WOOD VIEW
100 PINHURST DRIVE
UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
MARKET VALUE -
FEE SIMPLE ESTATE
AS OF MAY 20, 2003
PREPARED FOR:
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(AIMCO)
C/O LINER YANKELEVITZ SUNSHINE & REGENSTREIF LLP
&
LIEFF CABRASER HEIMANN & BERNSTEIN
ON BEHALF OF NUANES, ET. AL.
[AMERICAN APPRAISAL ASSOCIATES(R) LOGO]
[AMERICAN APPRAISAL ASSOCIATES(R) LETTERHEAD]
JULY 17, 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: WOOD VIEW
100 PINHURST DRIVE
UNINCORPORATED AREA OF COBB COUNTY, COBB COUNTY, GEORGIA
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 180 units with a
total of 179,970 square feet of rentable area. The improvements were built in
1982. The improvements are situated on 14.546 acres. Overall, the improvements
are in good condition. As of the date of this appraisal, the subject property is
91% 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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY,
GEORGIA
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 20, 2003 is:
($10,200,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
-s- Michael Bates
July 17, 2003 Michael Bates, MAI
#053272 Assistant Manager, Real Estate Group
State of Georgia, Certified General Real Property
Appraiser #CG00685
Report By:
Steven M. Zenkovich, ASA
State of Georgia, Certified General Real Property Appraiser #CG004796
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: Wood View
LOCATION: 100 Pinhurst Drive
Unincorporated Cobb County, Georgia
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 20, 2003
DATE OF REPORT: July 17, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 14.546 acres, or 633,624 square
feet
Assessor Parcel No.: 17095100050
Floodplain: Community Panel No. 130052 0075F
(August 18, 1992)
Flood Zone X, an area outside the
floodplain.
Zoning: RM 12 (Residential Multifamily
District)
BUILDING:
No. of Units: 180 Units
Total NRA: 179,970 Square Feet
Average Unit Size: 1,000 Square Feet
Apartment Density: 12.4 units per acre
Year Built: 1982
UNIT MIX AND MARKET RENT:
GROSS RENTAL INCOME PROJECTION
Market Rent
Square ----------------- Monthly Annual
Unit Type Feet Per Unit Per SF Income Income
- ---------------------------------------------------------------------
1Br/1Ba - 1A1 705 $ 654 $ 0.93 $ 26,160 $ 313,920
1Br/1Ba - 1B1 874 $ 681 $ 0.78 $ 34,050 $ 408,600
2Br/1Ba - 2A1 1,111 $ 813 $ 0.73 $ 16,260 $ 195,120
2Br/2Ba - 2A2 1,111 $ 835 $ 0.75 $ 16,700 $ 200,400
2Br/2Ba - 2B2 1,213 $ 815 $ 0.67 $ 32,600 $ 391,200
3Br/2Ba - 2C2 1,511 $ 949 $ 0.63 $ 9,490 $ 113,880
---------- ----------
Total $ 135,260 $1,623,120
========== ==========
OCCUPANCY: 91%
ECONOMIC LIFE: 45 Years
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
EFFECTIVE AGE: 18 Years
REMAINING ECONOMIC LIFE: 27 Years
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
SUBJECT PHOTOGRAPHS
[EXTERIOR - ENTRANCE PICTURE]
[EXTERIOR - TYPICAL APARTMENT BUILDING PICTURE]
AREA MAP
[MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
PART TWO - ECONOMIC INDICATORS
INCOME CAPITALIZATION APPROACH
Amount $/Unit
DIRECT CAPITALIZATION ------ ------
Potential Rental Income $ 1,623,120 $ 9,017
Effective Gross Income $ 1,563,439 $ 8,686
Operating Expenses $ 595,672 $ 3,309 38.1% of EGI
Net Operating Income: $ 922,767 $ 5,126
Capitalization Rate 9.00%
DIRECT CAPITALIZATION VALUE $10,100,000 * $ 56,111 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 20%
Stabilized Vacancy & Collection Loss: 9%
Lease-up / Stabilization Period N/A
Terminal Capitalization Rate 9.50%
Discount Rate 11.00%
Selling Costs 2.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $10,300,000 * $57,222 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $10,200,000 $56,667 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $48,421 to $74,471
Range of Sales $/Unit (Adjusted) $54,926 to $78,194
VALUE INDICATION - PRICE PER UNIT $10,600,000 * $58,889 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 5.91 to 6.89
Selected EGIM for Subject 6.45
Subject's Projected EGI $ 1,563,439
EGIM ANALYSIS CONCLUSION $ 9,900,000 * $55,000 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $ 9,700,000 * $53,889 / UNIT
RECONCILED SALES COMPARISON VALUE $10,100,000 $56,111 / 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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $10,600,000
NOI Per Unit $ 9,700,000
EGIM Multiplier $ 9,900,000
INDICATED VALUE BY SALES COMPARISON $10,100,000 $56,111 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $10,100,000
Discounted Cash Flow Method: $10,300,000
INDICATED VALUE BY THE INCOME APPROACH $10,200,000 $56,667 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $10,200,000 $56,667 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 100 Pinhurst Drive, Unincorporated Cobb
County, Georgia. Cobb County identifies it as 17095100050.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by Steven M.
Zenkovich, ASA on May 20, 2003. Michael Bates, MAI has not made a personal
inspection of the subject property. Steven M. Zenkovich, ASA performed the
research, valuation analysis and wrote the report. Michael Bates, MAI reviewed
the report and concurs with the value. Michael Bates, MAI and Steven M.
Zenkovich, ASA 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 20, 2003. The
date of the report is July 17, 2003.
PURPOSE AND USE OF APPRAISAL
The purpose of the appraisal is to estimate the market value of the fee simple
interest in the subject property. It is understood that the appraisal is
intended to assist the clients in litigation settlement proceedings. The
appraisal was not based on a requested minimum valuation, a specific valuation,
or the approval of a loan.
PROPERTY RIGHTS APPRAISED
We have appraised the Fee Simple Estate in the subject property (as applied in
the Sales & Income Approaches), subject to the existing short-term leases. A Fee
Simple Estate is
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
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 Fox Strategic Housing
Income Partner. 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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
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 an Unincorporated area of Cobb County, Georgia. Overall,
the neighborhood is characterized as a suburban setting with the predominant
land use being residential. The subject's neighborhood is generally defined by
the following boundaries.
NEIGHBORHOOD BOUNDARIES
East - Cobb Parkway
West - Interstate 285
South - Atlanta Road
North - Cobb Parkway
MAJOR EMPLOYERS
Major employers in the subject's area include Home Depot, Delta Air Lines, and
United Parcel Service. Delta Air Lines continues to reduce their work force due
to the downturn in the air transportation sector. The unemployment rate in
Atlanta is up, but is still much lower than nationally. The overall economic
outlook for the area is considered very 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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
NEIGHBORHOOD DEMOGRAPHICS
AREA
----------------------------------------
CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA
- ------------------------------------------------------------------------------------
POPULATION TRENDS
Current Population 270 51,975 178,614 4,326,075
5-Year Population 239 55,879 187,949 4,877,672
% Change CY-5Y -11.5% 7.5% 5.2% 12.8%
Annual Change CY-5Y -2.3% 1.5% 1.0% 2.6%
HOUSEHOLDS
Current Households 76 18,201 62,915 1,580,438
5-Year Projected Households 72 19,198 65,158 1,773,314
% Change CY - 5Y -5.3% 5.5% 3.6% 12.2%
Annual Change CY-5Y -1.1% 1.1% 0.7% 2.4%
INCOME TRENDS
Median Household Income $25,048 $29,423 $ 30,414 $ 61,400
Per Capita Income $ 6,321 $14,064 $ 14,470 $ 25,922
Average Household Income $33,976 $40,482 $ 40,996 $ 70,955
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 57.08% 53.59% 52.11% 30.54%
5-Year Projected % Renting 55.16% 54.29% 52.56% 29.71%
% of Households Owning 23.61% 34.49% 35.54% 61.85%
5-Year Projected % Owning 24.56% 34.38% 35.52% 63.29%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Multifamily housing
South - Vacant land; condominiums under construction
East - Multifamily housing
West - Offices and proposed condominium development
CONCLUSIONS
The subject is well located within the Cobb County. The neighborhood is
characterized as being mostly suburban in nature and is currently in the growth
stage of development. The economic outlook for the neighborhood is judged to be
very favorable with a good economic base.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 14
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
MARKET ANALYSIS
The subject property is located in the in Cobb County. The overall pace of
development in the subject's market is more or less decreasing. Demand for
apartments in the local market has decreased significantly. There are no known
projects under construction at this time. The following table illustrates
historical vacancy rates for the subject's market.
