CEDAR BROOKE APARTMENTS
3100 QUAIL CREEK DRIVE
INDEPENDENCE, MISSOURI
MARKET VALUE -
FEE SIMPLE ESTATE
AS OF MAY 9, 2003
PREPARED FOR:
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(AIMCO)
C/O LINER YANKELEVITZ SUNSHINE & REGENSTREIF LLP
&
LIEFF CABRASER HEIMANN & BERNSTEIN
ON BEHALF OF NUANES, ET. AL.
[AMERICAN APPRAISAL ASSOCIATES(R) LOGO]
[AMERICAN APPRAISAL ASSOCIATES(R) LOGO]
[AMERICAN APPRAISAL ASSOCIATES(R) LETTERHEAD]
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: CEDAR BROOKE APARTMENTS
3100 QUAIL CREEK DRIVE
INDEPENDENCE, JACKSON COUNTY, MISSOURI
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 158 units with a
total of 148,008 square feet of rentable area. The improvements were built in
1972. The improvements are situated on 10.56000918 acres. Overall, the
improvements are in average condition. As of the date of this appraisal, the
subject property is 96% 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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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 9, 2003 is:
($6,100,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
-s- Frank Fehribach
July 9, 2003 Frank Fehribach, MAI
#053272 Managing Principal, Real Estate Group
Missouri Temporary Practice Permit
Report By:
Kim Cook
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: Cedar Brooke Apartments
LOCATION: 3100 Quail Creek Drive
Independence, Missouri
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 9, 2003
DATE OF REPORT: July 9, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 10.5600091827365 acres, or 459,994 square feet
Assessor Parcel No.: 33-610-01-31-00-0-00-000;
Floodplain: Community Panel No. 290172 0035E (March 21,
2000)
Flood Zone X (see comments), an area outside
the floodplain.
Zoning: R-3 (Moderate Density Residential)
BUILDING:
No. of Units: 158 Units
Total NRA: 148,008 Square Feet
Average Unit Size: 937 Square Feet
Apartment Density: 15.0 units per acre
Year Built: 1972
UNIT MIX AND MARKET RENT:
GROSS RENTAL INCOME PROJECTION
Market Rent
Square ------------------------ Monthly Annual
Unit Type Feet Per Unit Per SF Income Income
- ----------------------------------------------------------------------------------------------------------
1Br/1Ba - 1A10 802 $560 $0.70 $22,400 $ 268,800
1Br/1Ba - 1B10 842 $570 $0.68 $22,800 $ 273,600
2Br/1Ba - 2A15 1,032 $660 $0.64 $25,740 $ 308,880
2Br/1Ba - 2B15 1,072 $700 $0.65 $24,500 $ 294,000
2Br/1Ba - 2C15 1,120 $720 $0.64 $ 2,880 $ 34,560
------- ---------
Total $98,320 $1,179,840
OCCUPANCY: 96%
ECONOMIC LIFE: 45 Years
EFFECTIVE AGE: 25 Years
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
REMAINING ECONOMIC LIFE: 20 Years
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
SUBJECT PHOTOGRAPHS
[ENTRANCE TO SUBJECT PICTURE] [EXTERIOR - TYPICAL VIEW OF BUILDINGS PICTURE]
AREA MAP
[MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
PART TWO - ECONOMIC INDICATORS
INCOME CAPITALIZATION APPROACH
Amount $/Unit
------ ------
DIRECT CAPITALIZATION
Potential Rental Income $1,179,840 $7,467
Effective Gross Income $1,203,901 $7,620
Operating Expenses $506,545 $3,206 42.1% of EGI
Net Operating Income: $657,856 $4,164
Capitalization Rate 11.00%
DIRECT CAPITALIZATION VALUE $6,000,000 * $37,975 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 5%
Stabilized Vacancy & Collection Loss: 7%
Lease-up / Stabilization Period N/A
Terminal Capitalization Rate 12.00%
Discount Rate 13.00%
Selling Costs 2.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $6,200,000 * $39,241 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $6,100,000 $38,608 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $21,053 to $53,438
Range of Sales $/Unit (Adjusted) $33,937 to $42,814
VALUE INDICATION - PRICE PER UNIT $6,100,000 * $38,608 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 4.08 to 6.59
Selected EGIM for Subject 5.00
Subject's Projected EGI $1,203,901
EGIM ANALYSIS CONCLUSION $6,000,000 * $37,975 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $6,000,000 * $37,975 / UNIT
RECONCILED SALES COMPARISON VALUE $6,000,000 $37,975 / 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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $6,100,000
NOI Per Unit $6,000,000
EGIM Multiplier $6,000,000
INDICATED VALUE BY SALES COMPARISON $6,000,000 $37,975 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $6,000,000
Discounted Cash Flow Method: $6,200,000
INDICATED VALUE BY THE INCOME APPROACH $6,100,000 $38,608 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $6,100,000 $38,608 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 3100 Quail Creek Drive, Independence, Jackson
County, Missouri. Independence identifies it as 33-610-01-31-00-0-00-000; .
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by Kim Cook on May 9,
2003. Frank Fehribach, MAI has not made a personal inspection of the subject
property. Kim Cook performed the research, valuation analysis and wrote the
report. Frank Fehribach, MAI reviewed the report and concurs with the value.
