THE LAKES
6615 THE LAKES DRIVE
RALEIGH, NORTH CAROLINA
MARKET VALUE -
FEE SIMPLE ESTATE
AS OF MAY 14, 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]
JUNE 30, 2003
Apartment Investment and Management
Company ("AIMCO") c/o
Mr. Steven A. Velkei, Esq.
Liner Yankelevitz Sunshine & Regenstreif LLP
1100 Glendon Avenue, 14th Floor
Los Angeles, California 90024-3503
Nuanes, et al.("Plaintiffs") c/o
Ms. Joy Kruse
Lieff Cabraser Heimann & Bernstein
Embarcadero Center West
275 Battery Street, 30th Floor
San Francisco, California 94111
RE: THE LAKES
6615 THE LAKES DRIVE
RALEIGH, WAKE COUNTY, NORTH CAROLINA
In accordance with your authorization, we have completed the appraisal of the
above- referenced property. This complete appraisal is intended to report our
analysis and conclusions in a summary format.
The subject property consists of an apartment project having 600 units with a
total of 496,980 square feet of rentable area. The improvements were built in
1972. The improvements are situated on 75.293 acres. Overall, the improvements
are in average condition. As of the date of this appraisal, the subject property
is 89% occupied.
It is our understanding the appraisal will be used by the clients to assist the
San Mateo Superior Court in the settlement of litigation between the above
mentioned clients. The appraisal is intended to conform to the Uniform Standards
of Professional Appraisal Practice ("USPAP") as promulgated by the Appraisal
Standards Board of the Appraisal Foundation and the Code of Professional Ethics
and Standards of Professional Practice of the Appraisal Institute. The appraisal
is presented in a summary report, and the Departure Provision of USPAP has not
been invoked in this appraisal. It is entirely inappropriate to use this value
conclusion or the report for any purpose other than the one stated.
AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 2
THE LAKES, RALEIGH, NORTH CAROLINA
The opinions expressed in this appraisal cover letter can only be completely
understood by reading the narrative report, addenda, and other data, which is
attached. The appraisal is subject to the attached general assumptions and
limiting conditions and general service conditions.
As a result of our investigation, it is our opinion that the fee simple market
value of the subject, effective May 14, 2003 is:
($22,800,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
/s/ Frank Fehribach
June 30, 2003 Frank Fehribach, MAI
#053272 Managing Principal, Real Estate Group
North Carolina Temporary Practice Permit #2578
Report By:
Jimmy Pat James, MAI
North Carolina Temporary Practice Permit #2603
Assisted By:
Chad Walker
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
THE LAKES, RALEIGH, NORTH CAROLINA
TABLE OF CONTENTS
Cover
Letter of Transmittal
Table of Contents
APPRAISAL DATA
Executive Summary .............................................................. 4
Introduction ................................................................... 9
Area Analysis .................................................................. 11
Market Analysis ................................................................ 14
Site Analysis .................................................................. 16
Improvement Analysis ........................................................... 16
Highest and Best Use ........................................................... 17
VALUATION
Valuation Procedure ............................................................ 18
Sales Comparison Approach ...................................................... 20
Income Capitalization Approach ................................................. 26
Reconciliation and Conclusion .................................................. 37
ADDENDA
Exhibit A - Photographs of Subject Property
Exhibit B - Summary of Rent Comparables and Photograph of Comparables
Exhibit C - Assumptions and Limiting Conditions
Exhibit D - Certificate of Appraiser
Exhibit E - Qualifications
General Service Conditions
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 4
THE LAKES, RALEIGH, NORTH CAROLINA
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: The Lakes
LOCATION: 6615 The Lakes Drive
Raleigh, North Carolina
INTENDED USE OF ASSIGNMENT: Court Settlement
PURPOSE OF APPRAISAL: "As Is" Market Value of the Fee Simple Estate
INTEREST APPRAISED: Fee simple estate
DATE OF VALUE: May 14, 2003
DATE OF REPORT: June 30, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 75.293 acres, or 3,279,763 square feet
Assessor Parcel No.: 1717003839
Floodplain: Community Panel No. 37183C0331E (March 3,
1992) Flood Zone X, an area outside the
floodplain.
Zoning: R-10 (Residential-10)
BUILDING:
No. of Units: 600 Units
Total NRA: 496,980 Square Feet
Average Unit Size: 828
Square Feet Apartment Density: 8.0 units per acre
Year Built: 1972
UNIT MIX AND MARKET RENT:
GROSS RENTAL INCOME PROJECTION
Market Rent
Square ------------------ Monthly Annual
Unit Type Feet Per Unit Per SF Income Income
- ------------------------------------------------------------------------------------------
Geneva - 1Bd/1Ba Eff 535 $490 $0.92 $ 35,280 $ 423,360
Tahoe - 1Bd/1Ba 735 $575 $0.78 $131,100 $1,573,200
Champlain - 2Bd/1Ba 960 $660 $0.69 $150,480 $1,805,760
Superior - 2Bd/2Ba 1,000 $685 $0.69 $ 49,320 $ 591,840
----------------------
Total $366,180 $4,394,160
======================
OCCUPANCY: 89%
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
THE LAKES, RALEIGH, NORTH CAROLINA
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
EXTERIOR - PROPERTY SIGN EXTERIOR - OFFICE
AREA MAP
[MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
THE LAKES, RALEIGH, NORTH CAROLINA
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
THE LAKES, RALEIGH, NORTH CAROLINA
PART TWO - ECONOMIC INDICATORS
Amount $/Unit
----------- --------------
INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION
Potential Rental Income $4,394,160 $7,324
Effective Gross Income $3,995,861 $6,660
Operating Expenses $1,630,193 $2,717 40.8% of EGI
Net Operating Income: $2,215,668 $3,693
Capitalization Rate 9.50%
DIRECT CAPITALIZATION VALUE $23,000,000 * $38,333 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 15%
Stabilized Vacancy & Collection Loss: 12%
Lease-up / Stabilization Period 1 months
Terminal Capitalization Rate 10.00%
Discount Rate 11.50%
Selling Costs 3.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $22,800,000 * $38,000 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $22,800,000 $38,000 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $42,151 to $71,277
Range of Sales $/Unit (Adjusted) $34,616 to $39,796
VALUE INDICATION - PRICE PER UNIT $23,700,000 * $39,500 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 5.28 to 7.54
Selected EGIM for Subject 5.75
Subject's Projected EGI $3,995,861
EGIM ANALYSIS CONCLUSION $22,700,000 * $37,833 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $23,700,000 * $39,500 / UNIT
RECONCILED SALES COMPARISON VALUE $23,700,000 $39,500 / UNIT
- -------------------
* Value indications are after adjustments for concessions, deferred maintenance,
excess land and lease-up costs, if any.
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 8
THE LAKES, RALEIGH, NORTH CAROLINA
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $23,700,000
NOI Per Unit $23,700,000
EGIM Multiplier $22,700,000
INDICATED VALUE BY SALES COMPARISON $23,700,000 $39,500 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $23,000,000
Discounted Cash Flow Method: $22,800,000
INDICATED VALUE BY THE INCOME APPROACH $22,800,000 $38,000 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $22,800,000 $38,000 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
THE LAKES, RALEIGH, NORTH CAROLINA
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 6615 The Lakes Drive, Raleigh, Wake County,
North Carolina. Raleigh identifies it as 1717003839.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by Chad Walker on May
14, 2003. Jimmy Pat James, MAI and Frank Fehribach, MAI have not made a personal
inspection of the subject property. Chad Walker assisted Jimmy Pat James, MAI in
the research, valuation analysis and writing the report. Frank Fehribach, MAI
reviewed the report and concurs with the value. Frank Fehribach, MAI, Jimmy Pat
James, MAI and Chad Walker have extensive experience in appraising similar
properties and meet the USPAP competency provision.
The scope of this investigation comprises the inspection of the property and the
collection, verification, and analysis of general and specific data pertinent to
the subject property. We have researched current improved sales and leases of
similar properties, analyzing them as to their comparability, and adjusting them
accordingly. We completed the Sales Comparison and Income Capitalization
Approaches to value. From these approaches to value, a concluded overall value
was made.
DATE OF VALUE AND REPORT
This appraisal was made to express the opinion of value as of May 14, 2003. The
date of the report is June 30, 2003.
PURPOSE AND USE OF APPRAISAL
The purpose of the appraisal is to estimate the market value of the fee simple
interest in the subject property. It is understood that the appraisal is
intended to assist the clients in litigation settlement proceedings. The
appraisal was not based on a requested minimum valuation, a specific valuation,
or the approval of a loan.
PROPERTY RIGHTS APPRAISED
We have appraised the Fee Simple Estate in the subject property (as applied in
the Sales &
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10
THE LAKES, RALEIGH, NORTH CAROLINA
Income Approaches), subject to the existing short-term leases. A Fee Simple
Estate is defined in The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago:
Appraisal Institute, 1993), as:
"Absolute ownership unencumbered by any other interest or estate,
subject only to the limitations imposed by the governmental powers of
taxation, eminent domain, police power, and escheat."
MARKETING/EXPOSURE PERIOD
MARKETING PERIOD: 6 to 12 months
EXPOSURE PERIOD: 6 to 12 months
HISTORY OF THE PROPERTY
Ownership in the subject property is currently vested in Consolidated Capital
Growth Fund. To the best of our knowledge, no transfers of ownership or offers
to purchase the subject are known to have occurred during the past three years.
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 11
THE LAKES, RALEIGH, NORTH CAROLINA
AREA / NEIGHBORHOOD ANALYSIS
NEIGHBORHOOD ANALYSIS
A neighborhood is a group of complementary land uses. The function of the
neighborhood analysis is to describe the immediate surrounding environs. The
subject is located in the city of Raleigh, North Carolina. Overall, the
neighborhood is characterized as a suburban setting with the predominant land
use being single family residential. The subject's neighborhood is generally
defined by the following boundaries.
NEIGHBORHOOD BOUNDARIES
East - Falls of Neuse Road
West - Six Forks Road
South - Lynn Road
North - Strickland Road
MAJOR EMPLOYERS
Major employers in the subject's area include MCI Telecommunications; Nortel;
Cisco Systems; IBM; State of North Carolina; Wake County Public School; North
Carolina State University; Wake County: and the City of Raleigh. The overall
economic outlook for the area is considered favorable.
