 5%
Quality / Appeal Superior -20% Comparable 0% Superior -10%
Age / Condition 1985 / Average 0% 1984 / Average 0% 1996 / Excellent -20%
Occupancy at Sale 87% 0% 89% 0% 93% -5%
Amenities Comparable 0% Comparable 0% Superior -10%
Average Unit Size (SF) 917 0% 729 0% 926 0%
PHYSICAL ADJUSTMENT -25% -5% -40%
FINAL ADJUSTED VALUE ($/UNIT) $47,115 $45,156 $46,622
SUMMARY
VALUE RANGE (PER UNIT) $45,156 TO $47,783
MEAN (PER UNIT) $46,400
MEDIAN (PER UNIT) $46,622
VALUE CONCLUSION (PER UNIT) $47,000
VALUE OF IMPROVEMENT & MAIN SITE $21,150,000
LESS: LEASE-UP COST -$ 175,000
PV OF CONCESSIONS -$ 391,000
VALUE INDICATED BY SALES COMPARISON APPROACH $20,584,000
ROUNDED $20,600,000
NET OPERATING INCOME (NOI) ANALYSIS
We have also conducted a net operating income (NOI) comparison analysis. The NOI
effectively takes into account the various physical, location, and operating
aspects of the sale. When the subject's NOI is compared to the sale NOI, a
percent adjustment can be arrived at. The following table illustrates this
analysis.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 24
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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-1 336 $16,900,000 9.03% $1,526,760 $1,964,207 0.961 $48,316
$ 50,298 $ 4,544 $ 4,365
I-2 262 $12,500,000 9.13% $1,141,545 $1,964,207 1.002 $47,796
$ 47,710 $ 4,357 $ 4,365
I-3 156 $ 9,800,000 9.10% $ 891,800 $1,964,207 0.764 $47,966
$ 62,821 $ 5,717 $ 4,365
I-4 152 $ 7,225,000 8.65% $ 625,000 $1,964,207 1.062 $50,458
$ 47,533 $ 4,112 $ 4,365
I-5 222 $17,250,000 7.92% $1,366,067 $1,964,207 0.709 $55,118
$ 77,703 $ 6,153 $ 4,365
PRICE/UNIT
Low High Average Median
$47,796 $55,118 $49,931 $48,316
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
Estimated Price Per Unit $ 48,000
Number of Units 450
Value $21,600,000
Less: Lease-Up Cost -$ 175,000
PV of Concessions -$ 391,000
------------
Value Based on NOI Analysis $21,034,000
Rounded $21,000,000
The adjusted sales indicate a range of value between $47,796 and $55,118 per
unit, with an average of $49,931 per unit. Based on the subject's competitive
position within the improved sales, a value of $48,000 per unit is estimated.
This indicates an "as is" market value of $21,000,000 (rounded after necessary
adjustment, if any) for the NOI Per Unit Analysis.
EFFECTIVE GROSS INCOME MULTIPLIER (EGIM) ANALYSIS
The effective gross income multiplier (EGIM) is derived by dividing the sales
price by the total effective gross income. The following table illustrates the
EGIMs for the comparable improved sales.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 25
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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-1 336 $16,900,000 $ 2,602,764 $1,076,004 41.34% 6.49
$ 50,298
I-2 262 $12,500,000 $ 1,966,496 $ 824,951 41.95% 6.36
$ 47,710
I-3 156 $ 9,800,000 38.11%
$ 62,821
I-4 152 $ 7,225,000
$ 47,533
I-5 222 $17,250,000 $ 2,122,787 $ 756,720 35.65% 8.13
$ 77,703
EGIM
Low High Average Median
- ---- ---- ------- ------
6.36 8.13 6.99 6.49
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
Estimate EGIM 6.50
Subject EGI $ 3,428,306
Value $22,283,992
Less: Lease-Up Cost -$ 175,000
PV of Concessions -$ 391,000
------------
Value Based on EGIM Analysis $21,717,992
Rounded $21,700,000
Value Per Unit $ 48,222
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 38.11% before reserves. The comparable sales
indicate a range of expense ratios from 35.65% to 41.95%, while their EGIMs
range from 6.36 to 8.13. Overall, we conclude to an EGIM of 6.50, which results
in an "as is" value estimate in the EGIM Analysis of $21,700,000.
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 $21,000,000.