Frank Fehribach, MAI and Kim Cook 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 9, 2003. The
date of the report is July 9, 2003.
PURPOSE AND USE OF APPRAISAL
The purpose of the appraisal is to estimate the market value of the fee simple
interest in the subject property. It is understood that the appraisal is
intended to assist the clients in litigation settlement proceedings. The
appraisal was not based on a requested minimum valuation, a specific valuation,
or the approval of a loan.
PROPERTY RIGHTS APPRAISED
We have appraised the Fee Simple Estate in the subject property (as applied in
the Sales & Income Approaches), subject to the existing short-term leases. A Fee
Simple Estate is
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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 JCIP. 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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
AREA / NEIGHBORHOOD ANALYSIS
NEIGHBORHOOD ANALYSIS
A neighborhood is a group of complementary land uses. The function of the
neighborhood analysis is to describe the immediate surrounding environs. The
subject is located in the city of Independence, Missouri. 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 - Lee's Summit Road
West - Noland Road
South - US Highway 40
North - Interstate 70
MAJOR EMPLOYERS
Major employers in the subject's area include Sprint (17,922 employees), Health
Midwest (8,735 employees), Hallmark Cards (5,600 employees), Ford Motor Company
(5,594 employees), Honeywell International (4,820 employees), Southwestern Bell
(4,600 employees), AT&T (4,023 employees), and DST (4,000 employees). The
overall economic outlook for the area is considered favorable.
DEMOGRAPHICS
We have reviewed demographic data within the neighborhood. The following table
summarizes the key data points.
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 12
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
NEIGHBORHOOD DEMOGRAPHICS
AREA
------------------------------------------
CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA
- --------------------------------------------------------------------------------------
POPULATION TRENDS
Current Population 6,627 54,118 136,792 1,807,569
5-Year Population 6,652 55,458 138,656 1,892,507
% Change CY-5Y 0.4% 2.5% 1.4% 4.7%
Annual Change CY-5Y 0.1% 0.5% 0.3% 0.9%
HOUSEHOLDS
Current Households 2,875 23,128 57,692 709,949
5-Year Projected Households 2,980 24,087 59,297 750,540
% Change CY - 5Y 3.7% 4.1% 2.8% 5.7%
Annual Change CY-5Y 0.7% 0.8% 0.6% 1.1%
INCOME TRENDS
Median Household Income $ 54,676 $ 46,767 $ 40,215 $ 49,518
Per Capita Income $ 27,281 $ 24,454 $ 23,137 $ 24,363
Average Household Income $ 63,258 $ 57,573 $ 54,851 $ 62,029
Source: Demographics Now
The subject neighborhood's population is expected to show increases below that
of the region. The immediate market offers superior income levels as compared to
the broader market.
The following table illustrates the housing statistics in the subject's
immediate area, as well as the MSA region.
HOUSING TRENDS
AREA
------------------------------------------
CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA
- --------------------------------------------------------------------------------
HOUSING TRENDS
% of Households Renting 21.38% 21.05% 27.22% 29.10%
5-Year Projected % Renting 22.93% 22.54% 27.45% 28.33%
% of Households Owning 75.55% 75.06% 67.08% 62.84%
5-Year Projected % Owning 74.10% 73.72% 67.04% 64.03%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Creek and good quality residential subdivision
South - Quail Creek Apartments
East - Creek and low, wet vacant land, residential development
West - Church, residential development
CONCLUSIONS
The subject is well located within the city of Independence. The neighborhood is
characterized as being mostly suburban in nature and is currently in the stable
stage of development. The economic outlook for the neighborhood is judged to be
favorable with a good economic base.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 14
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
MARKET ANALYSIS
The subject property is located in the city of Independence in Jackson County.
The overall pace of development in the subject's market is more or less stable.
No units are currently being added to this submarket, according to the REIS
report. The following table illustrates historical vacancy rates for the
subject's market.
HISTORICAL VACANCY RATE
Period Region Submarket
- -------------------------------------------------------------------------------------
1st Quarter 2003 7.0% 6.4%
4th Quarter 2002 6.4% 4.4%
Average Per Ending 12/31/02 5.5% 4.0%
Source: REIS, Subtrend Futures, Kansas City Apartment, Independence, 1st Quarter
2003
Occupancy trends in the subject's market are decreasing. Historically speaking,
the subject's submarket has outperformed the overall market.
Market rents in the subject's market have been following a stable trend. The
following table illustrates historical rental rates for the subject's market.
HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change
- -------------------------------------------------------------------------------------
1st Qtr 2003 NA NA $523 -
YE 2002 NA NA $531 1.5%
YE 2001 NA NA $527 -0.8%
YE 2000 NA NA $543 3.0%
Source: REIS, Subtrend Futures, Kansas City Apartment, Independence, 1st Quarter
2003
The following table illustrates a summary of the subject's competitive set.