DEMOGRAPHICS
We have reviewed demographic data within the neighborhood. The following table
summarizes the key data points.
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 12
THE LAKES, RALEIGH, NORTH CAROLINA
NEIGHBORHOOD DEMOGRAPHICS
AREA
-----------------------------------------------
CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA
- -----------------------------------------------------------------------------------------------
POPULATION TRENDS
Current Population 12,415 75,448 172,365 1,249,659
5-Year Population 12,592 79,410 187,857 1,408,794
% Change CY-5Y 1.4% 5.3% 9.0% 12.7%
Annual Change CY-5Y 0.3% 1.1% 1.8% 2.5%
HOUSEHOLDS
Current Households 5,755 32,250 73,126 484,776
5-Year Projected Households 5,812 33,996 79,287 545,189
% Change CY - 5Y 1.0% 5.4% 8.4% 12.5%
Annual Change CY-5Y 0.2% 1.1% 1.7% 2.5%
INCOME TRENDS
Median Household Income $ 55,517 $ 65,945 $ 67,821 $ 55,832
Per Capita Income $ 27,512 $ 31,391 $ 32,564 $ 25,814
Average Household Income $ 64,032 $ 74,022 $ 77,240 $ 66,544
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 44.30% 37.14% 36.69% 33.18%
5-Year Projected % Renting 44.21% 36.61% 35.95% 32.28%
% of Households Owning 49.28% 57.03% 58.17% 61.69%
5-Year Projected % Owning 49.13% 57.65% 59.10% 63.00%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
THE LAKES, RALEIGH, NORTH CAROLINA
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Sandy Forks Road and single-family residential
South - Apartments
East - Apartments
West - Apartments
CONCLUSIONS
The subject is well located within the city of Raleigh. The neighborhood is
characterized as being mostly suburban in nature and is currently in the stable
stage of development. The economic outlook for the neighborhood is judged to be
favorable with a good economic base.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 14
THE LAKES, RALEIGH, NORTH CAROLINA
MARKET ANALYSIS
The subject property is located in the city of Raleigh in Wake County. The
overall pace of development in the subject's market is more or less stable.
Currently, there are 176 units under construction in North Raleigh. 468 units of
the Columns at Wakefield have been completed in the past six months at Falls
Creek and Falls River Road. Additionally, there are 122 units proposed at The
Cliffs at Grove Barton Road and Doie Cope Road. The following table illustrates
historical vacancy rates for the subject's market.
HISTORICAL VACANCY RATE
Period Region Submarket
- ------ ------ ---------
1Q01 8.1% 10.4%
3Q01 9.6% 9.6%
1Q02 12.5% 12.5%
3Q02 12.0% 11.7%
1Q03 12.6% 13.7%
Occupancy trends in the subject's market are decreasing. Historically speaking,
the subject's submarket has underperformed the overall market. The
Raleigh-Durham apartment as a whole is reporting a high vacancy rate of 12.6%
for 1Q03. Vacancy rates in the Triangle (Raleigh, Durham, Chapel Hill) area have
steadily been rising since 1996, according to REAL DATA Real Estate Information
Services Apartment Index 1Q03. In comparison, the Raleigh-North Submarket is
posting vacancy rates of 13.7%. The vacancy rate has continued to increase in
this submarket as more apartment complexes have been built.
Market rents in the subject's market have been following a decreasing trend. The
following table illustrates historical rental rates for the subject's market.
HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change
- ------ ------ -------- --------- --------
1Q01 $746 - $727 -
3Q01 $763 2.3% $746 2.6%
1Q02 $764 0.1% $747 0.1%
3Q02 $761 -0.4% $746 -0.1%
1Q03 $758 -0.4% $739 -0.9%
The following table illustrates a summary of the subject's competitive set.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
THE LAKES, RALEIGH, NORTH CAROLINA
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
- -----------------------------------------------------------------------------------------------------------------
R-1 Cambridge 168 77% 1995 0.70 mile to the west of the subject
R-2 Archstone Ridgewood 228 93% 1986 0.50 mile to the north of the subject
R-3 Cedar Point 168 70% 1972 0.25 mile northeast of the subject
R-4 Laurel Springs 122 98% 1986 0.70 mile to the north of the subject
R-5 Hunting Ridge 176 97% 1982 0.75 mile northeast of the subject
Subject The Lakes 600 89% 1972
The Raleigh-Central submarket as well as the Triangle as a whole has experienced
declining apartment rental rates over the past two years. This is due in part to
the economic slowdown of the national economy and low interest rates currently
being offered. As of 1Q03, the average rental rate for the North Submarket was
$739, which is $19 below the Region at $758. However, rates are currently
stabilizing and remain at these levels in the short-term. As the national
economy improves so should contract rental rates.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
THE LAKES, RALEIGH, NORTH CAROLINA
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 75.293 acres, or 3,279,763 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 37183C0331E, dated March 3, 1992
Flood Zone Zone X
Zoning R-10, the subject improvements represent a legal
conforming use of the site.
REAL ESTATE TAXES
ASSESSED VALUE - 2002 TAX RATE / PROPERTY
----------------------------------------- --------------------
PARCEL NUMBER LAND BUILDING TOTAL MILL RATE TAXES
- ---------------------------------------------------------------------------------
1717003839 $4,800,000 $18,839,293 $23,639,293 0.01000 $236,337
IMPROVEMENT ANALYSIS
Year Built 1972
Number of Units 600
Net Rentable Area 496,980 Square Feet
Construction:
Foundation Reinforced concrete slab
Frame Heavy or light wood
Exterior Walls Wood or vinyl siding
Roof Composition shingle over a wood truss structure
Project Amenities Amenities at the subject include a swimming pool,
spa/jacuzzi, basketball court, sand volleyball,
tennis court, racquetball court, jogging track,
gym room, playground, laundry room, and parking
area.
Unit Amenities Individual unit amenities include a balcony, cable
TV connection, and washer dryer connection.
Appliances available in each unit include a
refrigerator, stove, dishwasher, water heater,
garbage disposal, and oven.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17
THE LAKES, RALEIGH, NORTH CAROLINA
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
- ---------------------------------------------------------------------
Geneva - 1Bd/1Ba Eff 72 535
Tahoe - 1Bd/1Ba 228 735
Champlain - 2Bd/1Ba 228 960
Superior - 2Bd/2Ba 72 1,000
Overall Condition Average
Effective Age 25 years
Economic Life 45 years
Remaining Economic Life 20 years
Deferred Maintenance None
HIGHEST AND BEST USE ANALYSIS
In accordance with the definition of highest and best use, an analysis of the
site relating to its legal uses, physical possibilities, and financial
feasibility is appropriate. The highest and best use as vacant is to hold for
future multi-family development. The subject improvements were constructed in
1972 and consist of a 600-unit multifamily project. The highest and best use as
improved is for a continued multifamily use. Overall, the highest and best use
of the subject property is the continued use of the existing apartment project.
AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 18
THE LAKES, RALEIGH, NORTH CAROLINA
THE VALUATION PROCEDURE
There are three traditional approaches, which can be employed in establishing
the market value of the subject property. These approaches and their
applicability to the valuation of the subject are summarized as follows:
THE COST APPROACH
The application of the Cost Approach is based on the principle of substitution.
This principle may be stated as follows: no one is justified in paying more for
a property than that amount by which he or she can obtain, by purchase of a site
and construction of a building, without undue delay, a property of equal
desirability and utility. In the case of a new building, no deficiencies in the
building should exist.
In the case of income-producing real estate, the cost of construction plays a
minor and relatively insignificant role in determining market value. The Cost
Approach is typically only a reliable indicator of value for: (a) new
properties; (b) special use properties; and (c) where the cost of reproducing
the improvements is easily and accurately quantified and there is no economic
obsolescence. In all instances, the issue of an appropriate entrepreneurial
profit - the reward for undertaking the risk of construction, remains a highly
subjective factor especially in a market lacking significant speculative
development.
THE SALES COMPARISON APPROACH
The Sales Comparison Approach is an estimate of value based upon a process of
comparing recent sales of similar properties in the surrounding or competing
areas to the subject property. Inherent in this approach is the principle of
substitution.
The application of this approach consists of comparing the subject property with
similar properties of the same general type, which have been sold recently or
currently are available for sale in competing areas. This comparative process
involves judgment as to the similarity of the subject property and the
comparable sale with respect to many value factors such as location, contract
rent levels, quality of construction, reputation and prestige, age and
condition, among others. The estimated value through this approach represents
the probable price at which a willing seller would sell the subject property to
a willing and knowledgeable buyer as of the date of value.
AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 19
THE LAKES, RALEIGH, NORTH CAROLINA
THE INCOME CAPITALIZATION APPROACH
The theory of the Income Capitalization Approach is based on the premise that
present value is the value of the cash flow and reversionary value the property
will produce over a reasonable holding (ownership) period.
The Discounted Cash Flow Analysis will convert equity cash flows (including cash
flows and equity reversion) into a present value utilizing an internal rate of
return (or discount rate). The Internal Rate of Return (IRR) will be derived
from a comparison of alternate investments, a comparative analysis of IRR's used
by recent buyers of similar properties, and a review of published industry
surveys.
The Direct Capitalization Analysis converts one year of income into an overall
value using overall capitalization rates from similar sales. The overall rates
take into consideration buyers assumptions of the market over the long-term.
The results of the Income Capitalization Analysis are usually the primary value
indicator for income producing properties. Investors expect a reasonable rate of
return on their equity investment based on the ownership risks involved; this
approach closely parallels the investment decision process.
RECONCILIATION
In this instance, we have completed the Sales Comparison and Income
Capitalization Approaches to value. As an income producing property, the income
approach is a primary approach to value. The Sales Comparison Approach is also
considered reliable as investors are buying similar buildings in the market.
Our research indicates that market participants are generally not buying,
selling, investing, or lending with reliance placed on the methodology of the
Cost Approach to establish the value. Therefore, we have decided that the Cost
Approach is not a reliable indicator of value for the subject, and this approach
has not been utilized.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 20
THE LAKES, RALEIGH, NORTH CAROLINA
SALES COMPARISON APPROACH
Use of market or comparable sales requires the collection and analysis of
comparable sales data. Similar properties recently sold are compared to the
subject and adjusted based on any perceived differences. This method is based on
the premise that the costs of acquiring a substitute property would tend to
establish a value for the subject property. The premise suggests that if a
substitute is unavailable in the market, the reliability of the approach may be
subordinate to the other approaches.