Price Per Unit $20,600,000
NOI Per Unit $21,000,000
EGIM Analysis $21,700,000
Sales Comparison Conclusion $21,000,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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 - A1 695 $ 525 $ 0.76 86.3%
2Br/1Ba - A2 775 $ 546 $ 0.70 74.8%
2Br/1Ba - A3 991 $ 636 $ 0.64 82.1%
2Br/1.5Ba - A4 1150 $ 692 $ 0.60 88.2%
2Br/2Ba - A5 1125 $ 709 $ 0.63 87.8%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
FOOTHILL PLACE, SALT LAKE CITY, UTAH
RENT ANALYSIS
COMPARABLE RENTS
-------------------------------------------------------
R-1 R-2 R-3 R-4 R-5
-------------------------------------------------------
Irving
The School Pinnacle
Palladio The Covey Santa Fe House Highland
-------------------------------------------------------
COMPARISON TO SUBJECT
SUBJECT SUBJECT -------------------------------------------------------
SUBJECT UNIT ACTUAL ASKING Slightly Slightly Slightly
DESCRIPTION TYPE RENT RENT Superior Inferior Superior Superior Superior
- -------------------------------------------------------------------------------------------------------------------------
Monthly Rent 1Br/1Ba - A1 $ 525 $ 560 $ 750 $ 470 $ 598 $ 699 $ 753
Unit Area (SF) 695 695 730 409 700 709 745
Monthly Rent Per Sq. Ft. $ 0.76 $ 0.81 $ 1.03 $1.15 $ 0.85 $ 0.99 $ 1.01
Monthly Rent 2Br/1Ba - A2 $ 546 $ 625 $ 685 $ 836
Unit Area (SF) 775 775 900 820
Monthly Rent Per Sq. Ft. $ 0.70 $ 0.81 $ 0.76 $ 1.02
Monthly Rent 2Br/1Ba - A3 $ 636 $ 725 $ 950 $ 705 $ 959 $ 825
Unit Area (SF) 991 991 1,038 900 1,014 1,075
Monthly Rent Per Sq. Ft. $ 0.64 $ 0.73 $ 0.92 $ 0.78 $ 0.95 $ 0.77
Monthly Rent 2Br/1.5Ba - A4 $ 692 $ 750 $1,095
Unit Area (SF) 1,150 1,150 1,124
Monthly Rent Per Sq. Ft. $ 0.60 $ 0.65 $ 0.97
Monthly Rent 2Br/2Ba - A5 $ 709 $ 725 $1,069 $1,200
Unit Area (SF) 1,125 1,125 1,156 1,318
Monthly Rent Per Sq. Ft. $ 0.63 $ 0.64 $ 0.92 $0.91
DESCRIPTION MIN MAX MEDIAN AVERAGE
- ----------------------------------------------------------------
Monthly Rent $ 470 $ 753 $ 699 $ 654
Unit Area (SF) 409 745 709 658
Monthly Rent Per Sq. Ft. $ 0.85 $ 1.15 $ 1.01 $ 1.01
Monthly Rent $ 685 $ 836 $ 760 $ 760
Unit Area (SF) 820 900 860 860
Monthly Rent Per Sq. Ft. $ 0.76 $ 1.02 $ 0.89 $ 0.89
Monthly Rent $ 705 $ 959 $ 888 $ 860
Unit Area (SF) 900 1,075 1,026 1,007
Monthly Rent Per Sq. Ft. $ 0.77 $ 0.95 $ 0.85 $ 0.85
Monthly Rent $1,095 $1,095 $1,095 $1,095
Unit Area (SF) 1,124 1,124 1,124 1,124
Monthly Rent Per Sq. Ft. $ 0.97 $ 0.97 $ 0.97 $ 0.97
Monthly Rent $1,069 $1,200 $1,135 $1,135
Unit Area (SF) 1,156 1,318 1,237 1,237
Monthly Rent Per Sq. Ft. $ 0.91 $ 0.92 $ 0.92 $ 0.92
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
Number of Unit Area ---------------------- Monthly Annual
Unit Type Units (Sq. Ft.) Per Unit Per SF Income Income
- ----------------------------------------------------------------------------------------------------------------
1Br/1Ba - A1 73 695 $550 $0.79 $ 40,150 $ 481,800
2Br/1Ba - A2 143 775 $600 $0.77 $ 85,800 $1,029,600
2Br/1Ba - A3 84 991 $705 $0.71 $ 59,220 $ 710,640
2Br/1.5Ba - A4 68 1,150 $725 $0.63 $ 49,300 $ 591,600
2Br/2Ba - A5 82 1,125 $710 $0.63 $ 58,220 $ 698,640
------------------------
Total $292,690 $3,512,280
========================
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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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 $3,625,779 $ 8,057 $3,731,115 $ 8,291 $3,780,121 $ 8,400 $3,723,330 $ 8,274
Vacancy $ 140,898 $ 313 $ 170,497 $ 379 $ 462,280 $ 1,027 $ 440,780 $ 980
Credit Loss/Concessions $ 130,687 $ 290 $ 100,728 $ 224 $ 130,980 $ 291 $ 172,344 $ 383
-----------------------------------------------------------------------------------------------------
Subtotal $ 271,585 $ 604 $ 271,225 $ 603 $ 593,260 $ 1,318 $ 613,124 $ 1,362
Laundry Income $ 52,073 $ 116 $ 40,862 $ 91 $ 53,370 $ 119 $ 68,548 $ 152
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 137,862 $ 306 $ 227,672 $ 506 $ 295,658 $ 657 $ 257,764 $ 573
-----------------------------------------------------------------------------------------------------
Subtotal Other Income $ 189,935 $ 422 $ 268,534 $ 597 $ 349,028 $ 776 $ 326,312 $ 725
-----------------------------------------------------------------------------------------------------