HISTORICAL VACANCY RATE
Period Region Submarket
- ---------------------------------------------------------
1998 Year-End 6.9% 6.9%
1999 Year-End 6.5% 6.5%
2000 Year-End 4.8% 4.7%
2001 Year-End 9.0% 8.4%
2002 Year-End 10.1% 9.1%
2003 1Q03 11.3% 10.2%
Source: Reis Subtrend Futures, 1st Quarter 2003
Occupancy trends in the subject's market are decreasing. Historically speaking,
the subject's submarket has outperformed the overall market. Rent concessions
have become prevalent over the past 1- 2 years. Competing projects are typically
offering two months of free rent prorated over a 12-month term. Lease agreements
at the subject property typically reflect reduced rent in lieu of free rent
concessions.
Market rents in the subject's market have been following an increasing trend.
The following table illustrates historical rental rates for the subject's
market.
HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change
- ---------------------------------------------------------------------------------
1998 Year-End N/A - $765 -
1999 Year-End N/A N/A $794 3.8%
2000 Year-End N/A N/A $831 4.7%
2001 Year-End N/A N/A $849 2.2%
2002 Year-End N/A N/A $852 0.4%
2003 1Q03 N/A N/A $853 0.1%
Source: Reis Subtrend Futures, 1st Quarter 2003
The following table illustrates a summary of the subject's competitive set.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
- -----------------------------------------------------------------------------------------------------------
R-1 Post Crest 410 92% 1996 1-mile west of subject
R-2 Gables Walk 310 93% 1996 2-miles southwest of subject
R-3 Magnolia Vinings 400 94% 1997 2-miles south of the subject
R-4 Paces Station 610 92% 1980 - 1992 2-miles south of subject
R-5 Lakes at Vinings 464 92% 1970 1/2-mile south of the subject
Subject Wood View 180 91% 1982
The historical average rent table reflects average asking rents, and does not
reflect rent concessions. Average asking rents outpaced the inflation rate in
1999 and 2000. Growth rates slowed significantly as the market contracted. At
present, rental rates remain static, and concessions are routinely offered.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY,
GEORGIA
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 14.546 acres, or 633,624 square feet
Shape Irregular
Topography Moderate 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 130052 0075F, dated August 18, 1992
Flood Zone Zone X
Zoning RM 12, 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
- ------------------------------------------------------------------------------------------------------------
17095100050 $1,354,924 $2,829,132 $4,184,056 0.02987 $124,978
IMPROVEMENT ANALYSIS
Year Built 1982
Number of Units 180
Net Rentable Area 179,970 Square Feet
Construction:
Foundation Reinforced concrete slab
Frame Heavy or light wood
Exterior Walls Brick or masonry
Roof Composition shingle over a wood truss structure
Project Amenities Amenities at the subject include a swimming
pool, spa/jacuzzi, sand volleyball, tennis
court, gym room, car wash, barbeque equipment,
laundry room, and parking area.
Unit Amenities Individual unit amenities include a balcony,
fireplace, cable TV connection, vaulted
ceiling, 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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY,
GEORGIA
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
- ---------------------------------------------------------------------------
1Br/1Ba - 1A1 40 705
1Br/1Ba - 1B1 50 874
2Br/1Ba - 2A1 20 1,111
2Br/2Ba - 2A2 20 1,111
2Br/2Ba - 2B2 40 1,213
3Br/2Ba - 2C2 10 1,511
Overall Condition Good
Effective Age 18 years
Economic Life 45 years
Remaining Economic Life 27 years
Deferred Maintenance A new leasing office is required. We deducted $100,000
for the cost of the new leasing office.
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
1982 and consist of a 180-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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY,
GEORGIA
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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY,
GEORGIA
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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY,
GEORGIA
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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY,
GEORGIA
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE
DESCRIPTION SUBJECT I - 1
- ------------------------------------------------------------------------------------------------------------
Property Name Wood View Cumberland Pines
LOCATION:
Address 100 Pinhurst Drive 3339 Seven Pines Court
City, State Unincorporated Cobb County, Atlanta, GA
County Cobb Cobb
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 179,970 185,246
Year Built 1982 1973
Number of Units 180 216
Unit Mix: Type Total Type Total
1Br/1Ba - 1A1 40 1Br/1Ba 90
1Br/1Ba - 1B1 50 2Br/2Ba 118
2Br/1Ba - 2A1 20 3Br/2Ba 8
2Br/2Ba - 2A2 20
2Br/2Ba - 2B2 40
3Br/2Ba - 2C2 10
Average Unit Size (SF) 1,000 858
Land Area (Acre) 14.5460 13.6000
Density (Units/Acre) 12.4 15.9
Parking Ratio (Spaces/Unit) 2.00 2.50
Parking Type (Gr., Cov., etc.) Open Open
CONDITION: Good Good
APPEAL: Good Fair
AMENITIES:
Pool/Spa Yes/Yes Yes/Yes
Gym Room Yes Yes
Laundry Room Yes Yes
Secured Parking No No
Sport Courts No Yes
Washer/Dryer Connection Yes Yes
OCCUPANCY: 91% 90%
TRANSACTION DATA:
Sale Date March, 2003
Sale Price ($) $10,800,000
Grantor Earl Phillips (LLC)
Grantee Vinings Vista (LLC)
Sale Documentation Book 13703, Page 4724
Verification AAA Files, Comps Inc.
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF
Potential Gross Income $1,864,080 $8,630 $10.06
Vacancy/Credit Loss $ 186,408 $ 863 $ 1.01
Effective Gross Income $1,677,672 $7,767 $ 9.06
Operating Expenses $ 777,600 $3,600 $ 4.20
Net Operating Income $ 900,072 $4,167 $ 4.86
NOTES: None
PRICE PER UNIT $50,000
PRICE PER SQUARE FOOT $ 58.30
EXPENSE RATIO 46.3%
EGIM 6.44
OVERALL CAP RATE 8.33%
Cap Rate based on Pro Forma or
Actual Income? PRO FORMA
COMPARABLE COMPARABLE
DESCRIPTION I - 2 I - 3
- -----------------------------------------------------------------------------------------------------------------
Property Name Concord Crossing Summer Lake
LOCATION:
Address 2935 Old Concord Road SE 6901 Glenlake Parkway NE
City, State Smyrna, GA Atlanta, GA
County Cobb Fulton
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 207,460 348,992
Year Built 1975 1982
Number of Units 190 270
Unit Mix: Type Total Type Total
1Br/1Ba 30 1Br/1Ba 78
2Br/2Ba 127 2Br/2Ba 172
3Br/2Ba 33 3Br/2Ba 20
Average Unit Size (SF) 1,092 1,293
Land Area (Acre) 15.7800 29.8900
Density (Units/Acre) 12.0 9.0
Parking Ratio (Spaces/Unit) N/A N/A
Parking Type (Gr., Cov., etc.) Open Open, Garages
CONDITION: Good Very Good
APPEAL: Fair Very Good
AMENITIES:
Pool/Spa Yes/Yes Yes/Yes
Gym Room Yes Yes
Laundry Room No Yes
Secured Parking No Yes
Sport Courts Yes Yes
Washer/Dryer Connection Yes Yes
OCCUPANCY: 91% 90%
TRANSACTION DATA:
Sale Date July, 2002 December, 2001
Sale Price ($) $9,200,000 $19,475,000
Grantor Garden Woodsong Connecticut General Life
Grantee Woodsong Apartments Beechnut Bayou Company
Sale Documentation Book 13561, Page 2533 Book 31465, Page 0403
Verification AAA Files, Comps Inc. AAA Files, Comps Inc.