The reliance on substitute properties produces shortcomings in the validity of
this approach. Geographic and demographic characteristics from each submarket
restrict which sales may be selected. Recent sales with a similar physical
characteristics, income levels, and location are usually limited. The sales we
have identified, however, do establish general valuation parameters as well as
provide support to our conclusion derived through the income approach method.
The standard unit of comparison among similar properties is the sales price per
unit and price per square foot of net rentable area. To accurately adjust prices
to satisfy the requirements of the sales comparison approach, numerous
calculations and highly subjective judgments would be required including
consideration of numerous income and expense details for which information may
be unreliable or unknown. The sales price per unit and square foot are
considered relevant to the investment decision, but primarily as a parameter
against which value estimates derived through the income approach can be judged
and compared.
In examining the comparable sales, we have applied a subjective adjustment
analysis, which includes specific adjustments derived from our experience and
consulting with the market participants.
SALES COMPARISON ANALYSIS
Detailed on the following pages are sales transactions involving properties
located in the subject's competitive investment market.
Photographs of the sale transactions are located in the Addenda. Following the
summary of sales is an adjustment grid that is used to arrive at a value.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 21
THE LAKES, RALEIGH, NORTH CAROLINA
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE
DESCRIPTION SUBJECT I - 1
- ------------------------------- --------------------------------- ---------------------------------
Property Name The Lakes Cottages of Stonehenge
LOCATION:
Address 6615 The Lakes Drive 7600 Falcon Rest Circle
City, State Raleigh, North Carolina Raleigh, North Carolina
County Wake Wake
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 496,980 235,400
Year Built 1972 1986
Number of Units 600 188
Unit Mix: Type Total Type Total
Geneva - 1Bd/1Ba Eff 72 2Br/2.5Ba 139
Tahoe - 1Bd/1Ba 228 3Br/2.5Ba 49
Champlain - 2Bd/1Ba 228
Superior - 2Bd/2Ba 72
Average Unit Size (SF) 828 1,252
Land Area (Acre) 75.2930 19.5100
Density (Units/Acre) 8.0 9.6
Parking Ratio (Spaces/Unit) 2.00 N/A
Parking Type (Gr., Cov., etc.) Open Open
CONDITION: Average Good
APPEAL: Average Good
AMENITIES:
Pool/Spa Yes/Yes Yes/Yes
Gym Room Yes Yes
Laundry Room Yes No
Secured Parking No No
Sport Courts No Yes
Washer/Dryer Connection Yes Yes
Fireplaces Yes Yes
Other
OCCUPANCY: 89% 91%
TRANSACTION DATA:
Sale Date July, 2002
Sale Price ($) $13,400,000
Grantor Daniel Mid-Atlantic Properties II
Grantee Sterling Aprtments LLC
Sale Documentation Book 09505 Page 0045
Verification Wake County Records
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF
- --------------------------------------------------------------------------------------------------
Potential Gross Income $1,953,497 $10,391 $ 8.30
Vacancy/Credit Loss $ 175,815 $ 935 $ 0.75
------------------------------
Effective Gross Income $1,777,682 $ 9,456 $ 7.55
Operating Expenses $ 797,443 $ 4,242 $ 3.39
------------------------------
Net Operating Income $ 980,239 $ 5,214 $ 4.16
- --------------------------------------------------------------------------------------------------
NOTES:
PRICE PER UNIT $ 71,277
PRICE PER SQUARE FOOT $ 56.92
EXPENSE RATIO 44.9%
EGIM 7.54
OVERALL CAP RATE 7.32%
Cap Rate based on Pro Forma or Actual Income? ACTUAL
COMPARABLE COMPARABLE
DESCRIPTION I - 2 I - 3
- ------------------------------- ----------------------------- ----------------------------------------
Property Name Calibre Chase Polo Run
LOCATION:
Address 231 Calibre Chase Drive 1803 Hillock Drive
City, State Raleigh, North Carolina Raleigh, North Carolina
County Wake Wake
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 171,312 307,630
Year Built 1988 1971
Number of Units 192 278
Unit Mix: Type Total Type Total
1Br/1Ba - Type 1 48 1Br/1Ba 50
1Br/1Ba - Type 2 48 2Br/2Ba 168
1Br/1Ba - Type 3 24 3Br/2Ba 60
2Br/2Ba 72
Average Unit Size (SF) 892 1,107
Land Area (Acre) 7.0100 28.3200
Density (Units/Acre) 27.4 9.8
Parking Ratio (Spaces/Unit) N/A N/A
Parking Type (Gr., Cov., etc.) Open Open
CONDITION: Good Average
APPEAL: Good Average
AMENITIES:
Pool/Spa Yes/No Yes/No
Gym Room Yes Yes
Laundry Room No Yes
Secured Parking No No
Sport Courts Yes Yes
Washer/Dryer Connection Yes Yes
Fireplaces Yes No
Other
OCCUPANCY: 98% 94%
TRANSACTION DATA:
Sale Date November, 2001 October, 2001
Sale Price ($) $11,755,000 $11,718,000
Grantor SWA Acquisitions LTD New Plan of Polo Run Inc.
Grantee Wilson Investment Properties CK Polo Run LLC
Inc.
Sale Documentation Book 09142 Page 2745 Book 09101 Page 1868
Verification Wake County Records Wake County Records
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
- ----------------------------------------------------------------------------------------------------
Potential Gross Income $1,890,720 $9,848 $11.04 $2,362,560 $8,498 $ 7.68
Vacancy/Credit Loss $ 75,629 $ 394 $ 0.44 $ 141,754 $ 510 $ 0.46
-------------------------------------------------------------------
Effective Gross Income $1,815,091 $9,454 $10.60 $2,220,806 $7,989 $ 7.22
Operating Expenses $ 705,889 $3,677 $ 4.12 $ 999,363 $3,595 $ 3.25
-------------------------------------------------------------------
Net Operating Income $1,109,202 $5,777 $ 6.47 $1,221,443 $4,394 $ 3.97
- ----------------------------------------------------------------------------------------------------
NOTES:
PRICE PER UNIT $61,224 $42,151
PRICE PER SQUARE FOOT $ 68.62 $ 38.09
EXPENSE RATIO 38.9% 45.0%
EGIM 6.48 5.28
OVERALL CAP RATE 9.44% 10.42%
Cap Rate based on Pro Forma or Actual Income? ACTUAL PRO FORMA
COMPARABLE COMPARABLE
DESCRIPTION I - 4 I - 5
- ------------------------------- ------------------------------ ------------------------------
Property Name Hidden Creek Sedgewood Green
LOCATION:
Address 5601 Old Wake Forest Road 3917 Knickerbocker Parkway
City, State Raleigh, North Carolina Raleigh, North Carolina
County Wake Wake
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 203,500 230,196
Year Built 1979 1990
Number of Units 200 228
Unit Mix: Type Total Type Total
1Br/1Ba 50 1Br/1Ba - Type 1 36
2Br/2Ba 110 1Br/1Ba - Type 2 36
3Br/2Ba 40 1Br/1Ba - Type 3 36
2Br/2Ba 60
3Br/2Ba 60
Average Unit Size (SF) 1,018 1,010
Land Area (Acre) 19.7700 22.8400
Density (Units/Acre) 10.1 10.0
Parking Ratio (Spaces/Unit) N/A N/A
Parking Type (Gr., Cov., etc.) Open Open/Garage
CONDITION: Average Good
APPEAL: Average Good
AMENITIES:
Pool/Spa Yes/Yes Yes/No
Gym Room Yes Yes
Laundry Room Yes Yes
Secured Parking No No
Sport Courts Yes Yes
Washer/Dryer Connection Yes Yes
Fireplaces Yes Yes
Other
OCCUPANCY: 92% 97%
TRANSACTION DATA:
Sale Date October, 2001 November, 2000
Sale Price ($) $9,862,835 $14,350,000
Grantor Schaedle Worthington Hyde ERI NC Inc.
Properties, LP
Grantee Hidden Creek Partners LP Segdewood Green Apartments LLC
Sale Documentation Book 09117 Page 1624 Book 08746 Page 0269
Verification Wake County Records Wake County Records
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
- ----------------------------------------------------------------------------------------------
Potential Gross Income $1,731,960 $8,660 $ 8.51 $1,979,381 $8,681 $ 8.60
Vacancy/Credit Loss $ 138,557 $ 693 $ 0.68 $ 59,381 $ 260 $ 0.26
----------------------------------------------
Effective Gross Income $1,593,403 $7,967 $ 7.83 $1,920,000 $8,421 $ 8.34
Operating Expenses $ 717,031 $3,585 $ 3.52 $ 729,600 $3,200 $ 3.17
----------------------------------------------
Net Operating Income $ 876,372 $4,382 $ 4.31 $1,190,400 $5,221 $ 5.17
- ----------------------------------------------------------------------------------------------
NOTES:
PRICE PER UNIT $49,314 $62,939
PRICE PER SQUARE FOOT $ 48.47 $ 62.34
EXPENSE RATIO 45.0% 38.0%
EGIM 6.19 7.47
OVERALL CAP RATE 8.89% 8.30%
Cap Rate based on Pro Forma or Actual Income? PRO FORMA ACTUAL
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
THE LAKES, RALEIGH, NORTH CAROLINA
IMPROVED SALES MAP
[MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $42,151 to $71,277 per
unit. Adjustments have been made to the sales to reflect differences in
location, age/condition and quality/appeal. Generally speaking, larger
properties typically have a lower price per unit when compared to smaller
properties, all else being equal. Similarly, those projects with a higher
average unit size will generally have a higher price per unit. After appropriate
adjustments are made, the improved sales demonstrate an adjusted range for the
subject from $34,616 to $39,796 per unit with a mean or average adjusted price
of $36,573 per unit. The median adjusted price is $35,828 per unit. Based on the
following analysis, we have concluded to a value of $40,000 per unit, which
results in an "as is" value of $23,700,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
THE LAKES, RALEIGH, NORTH CAROLINA
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- ---------------------------------------------------------------------------------------------------------
Property Name The Lakes Cottages of Stonehenge Calibre Chase
Address 6615 The Lakes Drive 7600 Falcon Rest Circle 231 Calibre Chase Drive
City Raleigh, North Carolina Raleigh, North Carolina Raleigh, North Carolina
Sale Date July, 2002 November, 2001
Sale Price ($) $13,400,000 $11,755,000
Net Rentable Area (SF) 496,980 235,400 171,312
Number of Units 600 188 192
Price Per Unit $71,277 $61,224
Year Built 1972 1986 1988
Land Area (Acre) 75.2930 19.5100 7.0100
- ---------------------------------------------------------------------------------------------------------
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
- ---------------------------------------------------------------------------------------------------------
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 07-2002 0% 11-2001 0%
VALUE AFTER TRANS. ADJUST.