Effective Gross Income $3,544,129 $ 7,876 $3,728,424 $ 8,285 $3,535,889 $ 7,858 $3,436,518 $ 7,637
Operating Expenses
Taxes $ 191,081 $ 425 $ 161,543 $ 359 $ 176,457 $ 392 $ 261,529 $ 581
Insurance $ 42,061 $ 93 $ 59,197 $ 132 $ 62,922 $ 140 $ 69,947 $ 155
Utilities $ 202,498 $ 450 $ 265,580 $ 590 $ 263,695 $ 586 $ 244,800 $ 544
Repair & Maintenance $ 72,268 $ 161 $ 89,262 $ 198 $ 61,749 $ 137 $ 122,850 $ 273
Cleaning $ 85,288 $ 190 $ 79,138 $ 176 $ 96,992 $ 216 $ 85,600 $ 190
Landscaping $ 20,908 $ 46 $ 27,690 $ 62 $ 27,345 $ 61 $ 0 $ 0
Security $ 24,757 $ 55 $ 21,633 $ 48 $ 10,517 $ 23 $ 0 $ 0
Marketing & Leasing $ 92,813 $ 206 $ 61,105 $ 136 $ 52,100 $ 116 $ 51,900 $ 115
General Administrative $ 371,096 $ 825 $ 469,465 $ 1,043 $ 350,529 $ 779 $ 373,731 $ 831
Management $ 181,405 $ 403 $ 197,955 $ 440 $ 178,585 $ 397 $ 188,106 $ 418
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
-----------------------------------------------------------------------------------------------------
Total Operating Expenses $1,284,175 $ 2,854 $1,432,568 $ 3,183 $1,280,891 $ 2,846 $1,398,463 $ 3,108
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
-----------------------------------------------------------------------------------------------------
Net Income $2,259,954 $ 5,022 $2,295,856 $ 5,102 $2,254,998 $ 5,011 $2,038,055 $ 4,529
ANNUALIZED 2003
-----------------------
PROJECTION AAA PROJECTION
------------------------------------------------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT %
- ---------------------------------------------------------------------------------------
Revenues
Rental Income $3,633,708 $ 8,075 $3,512,280 $ 7,805 100.0%
Vacancy $ 599,304 $ 1,332 $ 245,860 $ 546 7.0%
Credit Loss/Concessions $ 122,556 $ 272 $ 175,614 $ 390 5.0%
-----------------------------------------------------------
Subtotal $ 721,860 $ 1,604 $ 421,474 $ 937 12.0%
Laundry Income $ 49,464 $ 110 $ 67,500 $ 150 1.9%
Garage Revenue $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 257,004 $ 571 $ 270,000 $ 600 7.7%
-----------------------------------------------------------
Subtotal Other Income $ 306,468 $ 681 $ 337,500 $ 750 9.6%
-----------------------------------------------------------
Effective Gross Income $3,218,316 $ 7,152 $3,428,306 $ 7,618 100.0%
Operating Expenses
Taxes $ 254,716 $ 566 $ 258,750 $ 575 7.5%
Insurance $ 68,320 $ 152 $ 67,500 $ 150 2.0%
Utilities $ 257,536 $ 572 $ 247,500 $ 550 7.2%
Repair & Maintenance $ 47,512 $ 106 $ 90,000 $ 200 2.6%
Cleaning $ 109,372 $ 243 $ 90,000 $ 200 2.6%
Landscaping $ 5,800 $ 13 $ 0 $ 0 0.0%
Security $ 0 $ 0 $ 0 $ 0 0.0%
Marketing & Leasing $ 62,692 $ 139 $ 67,500 $ 150 2.0%
General Administrative $ 398,796 $ 886 $ 382,500 $ 850 11.2%
Management $ 168,848 $ 375 $ 102,849 $ 229 3.0%
Miscellaneous $ 0 $ 0 $ 0 $ 0 0.0%
-----------------------------------------------------------
Total Operating Expenses $1,373,592 $ 3,052 $1,306,599 $ 2,904 38.1%
Reserves $ 0 $ 0 $ 157,500 $ 350 12.1%
-----------------------------------------------------------
Net Income $1,844,724 $ 4,099 $1,964,207 $ 4,365 57.3%
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 12% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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 $350 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 $350 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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
SUMMARY OF OVERALL
CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
- --------------------------------------------------------------------------------
I-1 Apr-01 90% $50,298 9.03%
I-2 July, 2001 92% $47,710 9.13%
I-3 Dec-01 87% $62,821 9.10%
I-4 Dec-01 89% $47,533 8.65%
I-5 Apr-02 93% $77,703 7.92%
----------------------
High 9.13%
----------------------
Low 7.92%
----------------------
Average 8.77%
Based on this information, we have concluded the subject's overall
capitalization rate should be 9.00%. 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 9.75%. Finally, the subject's discount rate
or yield rate is estimated based on the previous investor survey and an
examination of returns available on alternative investments in the market. Based
on this analysis, the subject's discount rate is estimated to be 11.50%.