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $1,601,328 $8,428 $7.72 $3,378,000 $12,511 $9.68
Vacancy/Credit Loss $ 160,133 $ 843 $0.77 $ 337,800 $ 1,251 $0.97
Effective Gross Income $1,441,195 $7,585 $6.95 $3,040,200 $11,260 $8.71
Operating Expenses $ 627,000 $3,300 $3.02 $ 945,000 $ 3,500 $2.71
Net Operating Income $ 814,195 $4,285 $3.92 $2,095,200 $ 7,760 $6.00
NOTES: None None
PRICE PER UNIT $48,421 $72,130
PRICE PER SQUARE FOOT $ 44.35 $ 55.80
EXPENSE RATIO 43.5% 31.1%
EGIM 6.38 6.41
OVERALL CAP RATE 8.85% 10.76%
Cap Rate based on Pro Forma or
Actual Income? PRO FORMA PRO FORMA
COMPARABLE COMPARABLE
DESCRIPTION I - 4 I - 5
- ------------------------------------------------------------------------------------------------------------------------------
Property Name Madison at Forest Glen Worthing Crest
LOCATION:
Address 4236 Austell Road 3200 Spring Hill Road
City, State Austell, GA Smyrna, GA 30080
County Cobb Cobb
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 290,700 417,920
Year Built 1986 1987
Number of Units 264 378
Unit Mix: Type Total Type Total
1Br/1Ba 60 1Br/1Ba 150
2Br/2Ba 204 2Br/2Ba 228
3Br/2Ba 3Br/2Ba
Average Unit Size (SF) 1,101 1,106
Land Area (Acre) 26.4000 25.0300
Density (Units/Acre) 10.0 15.1
Parking Ratio (Spaces/Unit) 2.00 2.09
Parking Type (Gr., Cov., etc.) Open Open
CONDITION: Good Very Good
APPEAL: Good Very Good
AMENITIES:
Pool/Spa Yes/Yes Yes/Yes
Gym Room Yes Yes
Laundry Room Yes No
Secured Parking Yes Yes
Sport Courts Yes Yes
Washer/Dryer Connection Yes Yes
OCCUPANCY: 93% 92%
TRANSACTION DATA:
Sale Date February, 2002 February, 2001
Sale Price ($) $13,810,000 $28,150,000
Grantor Lincoln Walden Vinings Apartments Group
Grantee Forest Glen Apartments Worthing Cameron Crest
Sale Documentation Book 13501, Page 2716 Book 13334, Page 5127
Verification AAA Files, Comps Inc. AAA Files, Comps Inc.
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $2,513,592 $9,521 $8.65 N/A
Vacancy/Credit Loss $ 175,951 $ 666 $0.61 N/A
Effective Gross Income $2,337,641 $8,855 $8.04 $4,085,160 $10,807 $9.77
Operating Expenses $1,003,200 $3,800 $3.45 $1,134,000 $ 3,000 $2.71
Net Operating Income $1,334,441 $5,055 $4.59 $2,951,160 $ 7,807 $7.06
NOTES: None None
PRICE PER UNIT $52,311 $74,471
PRICE PER SQUARE FOOT $ 47.51 $ 67.36
EXPENSE RATIO 42.9% 27.8%
EGIM 5.91 6.89
OVERALL CAP RATE 9.66% 10.48%
Cap Rate based on Pro Forma or
Actual Income? PRO FORMA ACTUAL
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY,
GEORGIA
IMPROVED SALES MAP
[MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $48,421 to $74,471 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 $54,926 to $78,194 per unit with a mean or average adjusted price
of $62,991 per unit. The median adjusted price is $60,526 per unit. Based on the
following analysis, we have concluded to a value of $60,000 per unit, which
results in an "as is" value of $10,600,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY,
GEORGIA
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- -----------------------------------------------------------------------------------------------------------------------------------
Property Name Wood View Cumberland Pines Concord Crossing
Address 100 Pinhurst Drive 3339 Seven Pines Court 2935 Old Concord Road SE
City Unincorporated Cobb County, Atlanta, GA Smyrna, GA
Sale Date March, 2003 July, 2002
Sale Price ($) $10,800,000 $9,200,000
Net Rentable Area (SF) 179,970 185,246 207,460
Number of Units 180 216 190
Price Per Unit $50,000 $48,421
Year Built 1982 1973 1975
Land Area (Acre) 14.5460 13.6000 15.7800
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 03-2003 0% 07-2002 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $50,000 $48,421
Location Comparable 0% Inferior 10%
Number of Units 180 216 5% 190 0%
Quality / Appeal Good Inferior 5% Inferior 5%
Age / Condition 1982 1973 / Good 10% 1975 / Good 10%
Occupancy at Sale 91% 90% 0% 91% 0%
Amenities Good Comparable 0% Comparable 0%
Average Unit Size (SF) 1,000 858 5% 1,092 0%
PHYSICAL ADJUSTMENT 20% 25%
FINAL ADJUSTED VALUE ($/UNIT) $60,000 $60,526
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- ------------------------------------------------------------------------------------------------------------------------------------
Property Name Summer Lake Madison at Forest Glen Worthing Crest
Address 6901 Glenlake Parkway NE 4236 Austell Road 3200 Spring Hill Road
City Atlanta, GA Austell, GA Smyrna, GA 30080
Sale Date December, 2001 February, 2002 February, 2001
Sale Price ($) $19,475,000 $13,810,000 $28,150,000
Net Rentable Area (SF) 348,992 290,700 417,920
Number of Units 270 264 378
Price Per Unit $72,130 $52,311 $74,471
Year Built 1982 1986 1987
Land Area (Acre) 29.8900 26.4000 25.0300
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 12-2001 0% 02-2002 0% 02-2001 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $72,130 $52,311 $74,471
Location Superior -5% Inferior 10% Inferior 10%
Number of Units 270 0% 264 0% 378 5%
Quality / Appeal Comparable 0% Comparable 0% Comparable 0%
Age / Condition 1982 / Very Good 0% 1986 / Good -5% 1987 / Very Good -10%
Occupancy at Sale 90% 0% 93% 0% 92% 0%
Amenities Comparable 0% Comparable 0% Comparable 0%
Average Unit Size (SF) 1,293 -10% 1,101 0% 1,106 0%
PHYSICAL ADJUSTMENT -15% 5% 5%
FINAL ADJUSTED VALUE ($/UNIT) $61,310 $54,926 $78,194
SUMMARY
VALUE RANGE (PER UNIT) $54,926 to $ 78,194
MEAN (PER UNIT) $62,991
MEDIAN (PER UNIT) $60,526
VALUE CONCLUSION (PER UNIT) $60,000
VALUE OF IMPROVEMENT & MAIN SITE $10,800,000
PV OF CONCESSIONS -$ 85,000
NEW LEASING OFFICE -$ 100,000
VALUE INDICATED BY SALES COMPARISON APPROACH $10,615,000
ROUNDED $10,600,000
NET OPERATING INCOME (NOI) ANALYSIS
We have also conducted a net operating income (NOI) comparison analysis. The NOI
effectively takes into account the various physical, location, and operating
aspects of the sale. When the subject's NOI is compared to the sale NOI, a
percent adjustment can be arrived at. The following table illustrates this
analysis.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 24
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY,
GEORGIA
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-1 216 $10,800,000 8.33% $ 900,072 $922,767 1.230 $61,513
$ 50,000 $ 4,167 $ 5,126
I-2 190 $ 9,200,000 8.85% $ 814,195 $922,767 1.196 $57,927
$ 48,421 $ 4,285 $ 5,126
I-3 270 $19,475,000 10.76% $2,095,200 $922,767 0.661 $47,651
$ 72,130 $ 7,760 $ 5,126
I-4 264 $13,810,000 9.66% $1,334,441 $922,767 1.014 $53,053
$ 52,311 $ 5,055 $ 5,126
I-5 378 $28,150,000 10.48% $2,951,160 $922,767 0.657 $48,900
$ 74,471 $ 7,807 $ 5,126
PRICE/UNIT
Low High Average Median
$47,651 $61,513 $53,809 $53,053
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
Estimated Price Per Unit $ 55,000
Number of Units 180
Value $9,900,000
PV of Concessions -$ 85,000
New Leasing Office -$ 100,000
-----------
Value Based on NOI Analysis $9,715,000
Rounded $9,700,000
The adjusted sales indicate a range of value between $47,651 and $61,513 per
unit, with an average of $53,809 per unit. Based on the subject's competitive
position within the improved sales, a value of $55,000 per unit is estimated.