($/UNIT) $71,277 $61,224
Location Superior -20% Comparable 0%
Number of Units 600 188 -10% 192 -10%
Quality / Appeal Average Superior -10% Superior -10%
Age / Condition 1972 1986 / Good - 5% 1988 / Good -5%
Occupancy at Sale 89% 91% 0% 98% -10%
Amenities Good Comparable 0% Comparable 0%
Average Unit Size (SF) 828 1,252 -5% 892 0%
- ---------------------------------------------------------------------------------------------------------
PHYSICAL ADJUSTMENT -50% -35%
- ---------------------------------------------------------------------------------------------------------
FINAL ADJUSTED VALUE ($/UNIT) $35,638 $39,796
- ---------------------------------------------------------------------------------------------------------
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- -------------------------------------------------------------------------------------------------------------
Property Name Polo Run Hidden Creek Sedgewood Green
Address 1803 Hillock Drive 5601 Old Wake Forest Road 3917 Knickerbocker Parkway
City Raleigh, North Carolina Raleigh, North Carolina Raleigh, North Carolina
Sale Date October, 2001 October, 2001 November, 2000
Sale Price ($) $11,718,000 $9,862,835 $14,350,000
Net Rentable Area (SF) 307,630 203,500 230,196
Number of Units 278 200 228
Price Per Unit $42,151 $49,314 $62,939
Year Built 1971 1979 1990
Land Area (Acre) 28.3200 19.7700 22.8400
- -------------------------------------------------------------------------------------------------------------
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
- -------------------------------------------------------------------------------------------------------------
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 10-2001 0% 10-2001 0% 11-2000 0%
VALUE AFTER TRANS. ADJUST.
($/UNIT) $42,151 $49,314 $ 62,939
Location Comparable 0% Superior -5% Comparable 0%
Number of Units 278 -10% 200 -10% 228 -10%
Quality / Appeal Comparable 0% Comparable 0% Superior -10%
Age / Condition 1971 / Average 0% 1979 / Average -5% 1990 / Good -10%
Occupancy at Sale 94% 0% 92% 0% 97% -10%
Amenities Comparable 0% Comparable 0% Comparable 0%
Average Unit Size (SF) 1,107 -5% 1,018 -5% 1,010 -5%
- -------------------------------------------------------------------------------------------------------------
PHYSICAL ADJUSTMENT -15% -25% -45%
- -------------------------------------------------------------------------------------------------------------
FINAL ADJUSTED VALUE ($/UNIT) $35,828 $36,986 $34,616
- -------------------------------------------------------------------------------------------------------------
SUMMARY
VALUE RANGE (PER UNIT) $34,616 TO $ 39,796
MEAN (PER UNIT) $36,573
MEDIAN (PER UNIT) $35,828
VALUE CONCLUSION (PER UNIT) $40,000
VALUE OF IMPROVEMENT & MAIN SITE $24,000,000
PV OF CONCESSIONS -$ 283,000
VALUE INDICATED BY SALES COMPARISON APPROACH $23,717,000
ROUNDED $23,700,000
NET OPERATING INCOME (NOI) ANALYSIS
We have also conducted a net operating income (NOI) comparison analysis. The NOI
effectively takes into account the various physical, location, and operating
aspects of the sale. When the subject's NOI is compared to the sale NOI, a
percent adjustment can be arrived at. The following table illustrates this
analysis.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 24
THE LAKES, RALEIGH, NORTH CAROLINA
NOI PER UNIT COMPARISON
SALE PRICE NOI/ SUBJECT NOI
COMPARABLE NO. OF ---------- ---------- -------------- ADJUSTMENT INDICATED
NO. UNITS PRICE/UNIT OAR NOI/UNIT SUBJ. NOI/UNIT FACTOR VALUE/UNIT
- ------------------------------------------------------------------------------------------------------------------
I-1 188 $13,400,000 7.32% $ 980,239 $2,215,668 0.708 $50,481
$ 71,277 $ 5,214 $ 3,693
I-2 192 $11,755,000 9.44% $1,109,202 $2,215,668 0.639 $39,135
$ 61,224 $ 5,777 $ 3,693
I-3 278 $11,718,000 10.42% $1,221,443 $2,215,668 0.840 $35,427
$ 42,151 $ 4,394 $ 3,693
I-4 200 $ 9,862,835 8.89% $ 876,372 $2,215,668 0.843 $41,559
$ 49,314 $ 4,382 $ 3,693
I-5 228 $14,350,000 8.30% $1,190,400 $2,215,668 0.707 $44,516
$ 62,939 $ 5,221 $ 3,693
PRICE/UNIT
Low High Average Median
$35,427 $50,481 $42,223 $41,559
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
Estimated Price Per Unit $ 40,000
-----------
Number of Units 600
-----------
Value $24,000,000
PV of Concessions -$ 283,000
-----------
Value Based on NOI Analysis $23,717,000
Rounded $23,700,000
The adjusted sales indicate a range of value between $35,427 and $50,481 per
unit, with an average of $42,223 per unit. Based on the subject's competitive
position within the improved sales, a value of $40,000 per unit is estimated.
This indicates an "as is" market value of $23,700,000 (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
THE LAKES, RALEIGH, NORTH CAROLINA
EFFECTIVE GROSS INCOME MULTIPLIER COMPARISON
SALE PRICE
COMPARABLE NO. OF ----------- EFFECTIVE OPERATING SUBJECT
NO. UNITS PRICE/UNIT GROSS INCOME EXPENSE OER PROJECTED OER EGIM
- ---------------------------------------------------------------------------------------------------------------
I-1 188 $13,400,000 $ 1,777,682 $797,443 44.86% 7.54
$ 71,277
I-2 192 $11,755,000 $ 1,815,091 $705,889 38.89% 6.48
$ 61,224
I-3 278 $11,718,000 $ 2,220,806 $999,363 45.00% 5.28
$ 42,151 40.80%
I-4 200 $ 9,862,835 $ 1,593,403 $717,031 45.00% 6.19
$ 49,314
I-5 228 $14,350,000 $ 1,920,000 $729,600 38.00% 7.47
$ 62,939
EGIM
Low High Average Median
- --- ---- ------- ------
5.28 7.54 6.59 6.48
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
Estimate EGIM 5.75
Subject EGI $ 3,995,861
Value $22,976,200
PV of Concessions -$ 283,000
------------
Value Based on EGIM Analysis $22,693,200
Rounded $22,700,000
Value Per Unit $ 37,833
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 40.80% before reserves. The comparable sales
indicate a range of expense ratios from 38.00% to 45.00%, while their EGIMs
range from 5.28 to 7.54. Overall, we conclude to an EGIM of 5.75, which results
in an "as is" value estimate in the EGIM Analysis of $22,700,000.
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 $23,700,000.
Price Per Unit $23,700,000
NOI Per Unit $23,700,000
EGIM Analysis $22,700,000
Sales Comparison Conclusion $23,700,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
THE LAKES, RALEIGH, NORTH CAROLINA
INCOME CAPITALIZATION APPROACH
The income capitalization approach is based on the premise that value is created
by the expectation of future benefits. We estimated the present value of those
benefits to derive an indication of the amount that a prudent, informed
purchaser-investor would pay for the right to receive them as of the date of
value.
This approach requires an estimate of the NOI of a property. The estimated NOI
is then converted to a value indication by use of either the direct
capitalization or the discounted cash flow analysis (yield capitalization).
Direct capitalization uses a single year's stabilized NOI as a basis for a value
indication by dividing the income by a capitalization rate. The rate chosen
accounts for a recapture of the investment by the investor 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
THE LAKES, RALEIGH, NORTH CAROLINA
method is normally more appropriate for properties with relatively stable
operating histories and expectations.
A pro forma analysis for the first year of the investment is made to estimate a
reasonable potential net operating income for the Subject Property. Such an
analysis entails an estimate of the gross income the property should command in
the marketplace. From this total gross income must be deducted an allowance for
vacancy/collection loss and operating expenses as dictated by general market
conditions and the overall character of the subject's tenancy and leased income
to arrive at a projected estimate of net operating income. Conversion of the net
operating income to an indication of value is accomplished by the process of
capitalization, as derived primarily from market data.
MARKET RENT ANALYSIS
In order to determine a market rental rate for the subject, a survey of
competing apartment communities was performed. This survey was displayed
previously in the market analysis section of the report. Detailed information
pertaining to each of the comparable rental communities, along with photographs,
is presented in the Addenda of this report.
The following charts display the subject's current asking and actual rent rates
as well as a comparison with the previous referenced comparable rental
properties.