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
- ------------------------------------------------------------------------------------------------
R-1 Williamsburg Square 144 96% 1989 1.8 miles NW of subject
R-2 Quail Creek 180 99% 1981 Just S of subject
R-3 Cliffside Apartments 100 98% 1990 2 miles E of subject
R-4 Coventry Park 155 94% 1975 3 miles NE of subject
R-5 The Mansions 550 89% 1990 4 miles N of subject
Subject Cedar Brooke Apartments 158 96% 1972
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
Overall, the Independence submarket has lower vacancy rates than the surrounding
region. The submarket will have little expansion of the existing inventory
during the next few years.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 10.5600091827365 acres, or 459,994 square feet
Shape Irregular
Topography Slightly slope
Utilities All necessary utilities are available to the site.
Soil Conditions Stable
Easements Affecting Site None other than typical utility easements
Overall Site Appeal Good
Flood Zone:
Community Panel 290172 0035E, dated March 21, 2000
Flood Zone Zone X (see comments)
Zoning R-3, 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
- ------------------------------------------------------------------------------------------------
33-610-01-31-00-
0-00-000; $ 0 $1,065,493 $1,065,493 0.07113 $75,793
IMPROVEMENT ANALYSIS
Year Built 1972
Number of Units 158
Net Rentable Area 148,008 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,
meeting hall, laundry room, business office, and
parking area.
Unit Amenities Individual unit amenities include a balcony,
fireplace, cable TV connection, and washer dryer
connection. Appliances available in each unit
include a refrigerator, stove, dishwasher, water
heater, garbage disposal, and oven.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
- ---------------------------------------------------
1Br/1Ba - 1A10 40 802
1Br/1Ba - 1B10 40 842
2Br/1Ba - 2A15 39 1,032
2Br/1Ba - 2B15 35 1,072
2Br/1Ba - 2C15 4 1,120
Overall Condition Average
Effective Age 25 years
Economic Life 45 years
Remaining Economic Life 20 years
Deferred Maintenance None
HIGHEST AND BEST USE ANALYSIS
In accordance with the definition of highest and best use, an analysis of the
site relating to its legal uses, physical possibilities, and financial
feasibility is appropriate. The highest and best use as vacant is to hold for
future multi-family development. The subject improvements were constructed in
1972 and consist of a 158-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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- ---------------------------------------------------------------------------------------------------------------------
Property Name Cedar Brooke Apartments Stoneybrooke of Raytown Grandboro Arms Apartments
LOCATION:
Address 3100 Quail Creek Drive 9805 East 61st Street 13902 Grandboro Lane
City, State Independence, Missouri Raytown, MO Grandview, MO
County Jackson Jackson Jackson
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 148,008 97,277 115,585
Year Built 1972 1972 1976
Number of Units 158 119 114
Unit Mix: Type Total Type Total Type Total
1Br/1Ba - 1A10 40 1Br/1Ba 15
1Br/1Ba - 1B10 40 2Br/1Ba 58
2Br/1Ba - 2A15 39 3Br/1.5Ba 21
2Br/1Ba - 2B15 35 3Br/1.5Ba, TH 8
2Br/1Ba - 2C15 4 4Br/1.5Ba TH 12
Average Unit Size (SF) 937 817 1,014
Land Area (Acre) 10.5600 4.2200 9.1000
Density (Units/Acre) 15.0 28.2 12.5
Parking Ratio (Spaces/Unit) 1.90 NA 2.11
Parking Type (Gr., Cov.,
etc.) Open Open, carports Open
CONDITION: Average Fair Fair
APPEAL: Average Fair Fair
AMENITIES:
Pool/Spa Yes/No No/No Yes/No
Gym Room No No No
Laundry Room Yes Yes Yes
Secured Parking No No No
Sport Courts Yes No Yes
Washer/Dryer Connection Yes (in 2&3 Br units) No No
OCCUPANCY: 96% 80% 98%
TRANSACTION DATA:
Sale Date November, 2002 December, 2001
Sale Price ($) $3,700,000 $3,860,000
Grantor Midland-Missouri Real Estate Monopoly Acquisitions
Grantee Stoneybrook Apartments LTD David Jones, et al
Sale Documentation Book 2640, Page 1 Book 2001K/0075927
Verification Broker Contract/Grantee
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $818,724 $6,880 $8.42 $830,114 $7,282 $7.18
Vacancy/Credit Loss $ 40,936 $ 344 $0.42 $ 40,722 $ 357 $0.35
Effective Gross Income $777,788 $6,536 $8.00 $789,392 $6,924 $6.83
Operating Expenses $367,067 $3,085 $3.77 $372,201 $3,265 $3.22
Net Operating Income $410,721 $3,451 $4.22 $417,191 $3,660 $3.61
NOTES: Renovated in 1995 Sale price includes $110,000
Seller financed $400,000 at in deferred maintenance
prime rate. Inferior location Former HUD project conv
and age/condition to market rate project
PRICE PER UNIT $31,092 $33,860
PRICE PER SQUARE FOOT $ 38.04 $ 33.40
EXPENSE RATIO 47.2% 47.2%
EGIM 4.76 4.89
OVERALL CAP RATE 11.10% 10.81%