This indicates an "as is" market value of $9,700,000 (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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY,
GEORGIA
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-1 216 $10,800,000 $1,677,672 $ 777,600 46.35% 6.44
$ 50,000
I-2 190 $ 9,200,000 $1,441,195 $ 627,000 43.51% 6.38
$ 48,421
I-3 270 $19,475,000 $3,040,200 $ 945,000 31.08% 6.41
$ 72,130 38.10%
I-4 264 $13,810,000 $2,337,641 $1,003,200 42.92% 5.91
$ 52,311
I-5 378 $28,150,000 $4,085,160 $1,134,000 27.76% 6.89
$ 74,471
EGIM
Low High Average Median
- --- ---- ------- ------
5.91 6.89 6.41 6.41
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
Estimate EGIM 6.45
Subject EGI $ 1,563,439
Value $10,084,183
PV of Concessions -$ 85,000
New Leasing Office -$ 100,000
------------
Value Based on EGIM Analysis $ 9,899,183
Rounded $ 9,900,000
Value Per Unit $ 55,000
There is an inverse relationship, which generally holds among EGIMs and
operating expenses. Properties, which have higher expense ratios, typically sell
for relatively less and therefore produce a lower EGIM. As will be illustrated
in the Income Capitalization Approach of this report, the subject's operating
expense ratio (OER) is estimated at 38.10% before reserves. The comparable sales
indicate a range of expense ratios from 27.76% to 46.35%, while their EGIMs
range from 5.91 to 6.89. Overall, we conclude to an EGIM of 6.45, which results
in an "as is" value estimate in the EGIM Analysis of $9,900,000.
SALES COMPARISON CONCLUSION
The three valuation methods in the Sales Comparison Approach are shown below.
The overall value via the Sales Comparison Approach is estimated at $10,100,000.
Price Per Unit $10,600,000
NOI Per Unit $ 9,700,000
EGIM Analysis $ 9,900,000
Sales Comparison Conclusion $10,100,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
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
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
method is normally more appropriate for properties with relatively stable
operating histories and expectations.
A pro forma analysis for the first year of the investment is made to estimate a
reasonable potential net operating income for the Subject Property. Such an
analysis entails an estimate of the gross income the property should command in
the marketplace. From this total gross income must be deducted an allowance for
vacancy/collection loss and operating expenses as dictated by general market
conditions and the overall character of the subject's tenancy and leased income
to arrive at a projected estimate of net operating income. Conversion of the net
operating income to an indication of value is accomplished by the process of
capitalization, as derived primarily from market data.
MARKET RENT ANALYSIS
In order to determine a market rental rate for the subject, a survey of
competing apartment communities was performed. This survey was displayed
previously in the market analysis section of the report. Detailed information
pertaining to each of the comparable rental communities, along with photographs,
is presented in the Addenda of this report.
The following charts display the subject's current asking and actual rent rates
as well as a comparison with the previous referenced comparable rental
properties.
SUMMARY OF ACTUAL AVERAGE RENTS
Average
Unit Area -----------------------
Unit Type (Sq. Ft.) Per Unit Per SF %Occupied
- ------------------------------------------------------------------------------------------------
1Br/1Ba - 1A1 705 $654 $0.93 98.0%
1Br/1Ba - 1B1 874 $681 $0.78 94.0%
2Br/1Ba - 2A1 1111 $813 $0.73 65.0%
2Br/2Ba - 2A2 1111 $835 $0.75 80.0%
2Br/2Ba - 2B2 1213 $815 $0.67 100.0%
3Br/2Ba - 2C2 1511 $949 $0.63 90.0%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
RENT ANALYSIS
COMPARABLE RENTS
-----------------------------------------------------------
R-1 R-2 R-3 R-4 R-5
-----------------------------------------------------------
Gables Magnolia Paces Lakes at
Post Crest Walk Vinings Station Vinings
-----------------------------------------------------------
COMPARISON TO SUBJECT
SUBJECT SUBJECT -----------------------------------------------------------
SUBJECT UNIT ACTUAL ASKING Slightly
DESCRIPTION TYPE RENT RENT Superior Superior Very Superior Similar Superior
- --------------------------------------------------------------------------------------------------------------------------------
Monthly Rent 1Br/1Ba - 1A1 $ 654 $ 749 $ 769 $ 870 $ 790 $ 723 $ 754
Unit Area (SF) 705 705 650 855 663 586 730
Monthly Rent Per Sq. Ft. $ 0.93 $ 1.06 $ 1.18 $ 1.02 $ 1.19 $ 1.23 $ 1.03
Monthly Rent 1Br/1Ba - 1B1 $ 681 $ 779 $ 961 $ 915 $ 815 $ 911 $ 771
Unit Area (SF) 874 874 875 902 860 860 770
Monthly Rent Per Sq. Ft. $ 0.78 $ 0.89 $ 1.10 $ 1.01 $ 0.95 $ 1.06 $ 1.00
Monthly Rent 2Br/1Ba - 2A1 $ 813 $ 929 $1,098 $1,150 $ 926 $ 931
Unit Area (SF) 1,111 1,111 1,000 1,294 1,018 1,100
Monthly Rent Per Sq. Ft. $ 0.73 $ 0.84 $ 1.10 $ 0.89 $ 0.91 $ 0.85
Monthly Rent 2Br/2Ba - 2A2 $ 835 $ 929 $1,203 $1,150 $1,100 $1,030 $ 929
Unit Area (SF) 1,111 1,111 1,200 1,294 1,113 1,296 1,080
Monthly Rent Per Sq. Ft. $ 0.75 $ 0.84 $ 1.00 $ 0.89 $ 0.99 $ 0.79 $ 0.86
Monthly Rent 2Br/2Ba - 2B2 $ 815 $ 919 $1,317 $1,190 $1,100 $1,030 $1,151
Unit Area (SF) 1,213 1,213 1,320 1,322 1,113 1,296 1,288
Monthly Rent Per Sq. Ft. $ 0.67 $ 0.76 $ 1.00 $ 0.90 $ 0.99 $ 0.79 $ 0.89
Monthly Rent 3Br/2Ba - 2C2 $ 949 $1,259 $1,489 $1,370 $1,325 $1,227
Unit Area (SF) 1,511 1,511 1,400 1,450 1,366 1,366
Monthly Rent Per Sq. Ft. $ 0.63 $ 0.83 $ 1.06 $ 0.94 $ 0.97 $ 0.90
DESCRIPTION MIN MAX MEDIAN AVERAGE
- ----------------------------------------------------------------------
Monthly Rent $ 723 $ 870 $ 769 $ 781
Unit Area (SF) 586 855 663 697
Monthly Rent Per Sq. Ft. $ 1.02 $ 1.23 $ 1.18 $ 1.13
Monthly Rent $ 771 $ 961 $ 911 $ 875
Unit Area (SF) 770 902 860 853
Monthly Rent Per Sq. Ft. $ 0.95 $ 1.10 $ 1.01 $ 1.02
Monthly Rent $ 926 $1,150 $1,015 $1,026
Unit Area (SF) 1,000 1,294 1,059 1,103
Monthly Rent Per Sq. Ft. $ 0.85 $ 1.10 $ 0.90 $ 0.94
Monthly Rent $ 929 $1,203 $1,100 $1,082
Unit Area (SF) 1,080 1,296 1,200 1,197
Monthly Rent Per Sq. Ft. $ 0.79 $ 1.00 $ 0.89 $ 0.91
Monthly Rent $1,030 $1,317 $1,151 $1,158
Unit Area (SF) 1,113 1,322 1,296 1,268
Monthly Rent Per Sq. Ft. $ 0.79 $ 1.00 $ 0.90 $ 0.91
Monthly Rent $1,227 $1,489 $1,348 $1,353
Unit Area (SF) 1,366 1,450 1,383 1,396
Monthly Rent Per Sq. Ft. $ 0.90 $ 1.06 $ 0.96 $ 0.97
CONCLUDED MARKET RENTAL RATES AND TERMS
Based on this analysis above, the subject's concluded market rental rates and
gross rental income is calculated as follows:
GROSS RENTAL INCOME PROJECTION
Market Rent
Unit Area ------------------ Monthly Annual
Unit Type Number of Units (Sq. Ft.) Per Unit Per SF Income Income