SUMMARY OF ACTUAL AVERAGE RENTS
Average
Unit Area ----------------------
Unit Type (Sq. Ft.) Per Unit Per SF %Occupied
- -----------------------------------------------------------------------------------
Geneva - 1Bd/1Ba Eff 535 $487 $0.91 82.9%
Tahoe - 1Bd/1Ba 735 $576 $0.78 96.1%
Champlain - 2Bd/1Ba 960 $658 $0.69 86.1%
Superior - 2Bd/2Ba 1000 $683 $0.68 79.2%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
THE LAKES, RALEIGH, NORTH CAROLINA
RENT ANALYSIS
COMPARABLE RENTS
-----------------------------------------------
R-1 R-2 R-3 R-4 R-5
-----------------------------------------------
Archstone Laurel Hunting
Cambridge Ridgewood Cedar Point Springs Ridge
-----------------------------------------------
SUBJECT SUBJECT COMPARISON TO SUBJECT
SUBJECT UNIT ACTUAL ASKING -----------------------------------------------
DESCRIPTION TYPE RENT RENT Superior Similar Inferior Similar Similar MIN MAX MEDIAN AVERAGE
- -----------------------------------------------------------------------------------------------------------------------------
Monthly Rent GENEVA - $ 487 $ 539 $ 565 $ 565 $ 565 $ 565 $ 565
Unit Area (SF) 1BD/1BA EFF 535 535 510 510 510 510 510
Monthly Rent Per
Sq. Ft. $ 0.91 $ 1.01 $ 1.11 $ 1.11 $ 1.11 $ 1.11 $ 1.11
Monthly Rent TAHOE - 1BD/1BA $ 576 $ 609 $ 705 $ 690 $ 530 $ 630 $ 530 $ 705 $ 660 $ 639
Unit Area (SF) 735 735 808 710 685 760 685 808 735 741
Monthly Rent Per
Sq. Ft. $ 0.78 $ 0.83 $ 0.87 $ 0.97 $ 0.77 $ 0.83 $ 0.77 $ 0.97 $ 0.85 $ 0.86
Monthly Rent CHAMPLAIN - $ 658 $ 679 $ 725 $ 725 $ 725 $ 725 $ 725
Unit Area (SF) 2BD/1BA 960 960 836 836 836 836 836
Monthly Rent Per
Sq. Ft. $ 0.69 $ 0.71 $ 0.87 $ 0.87 $ 0.87 $ 0.87 $ 0.87
Monthly Rent SUPERIOR - $ 683 $ 719 $ 878 $ 640 $ 869 $ 640 $ 878 $ 869 $ 796
Unit Area (SF) 2BD/2BA 1,000 1,000 1,158 1,040 1,343 1,040 1,343 1,158 1,180
Monthly Rent Per
Sq. Ft. $ 0.68 $ 0.72 $ 0.76 $ 0.62 $ 0.65 $ 0.62 $ 0.76 $ 0.65 $ 0.67
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
- -------------------------------------------------------------------------------------------------------
Geneva - 1Bd/1Ba Eff 72 535 $490 $0.92 $ 35,280 $ 423,360
Tahoe - 1Bd/1Ba 228 735 $575 $0.78 $131,100 $1,573,200
Champlain - 2Bd/1Ba 228 960 $660 $0.69 $150,480 $1,805,760
Superior - 2Bd/2Ba 72 1,000 $685 $0.69 $ 49,320 $ 591,840
-------- ----------
Total $366,180 $4,394,160
======== ==========
PRO FORMA ANALYSIS
For purposes of this appraisal, we were provided with income and expense data
for the subject property. A summary of this data is presented on the following
page.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 29
THE LAKES, RALEIGH, NORTH CAROLINA
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 $4,454,134 $ 7,424 $4,543,794 $ 7,573 $4,275,932 $ 7,127 $4,343,552 $ 7,239
Vacancy $ 630,698 $ 1,051 $ 375,199 $ 625 $ 604,297 $ 1,007 $ 396,809 $ 661
Credit Loss/Concessions $ 138,476 $ 231 $ 210,638 $ 351 $ 52,527 $ 88 $ 61,200 $ 102
-------------------------------------------------------------------------------------
Subtotal $ 769,174 $ 1,282 $ 585,837 $ 976 $ 656,824 $ 1,095 $ 458,009 $ 763
Laundry Income $ 44,301 $ 74 $ 42,122 $ 70 $ 42,698 $ 71 $ 61,752 $ 103
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 99,724 $ 166 $ 87,536 $ 146 $ 108,051 $ 180 $ 104,947 $ 175
-------------------------------------------------------------------------------------
Subtotal Other Income $ 144,025 $ 240 $ 129,658 $ 216 $ 150,749 $ 251 $ 166,699 $ 278
-------------------------------------------------------------------------------------
Effective Gross Income $3,828,985 $ 6,382 $4,087,615 $ 6,813 $3,769,857 $ 6,283 $4,052,242 $ 6,754
Operating Expenses
Taxes $ 240,818 $ 401 $ 119,868 $ 200 $ 364,588 $ 608 $ 259,686 $ 433
Insurance $ 58,471 $ 97 $ 111,842 $ 186 $ 109,636 $ 183 $ 117,589 $ 196
Utilities $ 167,893 $ 280 $ 171,510 $ 286 $ 167,683 $ 279 $ 155,436 $ 259
Repair & Maintenance $ 428,877 $ 715 $ 320,537 $ 534 $ 324,021 $ 540 $ 261,780 $ 436
Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Landscaping $ 77,676 $ 129 $ 63,987 $ 107 $ 50,544 $ 84 $ 139,572 $ 233
Security $ 5,701 $ 10 $ 6,689 $ 11 $ 4,194 $ 7 $ 0 $ 0
Marketing & Leasing $ 96,662 $ 161 $ 99,982 $ 167 $ 57,680 $ 96 $ 52,728 $ 88
General Administrative $ 586,509 $ 978 $ 626,883 $ 1,045 $ 480,768 $ 801 $ 442,968 $ 738
Management $ 199,174 $ 332 $ 198,840 $ 331 $ 200,286 $ 334 $ 228,924 $ 382
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
-------------------------------------------------------------------------------------
Total Operating Expenses $1,861,781 $ 3,103 $1,720,138 $ 2,867 $1,759,400 $ 2,932 $1,658,683 $ 2,764
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
-------------------------------------------------------------------------------------
Net Income $1,967,204 $ 3,279 $2,367,477 $ 3,946 $2,010,457 $ 3,351 $2,393,559 $ 3,989
ANNUALIZED 2003
-------------------
PROJECTION AAA PROJECTION
------------------- -----------------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT %
- -----------------------------------------------------------------------------
Revenues
Rental Income $4,050,812 $ 6,751 $4,394,160 $ 7,324 100.0%
Vacancy $ 738,192 $ 1,230 $ 439,416 $ 732 10.0%
Credit Loss/Concessions $ 187,332 $ 312 $ 87,883 $ 146 2.0%
---------------------------------------------------
Subtotal $ 925,524 $ 1,543 $ 527,299 $ 879 12.0%
Laundry Income $ 41,056 $ 68 $ 42,000 $ 70 1.0%
Garage Revenue $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 72,796 $ 121 $ 87,000 $ 145 2.0%
---------------------------------------------------
Subtotal Other Income $ 113,852 $ 190 $ 129,000 $ 215 2.9%
---------------------------------------------------
Effective Gross Income $3,239,140 $ 5,399 $3,995,861 $ 6,660 100.0%
Operating Expenses
Taxes $ 279,580 $ 466 $ 236,400 $ 394 5.9%
Insurance $ 131,432 $ 219 $ 120,000 $ 200 3.0%
Utilities $ 225,832 $ 376 $ 165,000 $ 275 4.1%
Repair & Maintenance $ 421,768 $ 703 $ 285,000 $ 475 7.1%
Cleaning $ 0 $ 0 $ 0 $ 0 0.0%
Landscaping $ 152,824 $ 255 $ 90,000 $ 150 2.3%
Security $ 4,000 $ 7 $ 0 $ 0 0.0%
Marketing & Leasing $ 155,584 $ 259 $ 57,000 $ 95 1.4%
General Administrative $ 530,604 $ 884 $ 477,000 $ 795 11.9%
Management $ 167,332 $ 279 $ 199,793 $ 333 5.0%
Miscellaneous $ 0 $ 0 $ 0 0.0%
---------------------------------------------------
Total Operating Expenses $2,068,956 $ 3,448 $1,630,193 $ 2,717 40.8%
Reserves $ 0 $ 0 $ 150,000 $ 250 9.2%
---------------------------------------------------
Net Income $1,170,184 $ 1,950 $2,215,668 $ 3,693 55.4%
REVENUES AND EXPENSES
The subject's revenue and expense projections are displayed on the previous
chart. Rental income is based on the market analysis previously discussed. Other
income consists of forfeited deposits, laundry income, late rent payments, month
to month fees, pet fees, vending machine revenue, etc.
We forecasted the property's annual operating expenses after reviewing its
historical performance at the subject property. We analyzed each item of expense
and attempted to forecast amounts a typical informed investor would consider
reasonable.
VACANCY AND COLLECTION LOSS
An investor is primarily interested in the annual revenue an income property is
likely to produce over a specified period of time, rather than the income it
could produce if it were always 100% occupied and all tenants were paying their
rent in full and on time. An investor normally expects some income loss as
tenants vacate, fail to pay rent, or pay their rent late.
We have projected a stabilized vacancy and collection loss rate of 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
THE LAKES, RALEIGH, NORTH CAROLINA
RESERVES FOR REPLACEMENT
"Reserves for replacements" is a contingency account allocated to the expenses
of the property to provide for replacement of short-lived items and for
unforeseen necessary capital expenditures. We have utilized the Korpacz Real
Estate Investor Survey of the national apartment market, which reports a range
of replacement reserves between $150 and $400 per unit. For purposes of this
analysis, we have included an allowance of $250 per unit for reserves for
replacement.
CAPITAL EXPENDITURES
Capital expenditures represent expenses for immediate repair or replacement of
items that have average to long lives. Based on our inspection of the property
as well as discussions with property management personnel, there are no major
items remaining in need of repair or replacement that would require an expense
beyond our reserves for replacement. Therefore an allowance of $250 per unit
should be satisfactory in our reserves for replacement to cover future capital
expenditures.
DISCOUNTED CASH FLOW ANALYSIS
As the subject is a multi-tenant income property, the Discounted Cash Flow
Method is considered appropriate. This method is especially meaningful in that
it isolates the timing of the annual cash flows and discounts them, along with
the expected equity reversion, to a present value. The present value of the cash
flow is added to the present value of the reversion, resulting in a total
property value.
INVESTMENT CRITERIA
Appropriate investment criteria will be derived for the subject based upon
analysis of comparable sales and a survey of real estate investors. The
following table summarizes the findings of Korpacz National Investor Survey for
the most recent period.
KORPACZ NATIONAL INVESTOR SURVEY
1ST QUARTER 2003
NATIONAL APARTMENT MARKET
CAPITALIZATION RATES
-----------------------------------------------------
GOING-IN TERMINAL
------------------------- ----------------------
LOW HIGH LOW HIGH
-----------------------------------------------------
RANGE 6.00% 10.00% 7.00% 10.00%
AVERAGE 8.14% 8.47%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31
THE LAKES, RALEIGH, NORTH CAROLINA
SUMMARY OF OVERALL
CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
- ----------------------------------------------------------------------------
I-1 Jul-02 91% $71,277 7.32%
I-2 Nov-01 98% $61,224 9.44%
I-3 Oct-01 94% $42,151 10.42%
I-4 Oct-01 92% $49,314 8.89%
I-5 Nov-00 97% $62,939 8.30%
-------------------
High 10.42%
-------------------
Low 7.32%
-------------------
Average 8.87%
Based on this information, we have concluded the subject's overall
capitalization rate should be 9.50%. The terminal capitalization rate is applied
to the net operating income estimated for the year following the end of the
holding period. Based on the concluded overall capitalization rate, the age of
the property and the surveyed information, we have concluded the subject's
terminal capitalization rate to be 10.00%. Finally, the subject's discount rate
or yield rate is estimated based on the previous investor survey and an
examination of returns available on alternative investments in the market. Based
on this analysis, the subject's discount rate is estimated to be 11.50%.