Cap Rate based on Pro Forma or Actual Income? PRO FORMA ACTUAL
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- -------------------------------------------------------------------------------------------------------------------------
Property Name Broadway Village Apartments Candlelite Apartments The Pines Apartments
LOCATION:
Address 209 NW 63rd Street 6522 East 125th Street 9530 Mission Road
City, State Gladstone, MO Grandview, MO Overland Park, KS
County Clay Jackson Jackson
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 83,500 108,156 43,092
Year Built 1972 1973 1965
Number of Units 97 152 40
Unit Mix: Type Total Type Total Type Total
1Br/1Ba 30 1Br/1Ba 20
2Br/1Ba 56 1Br/1Ba 40
3Br/2Ba 11 2Br/1Ba 4
2Br/1.5Ba 24
2Br/1.5Ba 64
Average Unit Size (SF) 861 712 1,077
Land Area (Acre) 4.8000 10.1100 2.7000
Density (Units/Acre) 20.2 15.0 14.8
Parking Ratio (Spaces/Unit) 1.87 1.97 1.40
Parking Type (Gr., Cov.,
etc.) Open Open Open
CONDITION: Fair Fair Average
APPEAL: Fair Fair Average
AMENITIES:
Pool/Spa Yes/No Yes/No Yes/No
Gym Room No No No
Laundry Room Yes Yes Yes
Secured Parking No No No
Sport Courts Yes Yes No
Washer/Dryer Connection No Yes No
OCCUPANCY: 94% 94% 93%
TRANSACTION DATA:
Sale Date July, 2001 August, 2001 January, 2001
Sale Price ($) $2,750,000 $3,200,000 $2,137,500
Grantor Broadway East, Ltd Jacobson and Jones, Inc. Wendel Peterson
Grantee Joseph and Mary Candelosi Malcom Petty The Pines of Overalnd Park,
LLC
Sale Documentation Book 3376, Page 295 2001K/0019041 Document No. 184156
Verification Grantor Grantor Grantor
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $583,536 $6,016 $6.99 $885,000 $5,822 $8.18 $350,400 $8,760 $8.13
Vacancy/Credit Loss $ 28,071 $ 289 $0.34 $100,800 $ 663 $0.93 $ 26,100 $ 653 $0.61
Effective Gross Income $555,465 $5,726 $6.65 $784,200 $5,159 $7.25 $324,300 $8,108 $7.53
Operating Expenses $268,298 $2,766 $3.21 $405,384 $2,667 $3.75 $112,931 $2,823 $2.62
Net Operating Income $287,167 $2,960 $3.44 $378,816 $2,492 $3.50 $211,369 $5,284 $4.91
NOTES: Inferior location and Prior to sale 25, units under This property was
age/condition contract w/ HUD. Buyer chosen based on its
opted out of HUD and age and condition
occupancy dropped to 82%
PRICE PER UNIT $28,351 $21,053 $53,438
PRICE PER SQUARE FOOT $ 32.93 $ 29.59 $49.60
EXPENSE RATIO 48.3% 51.7% 34.8%
EGIM 4.95 4.08 6.59
OVERALL CAP RATE 10.44% 11.84% 9.89%
Cap Rate based on Pro Forma
or Actual Income? ACTUAL PRO FORMA PRO FORMA
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
IMPROVED SALES MAP
[MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $21,053 to $53,438 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 $33,937 to $42,814 per unit with a mean or average adjusted price
of $38,399 per unit. The median adjusted price is $38,735 per unit. Based on the
following analysis, we have concluded to a value of $38,500 per unit, which
results in an "as is" value of $6,100,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- ------------------------------------------------------------------------------------------------------------------
Property Name Cedar Brooke Apartments Stoneybrooke of Raytown Grandboro Arms Apartments
Address 3100 Quail Creek Drive 9805 East 61st Street 13902 Grandboro Lane
City Independence, Missouri Raytown, MO Grandview, MO
Sale Date November, 2002 December, 2001
Sale Price ($) $3,700,000 $3,860,000
Net Rentable Area (SF) 148,008 97,277 115,585
Number of Units 158 119 114
Price Per Unit $31,092 $33,860
Year Built 1972 1972 1976
Land Area (Acre) 10.5600 4.2200 9.1000
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 11-2002 2% 12-2001 4%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $31,714 $35,214
Location Inferior 5% Inferior 5%
Number of Units 158 119 -5% 114 -5%
Quality / Appeal Fair Inferior 10% Comparable 0%
Age / Condition 1972 1972 / Fair 5% 1976 / Fair 10%
Occupancy at Sale 96% 80% 10% 98% 0%
Amenities Fair Inferior 5% Comparable 0%
Average Unit Size (SF) 937 817 5% 1,014 0%
PHYSICAL ADJUSTMENT 35% 10%
FINAL ADJUSTED VALUE ($/UNIT) $42,814 $38,735
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- -------------------------------------------------------------------------------------------------------------------
Property Name Broadway Village Apartments Candlelite Apartments The Pines Apartments
Address 209 NW 63rd Street 6522 East 125th Street 9530 Mission Road
City Gladstone, MO Grandview, MO Overland Park, KS
Sale Date July, 2001 August, 2001 January, 2001
Sale Price ($) $2,750,000 $3,200,000 $2,137,500
Net Rentable Area (SF) 83,500 108,156 43,092
Number of Units 97 152 40
Price Per Unit $28,351 $21,053 $53,438
Year Built 1972 1973 1965
Land Area (Acre) 4.8000 10.1100 2.7000
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 07-2001 4% 08-2001 4% 01-2001 6%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $29,485 $21,895 $56,644