HOLDING PERIOD
The survey of investors indicates that most investors are completing either
10-year cash flows or extending the analysis to the end of the lease if it is
more than 10-years. A 10-year period has been used in the analysis of the
subject with the eleventh year stabilized NOI used to determine the reversion.
SELLING COSTS
Sales of similar size properties are typically accomplished with the aid of a
broker and will also incur legal and other transaction related cost. Based on
our survey of brokers and a review of institutional investor projections, an
allowance of 2.00% of the sale amount is applied.
DISCOUNTED CASH FLOW CONCLUSION
Discounting the annual cash flows and the equity reversion at the selected rate
of 11.50% indicates a value of $21,800,000. In this instance, the reversion
figure contributes
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
FOOTHILL PLACE, SALT LAKE CITY, UTAH
approximately 41% 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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
DISCOUNTED CASH FLOW ANALYSIS
FOOTHILL PLACE
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009
FISCAL YEAR 1 2 3 4 5 6
- -----------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $3,512,280 $3,617,648 $3,726,178 $3,837,963 $3,953,102 $4,071,695
Vacancy $ 447,104 $ 253,235 $ 260,832 $ 268,657 $ 276,717 $ 285,019
Credit Loss $ 175,614 $ 180,882 $ 186,309 $ 191,898 $ 197,655 $ 203,585
Concessions $ 245,860 $ 144,706 $ 74,524 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------
Subtotal $ 868,578 $ 578,824 $ 521,665 $ 460,556 $ 474,372 $ 488,603
Laundry Income $ 67,500 $ 69,525 $ 71,611 $ 73,759 $ 75,972 $ 78,251
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 270,000 $ 278,100 $ 286,443 $ 295,036 $ 303,887 $ 313,004
--------------------------------------------------------------------------------
Subtotal Other Income $ 337,500 $ 347,625 $ 358,054 $ 368,795 $ 379,859 $ 391,255
--------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME $2,981,202 $3,386,450 $3,562,567 $3,746,203 $3,858,589 $3,974,347
OPERATING EXPENSES:
Taxes $ 258,750 $ 266,513 $ 274,508 $ 282,743 $ 291,225 $ 299,962
Insurance $ 67,500 $ 69,525 $ 71,611 $ 73,759 $ 75,972 $ 78,251
Utilities $ 247,500 $ 254,925 $ 262,573 $ 270,450 $ 278,563 $ 286,920
Repair & Maintenance $ 90,000 $ 92,700 $ 95,481 $ 98,345 $ 101,296 $ 104,335
Cleaning $ 90,000 $ 92,700 $ 95,481 $ 98,345 $ 101,296 $ 104,335
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 67,500 $ 69,525 $ 71,611 $ 73,759 $ 75,972 $ 78,251
General Administrative $ 382,500 $ 393,975 $ 405,794 $ 417,968 $ 430,507 $ 443,422
Management $ 89,436 $ 101,593 $ 106,877 $ 112,386 $ 115,758 $ 119,230
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $1,293,186 $1,341,456 $1,383,935 $1,427,756 $1,470,589 $1,514,707
Reserves $ 157,500 $ 162,225 $ 167,092 $ 172,105 $ 177,268 $ 182,586
--------------------------------------------------------------------------------
NET OPERATING INCOME $1,530,516 $1,882,769 $2,011,540 $2,146,342 $2,210,733 $2,277,054
Operating Expense Ratio (% of EGI) 43.4% 39.6% 38.8% 38.1% 38.1% 38.1%
Operating Expense Per Unit $ 2,874 $ 2,981 $ 3,075 $ 3,173 $ 3,268 $ 3,366
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 7 8 9 10 11
- ---------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $4,193,846 $4,319,661 $4,449,251 $4,582,729 $4,720,211
Vacancy $ 293,569 $ 302,376 $ 311,448 $ 320,791 $ 330,415
Credit Loss $ 209,692 $ 215,983 $ 222,463 $ 229,136 $ 236,011
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------
Subtotal $ 503,262 $ 518,359 $ 533,910 $ 549,927 $ 566,425
Laundry Income $ 80,599 $ 83,016 $ 85,507 $ 88,072 $ 90,714
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 322,394 $ 332,066 $ 342,028 $ 352,289 $ 362,857
------------------------------------------------------------------
Subtotal Other Income $ 402,993 $ 415,082 $ 427,535 $ 440,361 $ 453,572