- -----------------------------------------------------------------------------------------------------
1Br/1Ba - 1A1 40 705 $654 $0.93 $ 26,160 $ 313,920
1Br/1Ba - 1B1 50 874 $681 $0.78 $ 34,050 $ 408,600
2Br/1Ba - 2A1 20 1,111 $813 $0.73 $ 16,260 $ 195,120
2Br/2Ba - 2A2 20 1,111 $835 $0.75 $ 16,700 $ 200,400
2Br/2Ba - 2B2 40 1,213 $815 $0.67 $ 32,600 $ 391,200
3Br/2Ba - 2C2 10 1,511 $949 $0.63 $ 9,490 $ 113,880
----------------------
Total $135,260 $1,623,120
======================
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
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
SUMMARY OF HISTORICAL INCOME & EXPENSES
FISCAL YEAR 2000 FISCAL YEAR 2001 FISCAL YEAR 2002
------------------------ ----------------------- -----------------------
ACTUAL ACTUAL ACTUAL
----------------------- ----------------------- -----------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT
- -------------------------------------------------------------------------------------------------------------------
Revenues
Rental Income $1,734,377 $9,635 $1,525,956 $8,478 $1,773,968 $9,855
Vacancy $ 76,438 $ 425 $ 145,671 $ 809 $ 282,782 $1,571
Credit Loss/Concessions $ 49,726 $ 276 $ 79,295 $ 441 $ 70,800 $ 393
------------------------------------------------------------------------------
Subtotal $ 126,164 $ 701 $ 224,966 $1,250 $ 353,582 $1,964
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 47,591 $ 264 $ 83,134 $ 462 $ 89,177 $ 495
------------------------------------------------------------------------------
Subtotal Other Income $ 47,591 $ 264 $ 83,134 $ 462 $ 89,177 $ 495
------------------------------------------------------------------------------
Effective Gross Income $1,655,804 $9,199 $1,384,124 $7,690 $1,509,563 $8,386
Operating Expenses
Taxes $ 122,395 $ 680 $ 103,870 $ 577 $ 126,203 $ 701
Insurance $ 23,935 $ 133 $ 23,046 $ 128 $ 32,529 $ 181
Utilities $ 67,255 $ 374 $ 59,001 $ 328 $ 91,075 $ 506
Repair & Maintenance $ 15,925 $ 88 $ 7,230 $ 40 $ 24,327 $ 135
Cleaning $ 34,483 $ 192 $ 19,239 $ 107 $ 36,710 $ 204
Landscaping $ 22,618 $ 126 $ 15,236 $ 85 $ 17,901 $ 99
Security $ 0 $ 0 $ 6,300 $ 35 $ 11,566 $ 64
Marketing & Leasing $ 28,131 $ 156 $ 28,737 $ 160 $ 34,767 $ 193
General Administrative $ 150,315 $ 835 $ 126,933 $ 705 $ 129,620 $ 720
Management $ 84,975 $ 472 $ 73,102 $ 406 $ 78,039 $ 434
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------------------
Total Operating Expenses $ 550,032 $3,056 $ 462,694 $2,571 $ 582,737 $3,237
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------------------
Net Income $1,105,772 $6,143 $ 921,430 $5,119 $ 926,826 $5,149
FISCAL YEAR 2003 ANNUALIZED 2003
------------------------ -----------------------
MANAGEMENT BUDGET PROJECTION AAA PROJECTION
----------------------- ----------------------- ------------------------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT %
- --------------------------------------------------------------------------------------------------------------------------------
Revenues
Rental Income $1,775,000 $9,861 $1,648,712 $9,160 $1,623,120 $9,017 100.0%
Vacancy $ 244,000 $1,356 $ 208,312 $1,157 $ 113,618 $ 631 7.0%
Credit Loss/Concessions $ 100,600 $ 559 $ 142,052 $ 789 $ 32,462 $ 180 2.0%
-------------------------------------------------------------------------------------------
Subtotal $ 344,600 $1,914 $ 350,364 $1,946 $ 146,081 $ 812 9.0%
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 82,200 $ 457 $ 86,220 $ 479 $ 86,400 $ 480 5.3%
-------------------------------------------------------------------------------------------
Subtotal Other Income $ 82,200 $ 457 $ 86,220 $ 479 $ 86,400 $ 480 5.3%
-------------------------------------------------------------------------------------------
Effective Gross Income $1,512,600 $8,403 $1,384,568 $7,692 $1,563,439 $8,686 100.0%
Operating Expenses
Taxes $ 128,176 $ 712 $ 127,980 $ 711 $ 128,160 $ 712 8.2%
Insurance $ 33,839 $ 188 $ 32,324 $ 180 $ 33,300 $ 185 2.1%
Utilities $ 108,000 $ 600 $ 102,996 $ 572 $ 99,000 $ 550 6.3%
Repair & Maintenance $ 36,000 $ 200 $ 40,504 $ 225 $ 27,000 $ 150 1.7%
Cleaning $ 31,500 $ 175 $ 137,156 $ 762 $ 31,500 $ 175 2.0%
Landscaping $ 36,696 $ 204 $ 23,800 $ 132 $ 27,000 $ 150 1.7%
Security $ 0 $ 0 $ 11,276 $ 63 $ 11,340 $ 63 0.7%
Marketing & Leasing $ 30,000 $ 167 $ 64,848 $ 360 $ 29,700 $ 165 1.9%
General Administrative $ 99,801 $ 554 $ 153,192 $ 851 $ 130,500 $ 725 8.3%
Management $ 76,873 $ 427 $ 67,404 $ 374 $ 78,172 $ 434 5.0%
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
-------------------------------------------------------------------------------------------
Total Operating Expenses $ 580,885 $3,227 $ 761,480 $4,230 $ 595,672 $3,309 38.1%
Reserves $ 0 $ 0 $ 0 $ 0 $ 45,000 $ 250 7.6%
-------------------------------------------------------------------------------------------
Net Income $ 931,715 $5,176 $ 623,088 $3,462 $ 922,767 $5,126 59.0%
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 9% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
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
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
SUMMARY OF OVERALL
CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
- ----------------------------------------------------------------------
I-1 Mar-03 90% $50,000 8.33%
I-2 Jul-02 91% $48,421 8.85%
I-3 Dec-01 90% $72,130 10.76%
I-4 Feb-02 93% $52,311 9.66%
I-5 Feb-01 92% $74,471 10.48%
High 10.76%
Low 8.33%
Average 9.62%
Based on this information, we have concluded the subject's overall
capitalization rate should be 9.00%. The terminal capitalization rate is applied
to the net operating income estimated for the year following the end of the
holding period. Based on the concluded overall capitalization rate, the age of
the property and the surveyed information, we have concluded the subject's
terminal capitalization rate to be 9.50%. Finally, the subject's discount rate
or yield rate is estimated based on the previous investor survey and an
examination of returns available on alternative investments in the market. Based
on this analysis, the subject's discount rate is estimated to be 11.00%.
HOLDING PERIOD
The survey of investors indicates that most investors are completing either
10-year cash flows or extending the analysis to the end of the lease if it is
more than 10-years. A 10-year period has been used in the analysis of the
subject with the eleventh year stabilized NOI used to determine the reversion.
SELLING COSTS
Sales of similar size properties are typically accomplished with the aid of a
broker and will also incur legal and other transaction related cost. Based on
our survey of brokers and a review of institutional investor projections, an
allowance of 2.00% of the sale amount is applied.