Location Inferior 10% Inferior 10% Superior -10%
Number of Units 97 -5% 152 0% 40 -10%
Quality / Appeal Comparable 0% Inferior 15% Superior -10%
Age / Condition 1972 / Fair 15% 1973 / Fair 15% 1965 / Average 0%
Occupancy at Sale 94% 0% 94% 0% 93% 0%
Amenities Comparable 0% Inferior 5% Inferior 5%
Average Unit Size (SF) 861 5% 712 10% 1,077 -5%
PHYSICAL ADJUSTMENT 25% 55% -30%
FINAL ADJUSTED VALUE ($/UNIT) $36,856 $33,937 $39,651
SUMMARY
VALUE RANGE (PER UNIT) $33,937 TO $42,814
MEAN (PER UNIT) $38,399
MEDIAN (PER UNIT) $38,735
VALUE CONCLUSION (PER UNIT) $38,500
VALUE INDICATED BY SALES COMPARISON APPROACH $6,083,000
ROUNDED $6,100,000
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
NOI PER UNIT COMPARISON
COMPARABLE NO. OF SALE PRICE NOI/ SUBJECT NOI ADJUSTMENT INDICATED
NO. UNITS PRICE/UNIT OAR NOI/UNIT SUBJ. NOI/UNIT FACTOR VALUE/UNIT
- ---------------------------------------------------------------------------------------------------------
I-1 119 $3,700,000 11.10% $410,721 $657,856 1.206 $37,508
$ 31,092 $ 3,451 $ 4,164
I-2 114 $3,860,000 10.81% $417,191 $657,856 1.138 $38,524
$ 33,860 $ 3,660 $ 4,164
I-3 97 $2,750,000 10.44% $287,167 $657,856 1.406 $39,872
$ 28,351 $ 2,960 $ 4,164
I-4 152 $3,200,000 11.84% $378,816 $657,856 1.671 $35,172
$ 21,053 $ 2,492 $ 4,164
I-5 40 $2,137,500 9.89% $211,369 $657,856 0.788 $42,105
$ 53,438 $ 5,284 $ 4,164
PRICE/UNIT
Low High Average Median
$35,172 $42,105 $38,636 $ 38,524
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
Estimated Price Per Unit $ 38,000
Number of Units 158
----------
Value Based on NOI Analysis $6,004,000
Rounded $6,000,000
The adjusted sales indicate a range of value between $35,172 and $42,105 per
unit, with an average of $38,636 per unit. Based on the subject's competitive
position within the improved sales, a value of $38,000 per unit is estimated.
This indicates an "as is" market value of $6,000,000 (rounded after necessary
adjustment, if any) for the NOI Per Unit Analysis.
EFFECTIVE GROSS INCOME MULTIPLIER (EGIM) ANALYSIS
The effective gross income multiplier (EGIM) is derived by dividing the sales
price by the total effective gross income. The following table illustrates the
EGIMs for the comparable improved sales.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 25
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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-1 119 $3,700,000 $777,788 $367,067 47.19% 4.76
$ 31,092
I-2 114 $3,860,000 $789,392 $372,201 47.15% 4.89
$ 33,860
I-3 97 $2,750,000 $555,465 $268,298 48.30% 4.95
42.08%
$ 28,351
I-4 152 $3,200,000 $784,200 $405,384 51.69% 4.08
$ 21,053
I-5 40 $2,137,500 $324,300 $112,931 34.82% 6.59
$ 53,438
EGIM
Low High Average Median
4.08 6.59 5.05 4.89
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
Estimate EGIM 5.00
Subject EGI $1,203,901
Value $6,019,506
$ 0
----------
Value Based on EGIM Analysis $6,019,506
Rounded $6,000,000
Value Per Unit $ 37,975
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 42.08% before reserves. The comparable sales
indicate a range of expense ratios from 34.82% to 51.69%, while their EGIMs
range from 4.08 to 6.59. Overall, we conclude to an EGIM of 5.00, which results
in an "as is" value estimate in the EGIM Analysis of $6,000,000.
SALES COMPARISON CONCLUSION
The three valuation methods in the Sales Comparison Approach are shown below.
The overall value via the Sales Comparison Approach is estimated at $6,000,000.
Price Per Unit $6,100,000
NOI Per Unit $6,000,000
EGIM Analysis $6,000,000
Sales Comparison Conclusion $6,000,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
method is normally more appropriate for properties with relatively stable
operating histories and expectations.
A pro forma analysis for the first year of the investment is made to estimate a
reasonable potential net operating income for the Subject Property. Such an
analysis entails an estimate of the gross income the property should command in
the marketplace. From this total gross income must be deducted an allowance for
vacancy/collection loss and operating expenses as dictated by general market
conditions and the overall character of the subject's tenancy and leased income
to arrive at a projected estimate of net operating income. Conversion of the net
operating income to an indication of value is accomplished by the process of
capitalization, as derived primarily from market data.
MARKET RENT ANALYSIS
In order to determine a market rental rate for the subject, a survey of
competing apartment communities was performed. This survey was displayed
previously in the market analysis section of the report. Detailed information
pertaining to each of the comparable rental communities, along with photographs,
is presented in the Addenda of this report.