HOLDING PERIOD
The survey of investors indicates that most investors are completing either
10-year cash flows or extending the analysis to the end of the lease if it is
more than 10-years. A 10-year period has been used in the analysis of the
subject with the eleventh year stabilized NOI used to determine the reversion.
SELLING COSTS
Sales of similar size properties are typically accomplished with the aid of a
broker and will also incur legal and other transaction related cost. Based on
our survey of brokers and a review of institutional investor projections, an
allowance of 3.00% of the sale amount is applied.
DISCOUNTED CASH FLOW CONCLUSION
Discounting the annual cash flows and the equity reversion at the selected rate
of 11.50% indicates a value of $22,800,000. In this instance, the reversion
figure contributes
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
THE LAKES, RALEIGH, NORTH CAROLINA
approximately 39% of the total value. Investors surveyed for this assignment
indicated they would prefer to have the cash flow contribute anywhere from 50%
to 60%. Overall, the blend seems reasonable. The cash flow and pricing matrix
are located on the following pages.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 33
THE LAKES, RALEIGH, NORTH CAROLINA
DISCOUNTED CASH FLOW ANALYSIS
THE LAKES
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009
FISCAL YEAR 1 2 3 4 5 6
- ------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $4,394,160 $4,394,160 $4,482,043 $4,571,684 $4,708,835 $4,850,100
Vacancy $ 444,220 $ 439,416 $ 448,204 $ 457,168 $ 470,883 $ 485,010
Credit Loss $ 87,883 $ 87,883 $ 89,641 $ 91,434 $ 94,177 $ 97,002
Concessions $ 131,825 $ 87,883 $ 89,641 $ 45,717 $ 0 $ 0
---------------------------------------------------------------------------
Subtotal $ 663,928 $ 615,182 $ 627,486 $ 594,319 $ 565,060 $ 582,012
Laundry Income $ 42,000 $ 42,000 $ 42,840 $ 43,697 $ 45,008 $ 46,358
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 87,000 $ 87,000 $ 88,740 $ 90,515 $ 93,230 $ 96,027
---------------------------------------------------------------------------
Subtotal Other Income $ 129,000 $ 129,000 $ 131,580 $ 134,212 $ 138,238 $ 142,385
---------------------------------------------------------------------------
EFFECTIVE GROSS INCOME $3,859,232 $3,907,978 $3,986,137 $4,111,577 $4,282,012 $4,410,473
OPERATING EXPENSES:
Taxes $ 236,400 $ 243,492 $ 250,797 $ 258,321 $ 266,070 $ 274,052
Insurance $ 120,000 $ 123,600 $ 127,308 $ 131,127 $ 135,061 $ 139,113
Utilities $ 165,000 $ 169,950 $ 175,049 $ 180,300 $ 185,709 $ 191,280
Repair & Maintenance $ 285,000 $ 293,550 $ 302,357 $ 311,427 $ 320,770 $ 330,393
Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Landscaping $ 90,000 $ 92,700 $ 95,481 $ 98,345 $ 101,296 $ 104,335
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 57,000 $ 58,710 $ 60,471 $ 62,285 $ 64,154 $ 66,079
General Administrative $ 477,000 $ 491,310 $ 506,049 $ 521,231 $ 536,868 $ 552,974
Management $ 192,962 $ 195,399 $ 199,307 $ 205,579 $ 214,101 $ 220,524
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
---------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $1,623,362 $1,668,711 $1,716,818 $1,768,616 $1,824,028 $1,878,749
Reserves $ 150,000 $ 154,500 $ 159,135 $ 163,909 $ 168,826 $ 173,891
---------------------------------------------------------------------------
NET OPERATING INCOME $2,085,870 $2,084,767 $2,110,184 $2,179,052 $2,289,158 $2,357,832
Operating Expense Ratio (% of EGI) 42.1% 42.7% 43.1% 43.0% 42.6% 42.6%
Operating Expense Per Unit $ 2,706 $ 2,781 $ 2,861 $ 2,948 $ 3,040 $ 3,131
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 7 8 9 10 11
- ----------------------------------------------------------------------------------------------------
REVENUE
Base Rent $4,995,603 $5,145,471 $5,299,835 $5,458,830 $5,622,595
Vacancy $ 499,560 $ 514,547 $ 529,983 $ 545,883 $ 562,259
Credit Loss $ 99,912 $ 102,909 $ 105,997 $ 109,177 $ 112,452
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------
Subtotal $ 599,472 $ 617,456 $ 635,980 $ 655,060 $ 674,711
Laundry Income $ 47,749 $ 49,181 $ 50,657 $ 52,176 $ 53,742
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 98,908 $ 101,875 $ 104,931 $ 108,079 $ 111,322
--------------------------------------------------------------
Subtotal Other Income $ 146,657 $ 151,056 $ 155,588 $ 160,256 $ 165,063
--------------------------------------------------------------
EFFECTIVE GROSS INCOME $4,542,787 $4,679,071 $4,819,443 $4,964,026 $5,112,947
OPERATING EXPENSES:
Taxes $ 282,274 $ 290,742 $ 299,464 $ 308,448 $ 317,702
Insurance $ 143,286 $ 147,585 $ 152,012 $ 156,573 $ 161,270
Utilities $ 197,019 $ 202,929 $ 209,017 $ 215,288 $ 221,746
Repair & Maintenance $ 340,305 $ 350,514 $ 361,029 $ 371,860 $ 383,016
Cleaning $ 0 $ 0 $ 0 $ 0 $ 0
Landscaping $ 107,465 $ 110,689 $ 114,009 $ 117,430 $ 120,952
Security $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 68,061 $ 70,103 $ 72,206 $ 74,372 $ 76,603
General Administrative $ 569,563 $ 586,650 $ 604,249 $ 622,377 $ 641,048
Management $ 227,139 $ 233,954 $ 240,972 $ 248,201 $ 255,647
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------
TOTAL OPERATING EXPENSES $1,935,112 $1,993,165 $2,052,960 $2,114,549 $2,177,985
Reserves $ 179,108 $ 184,481 $ 190,016 $ 195,716 $ 201,587
--------------------------------------------------------------
NET OPERATING INCOME $2,428,567 $2,501,424 $2,576,467 $2,653,761 $2,733,374
Operating Expense Ratio (% of EGI) 42.6% 42.6% 42.6% 42.6% 42.6%
Operating Expense Per Unit $ 3,225 $ 3,322 $ 3,422 $ 3,524 $ 3,630
Estimated Stabilized NOI $2,215,668 Sales Expense Rate 3.00%
Months to Stabilized 1 Discount Rate 11.50%
Stabilized Occupancy 90.0% Terminal Cap Rate 10.00%
Gross Residual Sale Price $27,333,739 Deferred Maintenance $ 0
Less: Sales Expense $ 820,012 Add: Excess Land $ 0
----------- Other Adjustments $ 0
Net Residual Sale Price $26,513,727 -----------
Value Indicated By "DCF" $22,829,316
PV of Reversion $ 8,927,341 Rounded $22,800,000
Add: NPV of NOI $13,901,975
-----------
PV Total $22,829,316
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE
---------------------------------------------------------------------
TOTAL VALUE 11.00% 11.25% 11.50% 11.75% 12.00%
- ------------------------------ ---------------------------------------------------------------------
TERMINAL CAP RATE 9.50% $24,062,089 $23,676,459 $23,299,176 $22,930,029 $22,568,817
9.75% $23,810,059 $23,430,036 $23,058,222 $22,694,412 $22,338,406
10.00% $23,570,630 $23,195,933 $22,829,316 $22,470,576 $22,119,516
10.25% $23,342,881 $22,973,250 $22,611,576 $22,257,658 $21,911,304
10.50% $23,125,976 $22,761,171 $22,404,204 $22,054,879 $21,713,006
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
THE LAKES, RALEIGH, NORTH CAROLINA
INCOME LOSS DURING LEASE-UP
The subject is currently near or at a stabilized condition. Therefore, there is
no income loss during lease-up at the subject property.
CONCESSIONS
Due to softness in the market, concessions have been utilized at the subject
property and within the market. Based on our discussions with the subject's
property manager and those at competing properties, these concessions are
expected to continue in the near term until the market returns to a stabilized
level. Concessions have been included as a line item deduction within the
discounted cash flow analysis. The present value of these concessions equates to
$283,000 (rounded). This amount has been deducted from the Direct Capitalization
analysis, as well as the Sales Comparison Approach value.
DIRECT CAPITALIZATION METHOD
After having projected the income and expenses for the property, the next step
in the valuation process is to capitalize the net income into an estimate of
value. The selected overall capitalization rate ("OAR") covers both return on
and return of capital. It is the overall rate of return an investor expects.