------------------------------------------------------------------
EFFECTIVE GROSS INCOME $4,093,577 $4,216,384 $4,342,876 $4,473,162 $4,607,357
OPERATING EXPENSES:
Taxes $ 308,961 $ 318,230 $ 327,777 $ 337,610 $ 347,738
Insurance $ 80,599 $ 83,016 $ 85,507 $ 88,072 $ 90,714
Utilities $ 295,528 $ 304,394 $ 313,526 $ 322,931 $ 332,619
Repair & Maintenance $ 107,465 $ 110,689 $ 114,009 $ 117,430 $ 120,952
Cleaning $ 107,465 $ 110,689 $ 114,009 $ 117,430 $ 120,952
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 80,599 $ 83,016 $ 85,507 $ 88,072 $ 90,714
General Administrative $ 456,725 $ 470,427 $ 484,540 $ 499,076 $ 514,048
Management $ 122,807 $ 126,492 $ 130,286 $ 134,195 $ 138,221
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------
TOTAL OPERATING EXPENSES $1,560,148 $1,606,952 $1,655,161 $1,704,816 $1,755,960
Reserves $ 188,063 $ 193,705 $ 199,516 $ 205,502 $ 211,667
------------------------------------------------------------------
NET OPERATING INCOME $2,345,366 $2,415,727 $2,488,199 $2,562,845 $2,639,730
Operating Expense Ratio (% of EGI) 38.1% 38.1% 38.1% 38.1% 38.1%
Operating Expense Per Unit $ 3,467 $ 3,571 $ 3,678 $ 3,788 $ 3,902
Estimated Stabilized NOI $1,964,207 Sales Expense Rate 2.00%
Months to Stabilized 12 Discount Rate 11.50%
Stabilized Occupancy 93.0% Terminal Cap Rate 9.75%
Gross Residual Sale Price $27,074,156 Deferred Maintenance $ 0
Less: Sales Expense $ 541,483 Add: Excess Land $ 0
----------- Other Adjustments $ 0
Net Residual Sale Price $26,532,673 -----------
PV of Reversion $ 8,933,720 Value Indicated By "DCF" $21,828,535
Add: NPV of NOI $12,894,815 Rounded $21,800,000
-----------
PV Total $21,828,535
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE
-----------------------------------------------------------------------------------
TOTAL VALUE 11.00% 11.25% 11.50% 11.75% 12.00%
- ------------------------------------------------------------------------------------------------------------------------
TERMINAL CAP RATE 9.25% $23,061,238 $22,682,214 $22,311,438 $21,948,704 $21,593,810
9.50% $22,802,041 $22,428,783 $22,063,633 $21,706,386 $21,356,847
9.75% $22,556,136 $22,188,348 $21,828,535 $21,476,495 $21,132,036
10.00% $22,322,526 $21,959,935 $21,605,192 $21,258,099 $20,918,466
10.25% $22,100,311 $21,742,664 $21,392,743 $21,050,356 $20,715,313
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
FOOTHILL PLACE, SALT LAKE CITY, UTAH
INCOME LOSS DURING LEASE-UP
The subject is currently 82% occupied, below our stabilized occupancy
projection. We have estimated a 12-month lease-up period. An adjustment must be
made to bring the subject to a stabilized operating level. To account for this
income loss during lease-up, we have compared the current DCF analysis to an "as
stabilized" DCF analysis assuming the subject's occupancy were stabilized. The
difference in net operating income during the lease-up period is discounted to a
present value figure of $175,000 as shown in the following table.
DESCRIPTION YEAR 1
- -------------------------------------------------------
"As Is" Net Operating Income $1,530,516
Stabilized Net Operating Income $1,725,723
----------
Difference $ 195,208
PV of Income Loss During Lease-Up $ 175,074
----------
Rounded $ 175,000
----------
CONCESSIONS
Due to softness in the market, concessions have been utilized at the subject
property and within the market. Based on our discussions with the subject's
property manager and those at competing properties, these concessions are
expected to continue in the near term until the market returns to a stabilized
level. Concessions have been included as a line item deduction within the
discounted cash flow analysis. The present value of these concessions equates to
$391,000 (rounded). This amount has been deducted from the Direct Capitalization
analysis, as well as the Sales Comparison Approach value.