The following charts display the subject's current asking and actual rent rates
as well as a comparison with the previous referenced comparable rental
properties.
SUMMARY OF ACTUAL AVERAGE RENTS
Average
Unit Area -------------------
Unit Type (Sq. Ft.) Per Unit Per SF % Occupied
- ------------------------------------------------------------------------
1Br/1Ba - 1A10 802 $552 $0.69 97.5%
1Br/1Ba - 1B10 842 $568 $0.67 97.5%
2Br/1Ba - 2A15 1032 $660 $0.64 89.7%
2Br/1Ba - 2B15 1072 $695 $0.65 100.0%
2Br/1Ba - 2C15 1120 $676 $0.60 100.0%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
RENT ANALYSIS
COMPARABLE RENTS
--------------------------------------------------------
R-1 R-2 R-3 R-4 R-5
--------------------------------------------------------
Williamsburg Cliffside Coventry The
Square Quail Creek Apartments Park Mansions
--------------------------------------------------------
COMPARISON TO SUBJECT
SUBJECT SUBJECT --------------------------------------------------------
SUBJECT UNIT ACTUAL ASKING Slightly Slightly Slightly
DESCRIPTION TYPE RENT RENT Superior Inferior Superior Superior Superior
- --------------------------------------------------------------------------------------------------------------------
Monthly Rent 1Br/1Ba - 1A10 $ 552 $ 559 $ 610 $ 509 $ 515 $ 630 $ 630
Unit Area (SF) 802 802 720 753 720 722 722
Monthly Rent Per Sq. Ft. $0.69 $ 0.70 $0.85 $ 0.68 $ 0.72 $0.87 $ 0.87
Monthly Rent 1Br/1Ba - 1B10 $ 568 $ 569 $ 695 $ 519 $ 555 $ 675 $ 710
Unit Area (SF) 842 842 950 753 815 853 917
Monthly Rent Per Sq. Ft. $0.67 $ 0.68 $0.73 $ 0.69 $ 0.68 $0.79 $ 0.77
Monthly Rent 2Br/1Ba - 2A15 $ 660 $ 699 $ 629 $ 615 $ 635 $ 675
Unit Area (SF) 1,032 1,032 938 922 917 853
Monthly Rent Per Sq. Ft. $0.64 $ 0.68 $ 0.67 $ 0.67 $0.69 $ 0.79
Monthly Rent 2Br/1Ba - 2B15 $ 695 $ 719 $ 625 $ 683
Unit Area (SF) 1,072 1,072 922 945
Monthly Rent Per Sq. Ft. $0.65 $ 0.67 $ 0.68 $0.72
Monthly Rent 2Br/1Ba - 2C15 $ 676 $ 749 $ 729 $ 865
Unit Area (SF) 1,120 1,120 1,115 1,157
Monthly Rent Per Sq. Ft. $0.60 $ 0.67 $ 0.65 $ 0.75
DESCRIPTION MIN MAX MEDIAN AVERAGE
- ---------------------------------------------------------
Monthly Rent $ 509 $ 630 $ 610 $ 579
Unit Area (SF) 720 753 722 727
Monthly Rent Per Sq. Ft. $ 0.68 $ 0.87 $ 0.85 $ 0.80
Monthly Rent $ 519 $ 710 $ 675 $ 631
Unit Area (SF) 753 950 853 858
Monthly Rent Per Sq. Ft. $ 0.68 $ 0.79 $ 0.73 $ 0.73
Monthly Rent $ 615 $ 675 $ 632 $ 639
Unit Area (SF) 853 938 920 908
Monthly Rent Per Sq. Ft. $ 0.67 $ 0.79 $ 0.68 $ 0.71
Monthly Rent $ 625 $ 683 $ 654 $ 654
Unit Area (SF) 922 945 934 934
Monthly Rent Per Sq. Ft. $ 0.68 $ 0.72 $ 0.70 $ 0.70
Monthly Rent $ 729 $ 865 $ 797 $ 797
Unit Area (SF) 1,115 1,157 1,136 1,136
Monthly Rent Per Sq. Ft. $ 0.65 $ 0.75 $ 0.70 $ 0.70
CONCLUDED MARKET RENTAL RATES AND TERMS
Based on this analysis above, the subject's concluded market rental rates and
gross rental income is calculated as follows:
GROSS RENTAL INCOME PROJECTION
Market Rent
Unit Area ----------------- Monthly Annual
Unit Type Number of Units (Sq. Ft.) Per Unit Per SF Income Income
- ----------------------------------------------------------------------------------------------
1Br/1Ba - 1A10 40 802 $560 $0.70 $22,400 $ 268,800
1Br/1Ba - 1B10 40 842 $570 $0.68 $22,800 $ 273,600
2Br/1Ba - 2A15 39 1,032 $660 $0.64 $25,740 $ 308,880
2Br/1Ba - 2B15 35 1,072 $700 $0.65 $24,500 $ 294,000
2Br/1Ba - 2C15 4 1,120 $720 $0.64 $ 2,880 $ 34,560
-------------------------------
Total $98,320 $1,179,840
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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 $1,124,733 $ 7,119 $1,162,124 $ 7,355 $1,177,168 $ 7,450
Vacancy $ 22,710 $ 144 $ 46,625 $ 295 $ 46,200 $ 292
Credit Loss/Concessions $ 5,134 $ 32 $ 7,242 $ 46 $ 18,388 $ 116
----------------------------------------------------------------------
Subtotal $ 27,844 $ 176 $ 53,867 $ 341 $ 64,588 $ 409
Laundry Income $ 14,589 $ 92 $ 11,567 $ 73 $ 10,609 $ 67
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 40,574 $ 257 $ 72,719 $ 460 $ 83,718 $ 530
----------------------------------------------------------------------
Subtotal Other Income $ 55,163 $ 349 $ 84,286 $ 533 $ 94,327 $ 597
----------------------------------------------------------------------