DISCOUNTED CASH FLOW CONCLUSION
Discounting the annual cash flows and the equity reversion at the selected rate
of 11.00% indicates a value of $10,300,000. In this instance, the reversion
figure contributes
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
approximately 42% 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
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
DISCOUNTED CASH FLOW ANALYSIS
WOOD VIEW
- --------------------------------------------------------------------------------------------------------------------------
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009 APR-2010
FISCAL YEAR 1 2 3 4 5 6 7
- ---------------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $1,623,120 $1,623,120 $1,671,814 $1,721,968 $1,773,627 $1,826,836 $1,881,641
Vacancy $ 113,618 $ 113,618 $ 117,027 $ 120,538 $ 124,154 $ 127,879 $ 131,715
Credit Loss $ 32,462 $ 32,462 $ 33,436 $ 34,439 $ 35,473 $ 36,537 $ 37,633
Concessions $ 64,925 $ 32,462 $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------------
Subtotal $ 211,006 $ 178,543 $ 150,463 $ 154,977 $ 159,626 $ 164,415 $ 169,348
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 86,400 $ 86,400 $ 88,992 $ 91,662 $ 94,412 $ 97,244 $ 100,161
----------------------------------------------------------------------------------------
Subtotal Other Income $ 86,400 $ 86,400 $ 88,992 $ 91,662 $ 94,412 $ 97,244 $ 100,161
----------------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME $1,498,514 $1,530,977 $1,610,342 $1,658,653 $1,708,412 $1,759,665 $1,812,455
OPERATING EXPENSES:
Taxes $ 128,160 $ 132,005 $ 135,965 $ 140,044 $ 144,245 $ 148,573 $ 153,030
Insurance $ 33,300 $ 34,299 $ 35,328 $ 36,388 $ 37,479 $ 38,604 $ 39,762
Utilities $ 99,000 $ 101,970 $ 105,029 $ 108,180 $ 111,425 $ 114,768 $ 118,211
Repair & Maintenance $ 27,000 $ 27,810 $ 28,644 $ 29,504 $ 30,389 $ 31,300 $ 32,239
Cleaning $ 31,500 $ 32,445 $ 33,418 $ 34,421 $ 35,454 $ 36,517 $ 37,613
Landscaping $ 27,000 $ 27,810 $ 28,644 $ 29,504 $ 30,389 $ 31,300 $ 32,239
Security $ 11,340 $ 11,680 $ 12,031 $ 12,392 $ 12,763 $ 13,146 $ 13,541
Marketing & Leasing $ 29,700 $ 30,591 $ 31,509 $ 32,454 $ 33,428 $ 34,430 $ 35,463
General Administrative $ 130,500 $ 134,415 $ 138,447 $ 142,601 $ 146,879 $ 151,285 $ 155,824
Management $ 74,926 $ 76,549 $ 80,517 $ 82,933 $ 85,421 $ 87,983 $ 90,623
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $ 592,426 $ 609,574 $ 629,533 $ 648,419 $ 667,871 $ 687,908 $ 708,545
Reserves $ 45,000 $ 46,350 $ 47,741 $ 49,173 $ 50,648 $ 52,167 $ 53,732
----------------------------------------------------------------------------------------
NET OPERATING INCOME $ 861,089 $ 875,053 $ 933,069 $ 961,061 $ 989,893 $1,019,590 $1,050,177
Operating Expense Ratio
(% of EGI) 39.5% 39.8% 39.1% 39.1% 39.1% 39.1% 39.1%
Operating Expense Per Unit $ 3,291 $ 3,387 $ 3,497 $ 3,602 $ 3,710 $ 3,822 $ 3,936
YEAR APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 8 9 10 11
- -------------------------------------------------------------------------------------
REVENUE
Base Rent $1,938,090 $1,996,233 $2,056,120 $2,117,803
Vacancy $ 135,666 $ 139,736 $ 143,928 $ 148,246
Credit Loss $ 38,762 $ 39,925 $ 41,122 $ 42,356
Concessions $ 0 $ 0 $ 0 $ 0
---------------------------------------------------
Subtotal $ 174,428 $ 179,661 $ 185,051 $ 190,602
Laundry Income $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 103,166 $ 106,261 $ 109,449 $ 112,732
---------------------------------------------------
Subtotal Other Income $ 103,166 $ 106,261 $ 109,449 $ 112,732
---------------------------------------------------
EFFECTIVE GROSS INCOME $1,866,828 $1,922,833 $1,980,518 $2,039,934
OPERATING EXPENSES:
Taxes $ 157,621 $ 162,349 $ 167,220 $ 172,236
Insurance $ 40,955 $ 42,183 $ 43,449 $ 44,752
Utilities $ 121,758 $ 125,410 $ 129,173 $ 133,048
Repair & Maintenance $ 33,207 $ 34,203 $ 35,229 $ 36,286
Cleaning $ 38,741 $ 39,903 $ 41,100 $ 42,333
Landscaping $ 33,207 $ 34,203 $ 35,229 $ 36,286
Security $ 13,947 $ 14,365 $ 14,796 $ 15,240
Marketing & Leasing $ 36,527 $ 37,623 $ 38,752 $ 39,914
General Administrative $ 160,499 $ 165,313 $ 170,273 $ 175,381
Management $ 93,341 $ 96,142 $ 99,026 $ 101,997
Miscellaneous $ 0 $ 0 $ 0 $ 0
---------------------------------------------------
TOTAL OPERATING EXPENSES $ 729,801 $ 751,695 $ 774,246 $ 797,473
Reserves $ 55,344 $ 57,005 $ 58,715 $ 60,476
---------------------------------------------------
NET OPERATING INCOME $1,081,683 $1,114,133 $1,147,557 $1,181,984
Operating Expense Ratio
(% of EGI) 39.1% 39.1% 39.1% 39.1%
Operating Expense Per Unit $ 4,054 $ 4,176 $ 4,301 $ 4,430
Estimated Stabilized NOI $922,767
Months to Stabilized 1
Stabilized Occupancy 93.0%
Sales Expense Rate 2.00%
Discount Rate 11.00%
Terminal Cap Rate 9.50%
Gross Residual Sale Price $12,441,936
Less: Sales Expense $ 248,839
-----------
Net Residual Sale Price $12,193,097
PV of Reversion $ 4,294,220
Add: NPV of NOI $ 6,123,784
-----------
PV Total $10,418,003
Deferred Maintenance $ 0
Add: Excess Land $ 0
Other Adjustments -$ 100,000
-----------
Value Indicated By "DCF" $10,318,003
Rounded $10,300,000
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE
-------------------------------------------------------------------------------------------
TOTAL VALUE 10.50% 10.75% 11.00% 11.25% 11.50%
- -----------------------------------------------------------------------------------------------------------------------
9.00% $11,014,396 $10,833,503 $10,656,571 $10,483,500 $10,314,192
9.25% $10,886,231 $10,708,202 $10,534,063 $10,363,717 $10,197,068
TERMINAL CAP RATE 9.50% $10,764,811 $10,589,495 $10,418,003 $10,250,239 $10,086,109
9.75% $10,649,618 $10,476,876 $10,307,895 $10,142,581 $ 9,980,840
10.00% $10,540,185 $10,369,888 $10,203,292 $10,040,305 $ 9,880,834
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
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
$85,000 (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 9.00% percent is applicable to the
subject. The results of our direct capitalization analysis are as follows:
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
WOOD VIEW
TOTAL PER SQ. FT. PER UNIT %OF EGI
- --------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $ 1,623,120 $ 9.02 $ 9,017
Less: Vacancy & Collection Loss 9.00% $ 146,081 $ 0.81 $ 812
Plus: Other Income
Laundry Income $ 0 $ 0.00 $ 0 0.00%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 86,400 $ 0.48 $ 480 5.53%
--------------------------------------------------------
Subtotal Other Income $ 86,400 $ 0.48 $ 480 5.53%
EFFECTIVE GROSS INCOME $ 1,563,439 $ 8.69 $ 8,686
OPERATING EXPENSES:
Taxes $ 128,160 $ 0.71 $ 712 8.20%
Insurance $ 33,300 $ 0.19 $ 185 2.13%
Utilities $ 99,000 $ 0.55 $ 550 6.33%
Repair & Maintenance $ 27,000 $ 0.15 $ 150 1.73%
Cleaning $ 31,500 $ 0.18 $ 175 2.01%
Landscaping $ 27,000 $ 0.15 $ 150 1.73%
Security $ 11,340 $ 0.06 $ 63 0.73%
Marketing & Leasing $ 29,700 $ 0.17 $ 165 1.90%
General Administrative $ 130,500 $ 0.73 $ 725 8.35%
Management 5.00% $ 78,172 $ 0.43 $ 434 5.00%
Miscellaneous $ 0 $ 0.00 $ 0 0.00%
TOTAL OPERATING EXPENSES $ 595,672 $ 3.31 $ 3,309 38.10%
Reserves $ 45,000 $ 0.25 $ 250 2.88%
--------------------------------------------------------
NET OPERATING INCOME $ 922,767 $ 5.13 $ 5,126 59.02%
"GOING IN" CAPITALIZATION RATE 9.00%
VALUE INDICATION $ 10,252,969 $ 56.97 $ 56,961
PV OF CONCESSIONS ($ 85,000)
NEW LEASING OFFICE ($ 100,000)
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $ 10,067,969
ROUNDED $ 10,100,000 $ 56.12 $ 56,111
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- -----------------------------------------------------------------------------------------------
8.25% $11,000,057 $11,000,000 $61,111 $61.12
8.50% $10,671,085 $10,700,000 $59,444 $59.45
8.75% $10,360,911 $10,400,000 $57,778 $57.79
9.00% $10,067,969 $10,100,000 $56,111 $56.12
9.25% $ 9,790,862 $ 9,800,000 $54,444 $54.45
9.50% $ 9,528,339 $ 9,500,000 $52,778 $52.79
9.75% $ 9,279,279 $ 9,300,000 $51,667 $51.68
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $10,100,000.