DIRECT CAPITALIZATION METHOD
After having projected the income and expenses for the property, the next step
in the valuation process is to capitalize the net income into an estimate of
value. The selected overall capitalization rate ("OAR") covers both return on
and return of capital. It is the overall rate of return an investor expects.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35
FOOTHILL PLACE, SALT LAKE CITY, UTAH
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 9.00% percent is applicable to the
subject. The results of our direct capitalization analysis are as follows:
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
FOOTHILL PLACE, SALT LAKE CITY, UTAH
FOOTHILL PLACE
TOTAL PER SQ. FT. PER UNIT %OF EGI
- ---------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $ 3,512,280 $ 8.46 $ 7,805
Less: Vacancy & Collection Loss 12.00% $ 421,474 $ 1.01 $ 937
Plus: Other Income
Laundry Income $ 67,500 $ 0.16 $ 150 1.97%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 270,000 $ 0.65 $ 600 7.88%
------------------------------------------------------------
Subtotal Other Income $ 337,500 $ 0.81 $ 750 9.84%
EFFECTIVE GROSS INCOME $ 3,428,306 $ 8.26 $ 7,618
OPERATING EXPENSES:
Taxes $ 258,750 $ 0.62 $ 575 7.55%
Insurance $ 67,500 $ 0.16 $ 150 1.97%
Utilities $ 247,500 $ 0.60 $ 550 7.22%
Repair & Maintenance $ 90,000 $ 0.22 $ 200 2.63%
Cleaning $ 90,000 $ 0.22 $ 200 2.63%
Landscaping $ 0 $ 0.00 $ 0 0.00%
Security $ 0 $ 0.00 $ 0 0.00%
Marketing & Leasing $ 67,500 $ 0.16 $ 150 1.97%
General Administrative $ 382,500 $ 0.92 $ 850 11.16%
Management 3.00% $ 102,849 $ 0.25 $ 229 3.00%
Miscellaneous $ 0 $ 0.00 $ 0 0.00%
TOTAL OPERATING EXPENSES $ 1,306,599 $ 3.15 $ 2,904 38.11%
Reserves $ 157,500 $ 0.38 $ 350 4.59%
------------------------------------------------------------
NET OPERATING INCOME $ 1,964,207 $ 4.73 $ 4,365 57.29%
"GOING IN" CAPITALIZATION RATE 9.00%
VALUE INDICATION $ 21,824,525 $ 52.56 $ 48,499
LESS: LEASE-UP COST ($ 175,000)
PV OF CONCESSIONS ($ 391,000)
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $ 21,258,525
ROUNDED $ 21,300,000 $ 51.29 $ 47,333
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 37
FOOTHILL PLACE, SALT LAKE CITY, UTAH
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- --------------------------------------------------------------------
8.25% $23,242,572 $23,200,000 $ 51,556 $ 55.87
8.50% $22,542,320 $22,500,000 $ 50,000 $ 54.18
8.75% $21,882,082 $21,900,000 $ 48,667 $ 52.74
9.00% $21,258,525 $21,300,000 $ 47,333 $ 51.29
9.25% $20,668,673 $20,700,000 $ 46,000 $ 49.85
9.50% $20,109,865 $20,100,000 $ 44,667 $ 48.40
9.75% $19,579,715 $19,600,000 $ 43,556 $ 47.20
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $21,300,000.
CORRELATION AND CONCLUSION BY THE INCOME APPROACH
The two methods used to estimate the market value of the subject property by the
income approach resulted in the following indications of value:
Discounted Cash Flow Analysis $21,800,000
Direct Capitalization Method $21,300,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$21,500,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 38
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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 $21,000,000
Income Approach $21,500,000
Reconciled Value $21,500,000
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 2, 2003 the market value of the fee simple estate in the property is:
$21,500,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
FOOTHILL PLACE, SALT LAKE CITY, UTAH
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
FOOTHILL PLACE, SALT LAKE CITY, UTAH
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
FOOTHILL PLACE, SALT LAKE CITY, UTAH
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
PARKING AREA EXTERIOR - REAR VIEW
[PICTURE] [PICTURE]
TYPICAL EXTERIOR EXTERIOR - VIEW LOOKING WEST
[PICTURE] [PICTURE]
EXTERIOR - LOOKING SOUTHEAST ACROSS A PARKING LOT TYPICAL BATHROOM
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
FOOTHILL PLACE, SALT LAKE CITY, UTAH
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
INTERIOR - KITCHEN INTERIOR - TYPICAL LIVING ROOM
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FOOTHILL PLACE, SALT LAKE CITY, UTAH
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FOOTHILL PLACE, SALT LAKE CITY, UTAH
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
BRIGHTON PLACE MOUNTAIN SHADOWS RIVERBEND
6900 South 135 West 3825 South 700 West 845 West River Hollow Road
Midlvale, Utah Salt Lake City, Utah Salt Lake City, Utah
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
RAINTREE APARTMENTS ALPINE MEADOWS
870 North 900 West 845 East 9000 South
Salt Lake City, Utah Sandy, Utah
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FOOTHILL PLACE, SALT LAKE CITY, UTAH