Effective Gross Income $1,152,052 $ 7,291 $1,192,543 $ 7,548 $1,206,907 $ 7,639
Operating Expenses
Taxes $ 68,046 $ 431 $ 67,979 $ 430 $ 77,864 $ 493
Insurance $ 39,446 $ 250 $ 65,637 $ 415 $ 24,709 $ 156
Utilities $ 55,685 $ 352 $ 59,697 $ 378 $ 58,007 $ 367
Repair & Maintenance $ 32,444 $ 205 $ 16,825 $ 106 $ 18,100 $ 115
Cleaning $ 5,333 $ 34 $ 5,000 $ 32 $ 5,459 $ 35
Landscaping $ 19,870 $ 126 $ 19,860 $ 126 $ 19,860 $ 126
Security $ 1,200 $ 8 $ 2,400 $ 15 $ 1,600 $ 10
Marketing & Leasing $ 32,201 $ 204 $ 32,645 $ 207 $ 35,461 $ 224
General Administrative $ 180,330 $ 1,141 $ 184,278 $ 1,166 $ 150,346 $ 952
Management $ 58,304 $ 369 $ 61,542 $ 390 $ 58,884 $ 373
Miscellaneous $ 17,386 $ 110 $ 25,362 $ 161 $ 27,892 $ 177
----------------------------------------------------------------------
Total Operating Expenses $ 510,245 $ 3,229 $ 541,225 $ 3,425 $ 478,182 $ 3,026
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------------------
Net Income $ 641,807 $ 4,062 $ 651,318 $ 4,122 $ 728,725 $ 4,612
----------------------------------------------------------------------
FISCAL YEAR 2003 ANNUALIZED 2003
----------------------------------------------
MANAGEMENT BUDGET PROJECTION AAA PROJECTION
---------------------------------------------- --------------------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT %
- -----------------------------------------------------------------------------------------------------------
Revenues
Rental Income $1,186,704 $ 7,511 $1,186,852 $ 7,512 $1,179,840 $ 7,467 100.0%
Vacancy $ 40,980 $ 259 $ 38,504 $ 244 $ 47,194 $ 299 4.0%
Credit Loss/Concessions $ 10,000 $ 63 $ 51,244 $ 324 $ 35,395 $ 224 3.0%
-------------------------------------------------------------------------------
Subtotal $ 50,980 $ 323 $ 89,748 $ 568 $ 82,589 $ 523 7.0%
Laundry Income $ 34,700 $ 220 $ 27,564 $ 174 $ 19,750 $ 125 1.7%
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 63,600 $ 403 $ 113,848 $ 721 $ 86,900 $ 550 7.4%
-------------------------------------------------------------------------------
Subtotal Other Income $ 98,300 $ 622 $ 141,412 $ 895 $ 106,650 $ 675 9.0%
-------------------------------------------------------------------------------
Effective Gross Income $1,234,024 $ 7,810 $1,238,516 $ 7,839 $1,203,901 $ 7,620 100.0%
Operating Expenses
Taxes $ 66,136 $ 419 $ 73,132 $ 463 $ 74,260 $ 470 6.2%
Insurance $ 25,456 $ 161 $ 49,816 $ 315 $ 27,650 $ 175 2.3%
Utilities $ 51,300 $ 325 $ 65,824 $ 417 $ 59,250 $ 375 4.9%
Repair & Maintenance $ 55,008 $ 348 $ 26,928 $ 170 $ 20,540 $ 130 1.7%
Cleaning $ 0 $ 0 $ 5,280 $ 33 $ 5,530 $ 35 0.5%
Landscaping $ 0 $ 0 $ 19,860 $ 126 $ 20,540 $ 130 1.7%
Security $ 0 $ 0 $ 0 $ 0 $ 1,580 $ 10 0.1%
Marketing & Leasing $ 46,700 $ 296 $ 49,156 $ 311 $ 39,500 $ 250 3.3%
General Administrative $ 175,944 $ 1,114 $ 183,436 $ 1,161 $ 173,800 $ 1,100 14.4%
Management $ 60,620 $ 384 $ 63,384 $ 401 $ 60,195 $ 381 5.0%
Miscellaneous $ 24,620 $ 156 $ 22,652 $ 143 $ 23,700 $ 150 2.0%
-------------------------------------------------------------------------------
Total Operating Expenses $ 505,784 $ 3,201 $ 559,468 $ 3,541 $ 506,545 $ 3,206 42.1%
Reserves $ 0 $ 0 $ 0 $ 0 $ 39,500 $ 250 7.8%
-------------------------------------------------------------------------------
Net Income $ 728,240 $ 4,609 $ 679,048 $ 4,298 $ 657,856 $ 4,164 54.6%
-------------------------------------------------------------------------------
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 7% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
SUMMARY OF OVERALL
CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
- ----------------------------------------------------
I-1 Nov-02 80% $31,092 11.10%
I-2 Dec-01 98% $33,860 10.81%
I-3 Jul-01 94% $28,351 10.44%
I-4 Aug-01 94% $21,053 11.84%
I-5 Jan-01 93% $53,438 9.89%
High 11.84%
Low 9.89%
Average 10.82%
Based on this information, we have concluded the subject's overall
capitalization rate should be 11.00%. 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 12.00%. Finally, the subject's discount rate
or yield rate is estimated based on the previous investor survey and an
examination of returns available on alternative investments in the market. Based
on this analysis, the subject's discount rate is estimated to be 13.00%.