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 9.50% percent is applicable to the
subject. The results of our direct capitalization analysis are as follows:
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35
THE LAKES, RALEIGH, NORTH CAROLINA
THE LAKES
TOTAL PER SQ. FT. PER UNIT %OF EGI
- --------------------------------------------------------------------------------------------------
REVENUE
Base Rent $ 4,394,160 $ 8.84 $ 7,324
Less: Vacancy & Collection Loss 12.00% $ 527,299 $ 1.06 $ 879
Plus: Other Income
Laundry Income $ 42,000 $ 0.08 $ 70 1.05%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 87,000 $ 0.18 $ 145 2.18%
-----------------------------------------------
Subtotal Other Income $ 129,000 $ 0.26 $ 215 3.23%
EFFECTIVE GROSS INCOME $ 3,995,861 $ 8.04 $ 6,660
OPERATING EXPENSES:
Taxes $ 236,400 $ 0.48 $ 394 5.92%
Insurance $ 120,000 $ 0.24 $ 200 3.00%
Utilities $ 165,000 $ 0.33 $ 275 4.13%
Repair & Maintenance $ 285,000 $ 0.57 $ 475 7.13%
Cleaning $ 0 $ 0.00 $ 0 0.00%
Landscaping $ 90,000 $ 0.18 $ 150 2.25%
Security $ 0 $ 0.00 $ 0 0.00%
Marketing & Leasing $ 57,000 $ 0.11 $ 95 1.43%
General Administrative $ 477,000 $ 0.96 $ 795 11.94%
Management 5.00% $ 199,793 $ 0.40 $ 333 5.00%
Miscellaneous $ 0 $ 0.00 $ 0 0.00%
TOTAL OPERATING EXPENSES $ 1,630,193 $ 3.28 $ 2,717 40.80%
Reserves $ 150,000 $ 0.30 $ 250 3.75%
-----------------------------------------------
NET OPERATING INCOME $ 2,215,668 $ 4.46 $ 3,693 55.45%
===============================================
"GOING IN" CAPITALIZATION RATE 9.50%
VALUE INDICATION $23,322,819 $46.93 $38,871
PV OF CONCESSIONS ($ 283,000)
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $23,039,819
ROUNDED $23,000,000 $46.28 $38,333
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
THE LAKES, RALEIGH, NORTH CAROLINA
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- --------------------------------------------------------------------------------------
8.75% $25,038,917 $25,000,000 $41,667 $50.30
9.00% $24,335,531 $24,300,000 $40,500 $48.90
9.25% $23,670,165 $23,700,000 $39,500 $47.69
9.50% $23,039,819 $23,000,000 $38,333 $46.28
9.75% $22,441,798 $22,400,000 $37,333 $45.07
10.00% $21,873,678 $21,900,000 $36,500 $44.07
10.25% $21,333,271 $21,300,000 $35,500 $42.86
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $23,000,000.
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 $22,800,000
Direct Capitalization Method $23,000,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$22,800,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37
THE LAKES, RALEIGH, NORTH CAROLINA
RECONCILIATION AND CONCLUSION
This appraisal was made to express an opinion as of the Market Value of the fee
simple estate in the property.
AS IS MARKET VALUE OF THE FEE SIMPLE ESTATE
Cost Approach Not Utilized
Sales Comparison Approach $23,700,000
Income Approach $22,800,000
Reconciled Value $22,800,000
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 14, 2003 the market value of the fee simple estate in the property is:
$22,800,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
THE LAKES, RALEIGH, NORTH CAROLINA
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
THE LAKES, RALEIGH, NORTH CAROLINA
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
THE LAKES, RALEIGH, NORTH CAROLINA
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
EXTERIOR - PROPERTY SIGN EXTERIOR - OFFICE
[PICTURE] [PICTURE]
INTERIOR - OFFICE EXTERIOR - TYPICAL UNIT
[PICTURE] [PICTURE]
EXTERIOR - TYPICAL UNIT INTERIOR - TYPICAL UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
THE LAKES, RALEIGH, NORTH CAROLINA
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
INTERIOR - TYPICAL KITCHEN EXTERIOR - PRIVATE POND
[PICTURE] [PICTURE]
INTERIOR - FITNESS FACILITY EXTERIOR - SAND VOLLEYBALL COURT
[PICTURE] [PICTURE]
EXTERIOR - TENNIS COURT INTERIOR - RACQUET BALL COURT
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
THE LAKES, RALEIGH, NORTH CAROLINA
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
THE LAKES, RALEIGH, NORTH CAROLINA
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
COTTAGES OF STONEHENGE CALIBRE CHASE POLO RUN
7600 Falcon Rest Circle 231 Calibre Chase Drive 1803 Hillock Drive
Raleigh, North Carolina Raleigh, North Carolina Raleigh, North Carolina
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
HIDDEN CREEK SEDGEWOOD GREEN
5601 Old Wake Forest Road 3917 Knickerbocker Parkway
Raleigh, North Carolina Raleigh, North Carolina
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
THE LAKES, RALEIGH, NORTH CAROLINA
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
- ------------------------------ ---------------------------------------------- ---------------------------------------------
Property Name The Lakes Cambridge
Management Company AIMCO Sentinel
LOCATION:
Address 6615 The Lakes Drive 6801 Chesterbrook Court
City, State Raleigh, North Carolina Raleigh, North Carolina
County Wake Wake
Proximity to Subject 0.70 mile to the west of the subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 496,980 163,120
Year Built 1972 1995
Effective Age 25 8
Building Structure Type Brick & wood/vinyl siding; composition
shingle
Parking Type (Gr.,Cov., etc.) Open
Number of Units 600 168
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 Geneva - 1Bd/1Ba Eff 535 72 $ 487 2 1Bd/1Ba 808 64 $ 705
2 Tahoe - 1Bd/1Ba 735 228 $ 576 1Bd/2Ba 1,026 32 $ 805
3 Champlain - 2Bd/1Ba 960 228 $ 658 4 2Bd/2Ba 1,158 24 $ 878
4 Superior - 2Bd/2Ba 1,000 72 $ 683 2Bd/2.5Ba 1,058 48 $ 858
Average Unit Size (SF) 828 700
Unit Breakdown: Efficiency 2-Bedroom Efficiency 0% 2-Bedroom 43%
1-Bedroom 3-Bedroom 1-Bedroom 57% 3-Bedroom 0%
CONDITION: Very Good
APPEAL: Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage X Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
Fireplace X Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
X Spa/Jacuzzi Car Wash Spa/Jacuzzi X Car Wash
X Basketball Court BBQ Equipment Basketball Court X BBQ Equipment
Volleyball Court Theater Room X Volleyball Court Theater Room
X Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
X Racquet Ball X Laundry Room Racquet Ball X Laundry Room
X Jogging Track Business Office Jogging Track X Business Office
X Gym Room X Gym Room
X Playground Playground
OCCUPANCY: 89% 77%
LEASING DATA:
Available Leasing Terms 6 to 12 months 6, 9, 12
Concessions Reduced rents ($100 off) 2 months free on 12 month lease on all unit
types
Pet Deposit $200 $300 with $200 non-refundable, $10 per month
pet
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
Water Trash X Water Trash
Confirmation Arnetta Brown
Telephone Number 919-847-1516 919-846-8274
NOTES:
COMPARISON TO SUBJECT: Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
- ------------------------------ ---------------------------------------------- ---------------------------------------------
Property Name Archstone Ridgewood Cedar Point
Management Company Archstone CRS Raleigh Housing Corp.
LOCATION:
Address 120 Ridgewood Drive 7101-1E Sandy Forks Road
City, State Raleigh, North Carolina Raleigh, North Carolina
County Wake Wake
Proximity to Subject 0.50 mile to the north of the subject 0.25 mile northeast of the subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 165,492 185,710
Year Built 1986 1972
Effective Age 17 31
Building Structure Type Brick & wood/vinyl siding; composition shingle Brick & wood/vinyl siding; composition
shingle
Parking Type (Gr.,Cov., etc.) Open Open
Number of Units 228 168
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1Bd/1Ba - Type 1 510 34 $ 565 2 1Bd/1Ba 685 14 $ 530
1Bd/1Ba - Type 2 624 72 $ 590 4 2Bd/2Ba 1,040 70 $ 640
2 1Bd/1Ba - Type 3 710 32 $ 690 3Bd/2Ba 1,230 84 $ 710
3 2Bd/1Ba 836 34 $ 725
2Bd/2Ba 930 56 $ 755
Average Unit Size (SF) 726 1,105
Unit Breakdown: Efficiency 0% 2-Bedroom 39% Efficiency 0% 2-Bedroom 42%
1-Bedroom 61% 3-Bedroom 0% 1-Bedroom 8% 3-Bedroom 50%
CONDITION: Average Fair
APPEAL: Average Poor
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball Laundry Room
Jogging Track Business Office Jogging Track Business Office
X Gym Room Gym Room
Playground X Playground
OCCUPANCY: 93% 70%
LEASING DATA:
Available Leasing Terms 3-12 month 12 months
Concessions $125 off market $31 off 1 BR, $90 off 2 BR, $60 off 3 BR
Pet Deposit $250 to 350 non-refundable and pet rent $200
Utilities Paid by Tenant: X Electric X Natural Gas X Electric Natural Gas
X Water X Trash Water Trash
Confirmation Adrianne Lopez Anna
Telephone Number 919-848-3511 919-847-1330
NOTES:
COMPARISON TO SUBJECT: Similar Inferior
COMPARABLE COMPARABLE
DESCRIPTION R - 4 R - 5
- ------------------------------ -------------------------------------------- ---------------------------------------------
Property Name Laurel Springs Hunting Ridge
Management Company Brookside Properties Drucker & Faulk
LOCATION:
Address 500-103 Bridleridge Drive 1001 Fox Hunt Lane
City, State Raleigh, North Carolina Raleigh, North Carolina
County Wake Wake
Proximity to Subject 0.70 mile to the north of the subject 0.75 mile northeast of the subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 137,028 182,320
Year Built 1986 1982
Effective Age 17 21
Building Structure Type Wood/vinyl siding; composition shingle Brick & wood/vinyl siding; composition shingle
Parking Type (Gr.,Cov., etc.) Open Open
Number of Units 122 176
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1Bd/1Ba 933 50 $ 709 2 1Bd/1Ba - Type 1 760 18 $ 630
4 2Bd/2Ba - Type 1 1,343 40 $ 869 1Bd/1Ba - Type 2 860 14 $ 663
2Bd/2Ba - Type 2 1,414 32 $ 909 2Bd/1.5Ba - Type 1 1,030 96 $ 750
2Bd/1.5Ba - Type 2 1,130 24 $ 745
3Bd/2Ba - Type 1 1,250 18 $ 900
3Bd/2Ba - Type 2 1,350 6 $ 925
Average Unit Size (SF) 1,194 1,036
Unit Breakdown: Efficiency 0% 2-Bedroom 59% Efficiency 0% 2-Bedroom 68%
1-Bedroom 41% 3-Bedroom 0% 1-Bedroom 18% 3-Bedroom 19%
CONDITION: Average Average
APPEAL: Average Average
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi X Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court X BBQ Equipment
Volleyball Court Theater Room X Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball Laundry Room Racquet Ball X Laundry Room
X Jogging Track Business Office Jogging Track Business Office
Gym Room X Gym Room
X Playground X Playground
OCCUPANCY: 98% 97%
LEASING DATA:
Available Leasing Terms 6 to 12 months 6 months and up
Concessions Reduced rents ($110 off) 1 month on 12 month lease, all unit types
Pet Deposit $290 non-refundable up to $300 with $150 non-refundable
Utilities Paid by Tenant: X Electric X Natural Gas X Electric Natural Gas
X Water Trash Water Trash
Confirmation Karen
Telephone Number 919-847-0632
NOTES:
COMPARISON TO SUBJECT: Similar Similar
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
THE LAKES, RALEIGH, NORTH CAROLINA
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
CAMBRIDGE ARCHSTONE RIDGEWOOD CEDAR POINT
6801 Chesterbrook Court 120 Ridgewood Drive 7101-1E Sandy Forks Road
Raleigh, North Carolina Raleigh, North Carolina Raleigh, North Carolina
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4 COMPARABLE R-5
LAUREL SPRINGS HUNTING RIDGE
500-103 Bridleridge Drive 1001 Fox Hunt Lane
Raleigh, North Carolina Raleigh, North Carolina
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
THE LAKES, RALEIGH, NORTH CAROLINA
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
THE LAKES, RALEIGH, NORTH CAROLINA
No responsibility is assumed for matters legal in nature. No investigation has
been made of the title to or any liabilities against the property appraised. In
this appraisal, it is presumed that, unless otherwise noted, the owner's claim
is valid, the property rights are good and marketable, and there are no
encumbrances which cannot be cleared through normal processes.