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
- ----------------------------------------------------------------------------------------------------------------------------------
Property Name Foothill Place The Palladio
Management Company Aimco Wasatch Property Management
LOCATION:
Address 2260 South Foothill Drive 360 South 200 West
City, State Salt Lake City, Utah Salt Lake City, Utah
County Salt Lake County Salt Lake County
Proximity to Subject 4-mile from the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 415,254 112,000
Year Built 1973 1996 & 1997
Effective Age 18 5
Building Structure Type Wood Frame Class C
Parking Type (Gr., Cov., etc.) Open , Covered Open , Covered
Number of Units 450 245
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba - A1 695 73 $525 1 1/Br/1Ba 730 152 $750
2 2Br/1Ba - A2 775 143 $546 3 2Br/2Ba 1,038 93 $950
3 2Br/1Ba - A3 991 84 $636
4 2Br/1.5Ba - A4 1,150 68 $692
5 2Br/2Ba - A5 1,125 82 $709
Average Unit Size (SF) 923 847
Unit Breakdown: Efficiency 2-Bedroom Efficiency 2-Bedroom 38%
1-Bedroom 3-Bedroom 1-Bedroom 62% 3-Bedroom
CONDITION: Average Excellent
APPEAL: Average Very Good
AMENITIES:
Unit Amenities X Attach. Garage Vaulted Ceiling Attach. Garage X Vaulted Ceiling
X Balcony X Balcony X
X Fireplace Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
X Spa/Jacuzzi Car Wash X Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
X Volleyball Court Theater Room Volleyball Court Theater Room
X 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 Laundry Room
Jogging Track Business Office Jogging Track Business Office
X Gym Room X Gym Room
OCCUPANCY: 82% 97%
LEASING DATA:
Available Leasing Terms 12 mos 12 mos
Concessions No No
Pet Deposit No No
Utilities Paid by Tenant: X Electric Natural Gas X Electric X Natural Gas
X Water Trash X Water Trash
Confirmation Inspection Emily Clark
Telephone Number 801-320-4400
NOTES:
COMPARISON TO SUBJECT: Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
- -----------------------------------------------------------------------------------------------------------------------------------
Property Name The Covey Santa Fe
Management Company Private Real Estate Management Associates
LOCATION:
Address 239 East South Temple 1550 East Fort Union Boulevard
City, State Salt Lake City, Utah Salt Lake City, Utah
County Salt Lake County Salt Lake County
Proximity to Subject 4-mile from the subject 6-mile from the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 430,000
Year Built 1909 15
Effective Age 20 10
Building Structure Type Class C Class C
Parking Type (Gr., Cov., etc.) Open, Covered Open, Covered
Number of Units 75 492
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1Br/1Ba 300 $425 1 1Br/1Ba 700 123 $595
1 1Br/1Ba 325 $440 1 1Br/1Ba 700 123 $600
1 1Br/1Ba 505 $505 2 2Br/1Ba 900 123 $685
1 1Br/1Ba 505 $510 3 2Br/2Ba 900 123 $705
Average Unit Size (SF) 800
Unit Breakdown: Efficiency 100% 2-Bedroom Efficiency 2-Bedroom 50%
1-Bedroom 3-Bedroom 1-Bedroom 50% 3-Bedroom
CONDITION: Good Good
APPEAL: Fair Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage X Vaulted Ceiling
X Balcony X Balcony X
Fireplace X Fireplace
Cable TV Ready X Cable TV Ready
Project Amenities Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash X Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment X Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall X Sand Volley Ball Meeting Hall
Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball Laundry Room Racquet Ball Laundry Room
Jogging Track Business Office Jogging Track Business Office
X Gym Room X Gym Room
OCCUPANCY: 96% 93%
LEASING DATA:
Available Leasing Terms 12 mos 12 mos
Concessions No Yes - One month on 13 month lease
Pet Deposit No No
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
Water Trash X Water Trash
Confirmation Micahel Caraasco Josh Anderson
Telephone Number 801-355-5021 877-457-8250
NOTES:
COMPARISON TO SUBJECT: Slightly Inferior Slightly Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 4 R - 5
- -----------------------------------------------------------------------------------------------------------------------------------
Property Name Irving School House Pinnacle Highland
Management Company Metric Management Alliance Company
LOCATION:
Address 1155 East 2100 South 7673 South Highland Dr
City, State Salt Lake City, Utah Salt Lake City, Utah
County Salt Lake County Salt Lake County
Proximity to Subject 1.5-mile from the subject 2-mile from the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 215,000 560,000
Year Built 100 8
Effective Age 10 8
Building Structure Type Class C Class C
Parking Type (Gr., Cov., etc.) Open, Covered Open, Covered
Number of Units 232 522
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1Br/1Ba 709 96 $ 699 1 1Br/1Ba 718 120 $ 705