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 $10,300,000
Direct Capitalization Method $10,100,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$10,200,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37
WOOD VIEW, UNINCORPORATED AREA OF COBB
COUNTY, GEORGIA
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 $10,100,000
Income Approach $10,200,000
Reconciled Value $10,200,000
The Income Capitalization Method is considered a reliable indicator of value.
Income and expenses were estimated and projected based on historical operating
statements and market oriented expenses. This method is primarily used by
investors in their underwriting analysis. Furthermore, there was good support
for an overall rate in the Direct Capitalization Method.
The Sales Comparison Approach to value supported the value conclusion by the
Income Approach and was given secondary consideration. Investment-grade,
income-producing properties such as the subject are not typically traded based
on cost. Therefore, the Cost Approach has not been considered in our valuation.
FINAL VALUE - FEE SIMPLE ESTATE
Based on the investigation and premise outlined, it is our opinion that as of
May 20, 2003 the market value of the fee simple estate in the property is:
$10,200,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
SUBJECT PHOTOGRAPHS
[EXTERIOR - ENTRANCE PICTURE] [EXTERIOR - TYPICAL APARTMENT BUILDING PICTURE]
[INTERIOR - APARTMENT UNIT PICTURE] [EXTERIOR - TYPICAL APARTMENT BUILDING
PICTURE]
[INTERIOR - APARTMENT UNIT PICTURE] [INTERIOR - APARTMENT UNIT PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
CUMBERLAND PINES CONCORD CROSSING SUMMER LAKE
3339 Seven Pines Court 2935 Old Concord Road SE 6901 Glenlake Parkway NE
Atlanta, GA Smyrna, GA Atlanta, GA
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
MADISON AT FOREST GLEN WORTHING CREST
4236 Austell Road 3200 Spring Hill Road
Austell, GA Smyrna, GA 30080
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
- ------------------------------------------------------------------------------------------------------------------------------------
Property Name Wood View Post Crest
Management Company AIMCO Post Properties
LOCATION:
Address 100 Pinhurst Drive 50 Adams Lake Boulevard
City, State Unincorporated Cobb County, Georgia Atlanta, GA
County Cobb Cobb
Proximity to Subject 1-mile west of subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 179,970 N/A
Year Built 1982 1996
Effective Age 18 7
Building Structure Type Brick & wood siding walls; asphalt shingle roof Wood siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc.) Garage, Open Covered Open, Garages
Number of Units 180 410
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba - 1A1 705 40 $654 1 1BD/1BH - Plan A3 650 $ 792
2 1Br/1Ba - 1B1 874 50 $681 1 1BD/1BH - Plan A4 650 $ 745
3 2Br/1Ba-2A1 1,111 20 $813 2 1BD/1BH - Plan G 850 $ 953
4 2Br/2Ba - 2A2 1,111 20 $835 2 1BD/1BH - Plan Z 900 $ 968
5 2Br/2Ba - 2B2 1,213 40 $815 3 2BD/1BH - Plan D 1,000 $1,098
6 3Br/2Ba - 2C2 1,511 10 $949 4 2BD/2BH - Plan J 1,200 $1,203
5 2BD/2BH - Plan E 1,320 $1,317
6 3BD/2BH - Plan K 1,400 $1,489
Average Unit Size (SF) 1,000
Unit Breakdown: Efficiency 0% 2-Bedroom 39% Efficiency 0% 2-Bedroom 0%
1-Bedroom 61% 3-Bedroom 0% 1-Bedroom 0% 3-Bedroom 0%
CONDITION: Good Very Good
APPEAL: Fair Very Good
AMENITIES:
Unit Amenities Attach. Garage X Vaulted Ceiling X 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
X Spa/Jacuzzi X Car Wash Spa/Jacuzzi X Car Wash
Basketball Court X BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
X Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking X Tennis Court X Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track Business Office Jogging Track X Business Office
X Gym Room X Gym Room
OCCUPANCY: 91% 92%
LEASING DATA:
Available Leasing Terms 6 to 15 Months 6 to 12 Months
Concessions 1 - 1 1/2 Months Free 1 - 2 Months Free
Pet Deposit $300 - $500 N/A
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water Trash X Water Trash
Confirmation May 1, 2003; Joseph Beard (Property Manager) May 20, 2003; Jean Scott, Senior Leasing
Telephone Number (972)234-1231 770-333-3000
NOTES: Modern garden style apartment complex
Located one block from Cumberland Mall
COMPARISON TO SUBJECT Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
- ------------------------------------------------------------------------------------------------------------------------------------
Property Name Gables Walk Magnolia Vinings
Management Company Gables Residential Trammell Crow Residential Services
LOCATION:
Address 2158 Cumberland Parkway 2151 Cumberland Parkway
City, State Atlanta, GA Atlanta, GA
County Cobb Cobb
Proximity to Subject 2-miles southwest of subject 2-miles south of the subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) N/A N/A
Year Built 1996 1997
Effective Age 7 6
Building Structure Type Wood siding walls; asphalt shingle roof Brick & wood siding walls; asphalt shingle
roof
Parking Type (Gr., Cov., etc.) Open, Garages Open, Garages
Number of Units 310 400
Unit Mix: Type Unit Qty Mo. Type Unit Qty Mo.
1 1BD/1BH - Plan A2 855 $ 870 1 1BD/1BH - Willow 572 $ 760
2 1BD/1BH - Plan A2 902 $ 915 1 1BD/1BH - Pine 753 $ 820
3 2BD/2BH - Plan B1 1,294 $1,150 2 1BD/1BH - Pine 753 $ 820
4 2BD/2BH - Plan B1 1,294 $1,150 2 1BD/1BH -Dogwood 967 $ 810
5 2BD/2BH - Plan B1 1,294 $1,150 4 2BD/2BH-Sycamore 1,113 $1,100
5 2BD/2BH - Plan B3 1,349 $1,230 5 2BD/2BH-Sycamore 1,113 $1,100
6 3BD/2BH - Plan C1 1,450 $1,370 6 3BD/2BH-Magnolia 1,366 $1,325
Average Unit Size (SF)
Unit Breakdown: Efficiency 0% 2-Bedroom 0% Efficiency 0% 2-Bedroom 0%
1-Bedroom 0% 3-Bedroom 0% 1-Bedroom 0% 3-Bedroom 0%
CONDITION: Very Good Excellent
APPEAL: Very Good Excellent
AMENITIES:
Unit Amenities X Attach. Garage Vaulted Ceiling X Attach. Garage X Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace X Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
X Spa/Jacuzzi Car Wash X Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court X BBQ Equipment
Volleyball Court X Theater Room Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall Sand Volley Ball X Meeting Hall
X Tennis Court X Secured Parking X Tennis Court X Secured Parking
Racquet Ball Laundry Room Racquet Ball Laundry Room
Jogging Track X Business Office X Jogging Track X Business Office
X Gym Room X Gym Room
OCCUPANCY: 93% 94%
LEASING DATA:
Available Leasing Terms 6 to 12 Months 6 to 12 Months
Concessions Yes; actual provision not 2 Months Free
reported
Pet Deposit $400 $300 - $500
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water Trash X Water Trash
Confirmation May 20, 2003; Jacqueline Wamaitha Leasing May 20, 2003; Amy Sanders, Community Manager
Telephone Number 770-803-5000 770-801-3600
NOTES: Modern garden style apartment complex Modern garden style apartment complex
COMPARISON TO SUBJECT Superior Very Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 4 R - 5
- ---------------------------------------------------------------------------------------------------------------------------------
Property Name Paces Station Lakes at Vinings
Management Company Equity Residential Equity
Residential
LOCATION:
Address 3000 Paces Walk 2800 Paces Ferry Road
City, State Atlanta, GA Atlanta, GA
County Cobb Cobb
Proximity to Subject 2-miles south of subject 1/2-mile south of the subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) N/A N/A
Year Built 1980 - 1992 1970
Effective Age 20 33
Building Structure Type Wood siding walls; asphalt shingle roof Vinyl siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc.) Garage, Open Open
Number of Units 610 464
Unit Mix: Type Unit Qty Mo Type Unit Qty. Mo.