To the best of our knowledge, all data set forth in this report are true and
accurate. Although gathered from reliable sources, no guarantee is made nor
liability assumed for the accuracy of any data, opinions, or estimates
identified as being furnished by others which have been used in formulating this
analysis.
Land areas and descriptions used in this appraisal were obtained from public
records and have not been verified by legal counsel or a licensed surveyor.
No soil analysis or geological studies were ordered or made in conjunction with
this report, nor were any water, oil, gas, or other subsurface mineral and use
rights or conditions investigated.
Substances such as asbestos, urea-formaldehyde foam insulation, other chemicals,
toxic wastes, or other potentially hazardous materials could, if present,
adversely affect the value of the property. Unless otherwise stated in this
report, the existence of hazardous substance, which may or may not be present on
or in the property, was not considered by the appraiser in the development of
the conclusion of value. The stated value estimate is predicated on the
assumption that there is no material on or in the property that would cause such
a loss in value. No responsibility is assumed for any such conditions, and the
client has been advised that the appraiser is not qualified to detect such
substances, quantify the impact on values, or develop the remedial cost.
No environmental impact study has been ordered or made. Full compliance with
applicable federal, state, and local environmental regulations and laws is
assumed unless otherwise stated, defined, and considered in the report. It is
also assumed that all required licenses, consents, or other legislative or
administrative authority from any local, state, or national government or
private entity organization either have been or can be obtained or renewed for
any use which the report covers.
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
THE LAKES, RALEIGH, NORTH CAROLINA
It is assumed that all applicable zoning and use regulations and restrictions
have been complied with unless a nonconformity has been stated, defined, and
considered in the appraisal report. Further, it is assumed that the utilization
of the land and improvements is within the boundaries of the property described
and that no encroachment or trespass exists unless noted in the report.
The Americans with Disabilities Act ("ADA") became effective January 26, 1992.
We have not made a specific compliance survey and analysis of this property to
determine whether or not it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the property
together with a detailed analysis of the requirements of the ADA could reveal
that the property is not in compliance with one or more of the requirements of
the act. If so, this fact could have a negative effect on the value of the
property. Since we have no direct evidence relating to this issue, we did not
consider the possible noncompliance with the requirements of ADA in estimating
the value of the property.
We have made a physical inspection of the property and noted visible physical
defects, if any, in our report. This inspection was made by individuals
generally familiar with real estate and building construction. However, these
individuals are not architectural or structural engineers who would have
detailed knowledge of building design and structural integrity. Accordingly, we
do not opine on, nor are we responsible for, the structural integrity of the
property including its conformity to specific governmental code requirements,
such as fire, building and safety, earthquake, and occupancy, or any physical
defects which were not readily apparent to the appraiser during the inspection.
The value or values presented in this report are based upon the premises
outlined herein and are valid only for the purpose or purposes stated.
The date of value to which the conclusions and opinions expressed apply is set
forth in this report. The value opinion herein rendered is based on the status
of the national business economy and the purchasing power of the U.S. dollar as
of that date.
Testimony or attendance in court or at any other hearing is not required by
reason of this appraisal unless arrangements are previously made within a
reasonable time in advance for
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
THE LAKES, RALEIGH, NORTH CAROLINA
such testimony, and then such testimony shall be at American Appraisal
Associates, Inc.'s, prevailing per diem for the individuals involved.
Possession of this report or any copy thereof does not carry with it the right
of publication. No portion of this report (especially any conclusion to use, the
identity of the appraiser or the firm with which the appraiser is connected, or
any reference to the American Society of Appraisers or the designations awarded
by this organization) shall be disseminated to the public through prospectus,
advertising, public relations, news, or any other means of communication without
the written consent and approval of American Appraisal Associates, Inc.
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D
THE LAKES, RALEIGH, NORTH CAROLINA
EXHIBIT D
CERTIFICATE OF APPRAISER
(1 PAGE)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D
CERTIFICATE OF APPRAISER
I certify that, to the best of my knowledge and belief:
The statements of fact contained in this report are true and correct.
The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and represent the
unbiased professional analyses, opinions, and conclusions of American
Appraisal Associates, Inc.
American Appraisal Associates, Inc. and I personally, have no present
or prospective interest in the property that is the subject of this
report and have no personal interest or bias with respect to the
parties involved.
Compensation for American Appraisal Associates, Inc. is not contingent
on an action or event resulting from the analyses, opinions, or
conclusions in, or the use of, this report.
The analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the requirements of the Uniform
Standards of Professional Appraisal Practice and the Code of
Professional Ethics and the Standards of Professional Practice of the
Appraisal Institute.
The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
I personally did not inspect the subject property. Jimmy Pat James, MAI
and Chad Walker provided significant real property appraisal assistance
in the preparation of this report.
I am currently in compliance with the Appraisal Institute's continuing
education requirements.
/s/ Frank Fehribach
----------------------------
Frank Fehribach, MAI
Managing Principal, Real Estate Group
North Carolina Temporary Practice Permit
#2578
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
THE LAKES, RALEIGH, NORTH CAROLINA
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
THE LAKES, RALEIGH, NORTH CAROLINA
FRANK A. FEHRIBACH, MAI
MANAGING PRINCIPAL, REAL ESTATE GROUP
POSITION Frank A. Fehribach is a Managing Principal for the Dallas
Real Estate Group of American Appraisal Associates, Inc.
("AAA").
EXPERIENCE
Valuation Mr. Fehribach has experience in valuations for resort
hotels; Class A office buildings; Class A multifamily
complexes; industrial buildings and distribution
warehousing; multitract mixed-use vacant land; regional
malls; residential subdivision development; and
special-purpose properties such as athletic clubs, golf
courses, manufacturing facilities, nursing homes, and
medical buildings. Consulting assignments include
development and feasibility studies, economic model
creation and maintenance, and market studies.
Mr. Fehribach also has been involved in overseeing
appraisal and consulting assignments in Mexico and South
America.
Business Mr. Fehribach joined AAA as an engagement director in
1998. He was promoted to his current position in 1999.
Prior to that, he was a manager at Arthur Andersen LLP.
Mr. Fehribach has been in the business of real estate
appraisal for over ten years.
EDUCATION University of Texas - Arlington
Master of Science - Real Estate
University of Dallas
Master of Business Administration - Industrial
Management
Bachelor of Arts - Economics
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
THE LAKES, RALEIGH, NORTH CAROLINA
STATE CERTIFICATIONS State of Arizona, Certified General Real Estate
Appraiser, #30828
State of Arkansas, State Certified General Appraiser,
#CG1387N
State of Colorado, Certified General Appraiser,
#CG40000445
State of Georgia, Certified General Real Property
Appraiser, #218487
State of Michigan, Certified General Appraiser,
#1201008081
State of Texas, Real Estate Salesman License, #407158
(Inactive)
State of Texas, State Certified General Real Estate
Appraiser, #TX-1323954-G
PROFESSIONAL Appraisal Institute, MAI Designated Member
AFFILIATIONS Candidate Member of the CCIM Institute pursuing Certified
Commercial Investment Member (CCIM) designation
PUBLICATIONS "An Analysis of the Determinants of Industrial Property
-authored with Dr. Ronald C. Rutherford and Dr. Mark
Eakin, The Journal of Real Estate Research, Vol. 8, No.
3, Summer 1993, p. 365.
AMERICAN APPRAISAL ASSOCIATES, INC.
THE LAKES, RALEIGH, NORTH CAROLINA
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
THE LAKES, RALEIGH, NORTH CAROLINA
GENERAL SERVICE CONDITIONS
The services(s) provided by AAA will be performed in accordance with
professional appraisal standards. Our compensation is not contingent in any way
upon our conclusions of value. We assume, without independent verification, the
accuracy of all data provided to us. We will act as an independent contractor
and reserve the right to use subcontractors. All files, workpapers or documents
developed by us during the course of the engagement will be our property. We
will retain this data for at least five years.
Our report is to be used only for the specific purpose stated herein; and any
other use is invalid. No reliance may be made by any third party without our
prior written consent. You may show our report in its entirety to those third
parties who need to review the information contained herein. No one should rely
on our report as a substitute for their own due diligence. We understand that
our reports will be described in public tender offer documents distributed to
limited partners. We reserve the right to review the public tender offer
documents prior to their issuance to confirm that disclosures of facts from the
current appraisals are accurate. No reference to our name or our report, in
whole or in part, in any other SEC filing or private placement memorandum you
prepare and/or distribute to third parties may be made without our prior written
consent.
The Tender Offer Partnerships, as that term is defined in the Settlement
Agreement, agree to indemnify and hold us harmless against and from any and all
losses, claims, actions, damages, expenses or liabilities, including reasonable
attorneys' fees, to which we may become subject in connection with this
engagement except where such losses, claims, actions, damages, expenses or
liabilities, including reasonable attorney's fees, arise or result from AAA's
misconduct, bad faith or negligence. Co-Clients will not be liable for any of
our acts or omissions.
AAA is an equal opportunity employer.