2 1Br/1Ba 789 48 $ 799 1 1Br/1Ba 771 120 $ 800
2 1Br/1Ba 883 24 $ 909 3 2Br/2Ba 1,075 110 $ 825
3 2Br/2Ba 1,014 48 $ 959 4 2Br/2Ba 1,124 110 $1,095
5 2Br/2Ba 1,156 16 $1,069 5 3Br/2Ba 1,318 62 $1,200
Average Unit Size (SF) 837 962
Unit Breakdown: Efficiency 2-Bedroom Efficiency 2-Bedroom 42%
1-Bedroom 3-Bedroom 1-Bedroom 46% 3-Bedroom 12%
CONDITION: Very Good Very Good
APPEAL: Very Good Very Good
AMENITIES:
Unit Amenities Attach. Garage X Vaulted Ceiling X Attach. Garage X Vaulted Ceiling
X Balcony X X Balcony
X Fireplace X Fireplace
X Cable TV Ready Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
X Spa/Jacuzzi Car Wash X Spa/Jacuzzi Car Wash
X Basketball Court BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall Sand Volley Ball Meeting Hall
Tennis Court Secured Parking Tennis Court Secured Parking
X Racquet Ball X Laundry Room Racquet Ball Laundry Room
Jogging Track Business Office Jogging Track Business Office
X Gym Room X Gym Room
OCCUPANCY: 93% 90%
LEASING DATA:
Available Leasing Terms 12 mos 12 mos
Concessions Yes - 1 mo free rent Yes - 1 mo free rent
Pet Deposit No No
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water X Trash X Water Trash
Confirmation Michelle Riggs Andy Clark
Telephone Number 801-493-2000 877-269-4692
NOTES:
COMPARISON TO SUBJECT: Slightly Superior Superior
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FOOTHILL PLACE, SALT LAKE CITY, UTAH
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
THE PALLADIO THE COVEY SANTA FE
360 South 200 West 239 East South Temple 1550 East Fort Union Boulevard
Salt Lake City, Utah Salt Lake City, Utah Salt Lake City, Utah
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4 COMPARABLE R-5
IRVING SCHOOL HOUSE PINNACLE HIGHLAND
1155 East 2100 South 7673 South Highland Dr
Salt Lake City, Utah Salt Lake City, Utah
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
FOOTHILL PLACE, SALT LAKE CITY, UTAH
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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 Appraisal Institute 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
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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 inspected the subject property. No one 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- JUDE FLYNN
----------------------------
Jude Flynn, MAI, SRA
Managing Principal, Real Estate Group
Utah Temporary Practice Permit #CG021105
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
FOOTHILL PLACE, SALT LAKE CITY, UTAH
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
FOOTHILL PLACE, SALT LAKE CITY, UTAH
JUDE T. FLYNN, MAI, SRA
PRINCIPAL, REAL ESTATE ADVISORY GROUP
POSITION Jude T. Flynn is a Principal for the Boston Real Estate
Advisory Group of American Appraisal Associates, Inc.
("AAA").
EXPERIENCE
Valuation Mr. Flynn has completed appraisals of commercial and
residential real estate. He has also generated discounted
cash flow and sensitivity analyses for investment-grade
real estate, securitization, and pension funds/insurance
industries.
Analyses Mr. Flynn has performed involve various types of
investment-grade real estate throughout the continental
United States including apartments, cooperatives, hotels,
industrial and research and development parks, office
buildings, regional shopping centers, and undeveloped
acreage.
Additionally, Mr. Flynn has experience in valuation for
acquisitions, ad valorem, arbitration, asset management,
cost segregation, development, dispositions, due diligence,
lease analysis, and portfolio analysis.
Business Mr. Flynn first joined AAA in 1998 and was promoted to his
current position in 2001. Prior to joining AAA, he was a
manager at Deloitte & Touche, LLP, and an appraisal
director at Marshall and Stevens, Inc.
EDUCATION Saint Anselm College
Bachelor of Arts - History
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
FOOTHILL PLACE, SALT LAKE CITY, UTAH
STATE CERTIFICATIONS State of Maine, Certified General Real Property Appraiser,
#CG953
Commonwealth of Massachusetts, Certified General Real
Estate Appraiser, #926 State of Rhode Island, Certified
General Real Estate
Appraiser,
#A00829G
PROFESSIONAL Appraisal Institute, MAI Designated Member and Senior
AFFILIATIONS Residential Appraiser
VALUATION AND Mr. Flynn completes several courses annually as part of the
SPECIAL COURSES continuing education requirements of the Appraisal
Institute. In addition, he attends real estate and
financial industry-related conferences and seminars.
PUBLICATIONS "Considering Business Enterprise Value," New England Real
Estate Journal, 2000
AMERICAN APPRAISAL ASSOCIATES, INC.
FOOTHILL PLACE, SALT LAKE CITY, UTAH
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
FOOTHILL PLACE, SALT LAKE CITY, UTAH
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.