1 1BD/1BH-Fairfield 522 $ 706 1 1BD/1BH 702 $ 749
1 1BD/1BH-Tuxedo 650 $ 740 1 1BD/1BH 758 $ 759
2 1BD/1BH-Westbr'k 840 $ 961 2 1BD/1BH 770 $ 771
2 1BD/1BH-Conway 880 $ 861 3 2BD/ 1 & 3/4 BH 1,100 $ 931
3 2BD/1BH-Stratford 1,017 $ 961 4 2BD/ 1 & 3/4 BH 1,100 $ 931
3 2BD/1BH-Wesley 1,019 $ 891 4 2BD/2BH 1,051 $ 931
4 2BD/2BH-Rembr'dt 1,248 $1,036 4 2BD/2BH 1,048 $ 927
4 2BD/2BH-Clairmont 1,343 $1,023 4 2BD/2BH 1,121 $ 927
5 2BD/2BH-Rembr'dt 1,248 $1,036 5 2BD/2BH 1,288 $1,151
5 2BD/2BH-Clairmont 1,343 $1,023 6 3BD/2BH 1,366 $1,227
Average Unit Size (SF)
Unit Breakdown: Efficiency 0% 2-Bedroom 0% Efficiency 0% 2-Bedroom 0%
1-Bedroom 0% 3-Bedroom 0% 1-Bedroom 0% 3-Bedroom 0%
CONDITION: Good Good
APPEAL: Fair Fair
AMENITIES:
Unit Amenities Attach. Garage X Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
X Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall X Sand Volley Ball X Meeting Hall
X Tennis Court X Secured Parking X Tennis Court X Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office X Jogging Track X Business Office
X Gym Room X Gym Room
OCCUPANCY: 92% 92%
LEASING DATA:
Available Leasing Terms 6 to 12 Months 6 to 12 Months
Concessions 1 - 2 Months Free 2 Months Free
Pet Deposit N/A N/A
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water Trash X Water Trash
Confirmation May 20, 2003; Courtney Bates General Manager May 20, 2003; Gabrielle Deaton, Leasing
Telephone Number 770-436-4400 770-432-5105
NOTES: Older facility located south of Paces Ferry Road Older complex with a central location on Paces
Ferry Road in the center of Vinings
COMPARISON TO SUBJECT Similar Slightly Superior
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
POST CREST GABLES WALK MAGNOLIA VININGS
50 Adams Lake Boulevard 2158 Cumberland Parkway 2151 Cumberland Parkway
Atlanta, GA Atlanta, GA Atlanta, GA
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4 COMPARABLE R-5
PACES STATION LAKES AT VININGS
3000 Paces Walk 2800 Paces Ferry Road
Atlanta, GA Atlanta, GA
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
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
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
such testimony, and then such testimony shall be at American Appraisal
Associates, Inc.'s, prevailing per diem for the individuals involved.
Possession of this report or any copy thereof does not carry with it the right
of publication. No portion of this report (especially any conclusion to use, the
identity of the appraiser or the firm with which the appraiser is connected, or
any reference to the Appraisal Institute or the designations awarded by this
organization) shall be disseminated to the public through prospectus,
advertising, public relations, news, or any other means of communication without
the written consent and approval of American Appraisal Associates, Inc.
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
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. Steven M. Zenkovich,
ASA 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- MICHAEL BATES,
----------------------------------------
Michael Bates, MAI
Assistant Manager, Real Estate Group
State of Georgia, Certified General Real
Property Appraiser #CG00685
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
MICHAEL P. BATES, MAI
DIRECTOR - HEALTHCARE REAL ESTATE
AND ASSISTANT MANAGER,
REAL ESTATE GROUP
POSITION Michael P. Bates is the Assistant Manager of the Atlanta Real
Estate Group of American Appraisal Associates, Inc. ("AAA"). He
shares responsibility for the management, quality control, and
review of commercial real estate assignments principally in the
southeast United States. Mr. Bates is also the national Director
- Healthcare Real Estate for AAA and is responsible for the
management and valuation process for specialty health care
facility assignments.
EXPERIENCE
Valuation Mr. Bates has 17 years of commercial appraisal experience. He has
performed appraisals in 43 states and Canada, and he is currently
a certified general appraiser in 21 states.
Court Mr. Bates has been accepted as an expert witness and given
testimony in federal bankruptcy court in Delaware. He has
prepared many other appraisals that were submitted as expert
evidence to federal bankruptcy court, but those cases were
settled prior to testimony being required. Mr. Bates has
testified in property tax appeal cases in California, Missouri,
and Texas, and his hospital appraisals have been submitted in tax
appeal cases in Pennsylvania, South Carolina, and South Dakota.
Business Mr. Bates joined AAA in 1997. Prior to joining AAA, he was
president of his own valuation company and was previously a vice
president for both Gulf/Atlantic Valuation Services, Inc., and
Valuation Counselors. Prior to gaining his appraisal experience,
Mr. Bates worked seven years in commercial mortgage financing.
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
EDUCATION University of Tennessee - Knoxville
Master of Business Administration - Finance and Management
Bachelor of Science - Marketing
STATE State of Alabama, Certified General Real Property Appraiser,
CERTIFICATIONS #G00503
State of Arizona, Certified General Real Estate Appraiser, #31067
State of Arkansas, State Certified General Appraiser, #CG1414N
State of California, Certified General Real Estate Appraiser,
#AG026120
State of Colorado, Certified General Appraiser, #CG40023849
State of Delaware, Certified General Appraiser, #X1-0000352
State of Florida, Certified General Appraiser, #0002494
State of Georgia, Certified General Real Property Appraiser,
#CG00685
State of Illinois, State Certified General Real Estate Appraiser,
#153001243
State of Maryland, Certified General Real Estate Appraiser,
#10814
State of Michigan, Certified General Appraiser, #1201069262
State of Mississippi, State Certified General Real Estate
Appraiser, #GA-629
State of New Jersey, General Appraiser, #42KG00195600
State of New York, Real Estate General Appraiser, #46000041317
State of North Carolina, Certified General Real Estate Appraiser,
#A4095
Commonwealth of Pennsylvania, Certified General Appraiser,
#GA001817R
State of South Carolina, Certified Real Estate Appraiser, #CG3059
State of Tennessee, Certified General Real Estate Appraiser,
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
#00051881
State of Texas, State Certified General Real Estate Appraiser,
#TX-1328483-G
Commonwealth of Virginia, Certified General Real Estate
Appraiser, #4001005254
State of Washington, Certified General Real Estate Appraiser,
#1100998
PROFESSIONAL Appraisal Institute, MAI Designated Member
AFFILIATIONS
VALUATION AND Appraisal Institute
SPECIAL All required courses
COURSES Standards of Professional Practice, Parts A and B
The Appraiser as an Expert Witness: Preparation and
Testimony
Litigation Appraising: Specialized Topics and Applications
Separating Real and Personal Property from Intangible
Business Assets
Specialty Courses
Hotel/Motel Valuation and Investment Seminar
Valuation of Special-Purpose Properties
PUBLICATIONS "Estimating Hospital Real Property Values for Ad Valorem Tax
Purposes," Journal of Property Tax Management, Fall 1997,
republished by Appraisal Institute in A Business Enterprise Value
Anthology, 2001
Co-authored "Abnormal Investor Returns Resulting from the
Burroughs and Memorex Merger," Mergers & Acquisitions, June 1984
AMERICAN APPRAISAL ASSOCIATES, INC.
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
WOOD VIEW, UNINCORPORATED AREA OF COBB COUNTY, GEORGIA
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.