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 13.00% indicates a value of $6,200,000. In this instance, the reversion
figure contributes
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
approximately 34% 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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
DISCOUNTED CASH FLOW ANALYSIS
CEDAR BROOKE APARTMENTS
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009
FISCAL YEAR 1 2 3 4 5 6
- ------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $1,179,840 $1,203,437 $1,239,540 $1,276,726 $1,315,028 $1,354,479
Vacancy $ 47,194 $ 48,137 $ 49,582 $ 51,069 $ 52,601 $ 54,179
Credit Loss $ 35,395 $ 36,103 $ 37,186 $ 38,302 $ 39,451 $ 40,634
Concessions $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
---------------------------------------------------------------------------
Subtotal $ 82,589 $ 84,241 $ 86,768 $ 89,371 $ 92,052 $ 94,814
Laundry Income $ 19,750 $ 20,145 $ 20,749 $ 21,372 $ 22,013 $ 22,673
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 86,900 $ 88,638 $ 91,297 $ 94,036 $ 96,857 $ 99,763
---------------------------------------------------------------------------
Subtotal Other Income $ 106,650 $ 108,783 $ 112,046 $ 115,408 $ 118,870 $ 122,436
---------------------------------------------------------------------------
EFFECTIVE GROSS INCOME $1,203,901 $1,227,979 $1,264,819 $1,302,763 $1,341,846 $1,382,101
OPERATING EXPENSES:
Taxes $ 74,260 $ 76,488 $ 78,782 $ 81,146 $ 83,580 $ 86,088
Insurance $ 27,650 $ 28,480 $ 29,334 $ 30,214 $ 31,120 $ 32,054
Utilities $ 59,250 $ 61,028 $ 62,858 $ 64,744 $ 66,686 $ 68,687
Repair & Maintenance $ 20,540 $ 21,156 $ 21,791 $ 22,445 $ 23,118 $ 23,811
Cleaning $ 5,530 $ 5,696 $ 5,867 $ 6,043 $ 6,224 $ 6,411
Landscaping $ 20,540 $ 21,156 $ 21,791 $ 22,445 $ 23,118 $ 23,811
Security $ 1,580 $ 1,627 $ 1,676 $ 1,727 $ 1,778 $ 1,832
Marketing & Leasing $ 39,500 $ 40,685 $ 41,906 $ 43,163 $ 44,458 $ 45,791
General Administrative $ 173,800 $ 179,014 $ 184,384 $ 189,916 $ 195,613 $ 201,482
Management $ 60,195 $ 61,399 $ 63,241 $ 65,138 $ 67,092 $ 69,105
Miscellaneous $ 23,700 $ 24,411 $ 25,143 $ 25,898 $ 26,675 $ 27,475
---------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $ 506,545 $ 521,139 $ 536,774 $ 552,877 $ 569,463 $ 586,547
Reserves $ 39,500 $ 40,685 $ 41,906 $ 43,163 $ 44,458 $ 45,791
---------------------------------------------------------------------------
NET OPERATING INCOME $ 657,856 $ 666,155 $ 686,139 $ 706,724 $ 727,925 $ 749,763
Operating Expense Ratio (% of EGI) 42.1% 42.4% 42.4% 42.4% 42.4% 42.4%
Operating Expense Per Unit $ 3,206 $ 3,298 $ 3,397 $ 3,499 $ 3,604 $ 3,712
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 7 8 9 10 11
- ----------------------------------------------------------------------------------------------------
REVENUE
Base Rent $1,395,113 $1,436,966 $1,480,075 $1,524,478 $1,570,212
Vacancy $ 55,805 $ 57,479 $ 59,203 $ 60,979 $ 62,808
Credit Loss $ 41,853 $ 43,109 $ 44,402 $ 45,734 $ 47,106
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------
Subtotal $ 97,658 $ 100,588 $ 103,605 $ 106,713 $ 109,915
Laundry Income $ 23,354 $ 24,054 $ 24,776 $ 25,519 $ 26,285
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 102,756 $ 105,838 $ 109,014 $ 112,284 $ 115,652
--------------------------------------------------------------
Subtotal Other Income $ 126,109 $ 129,893 $ 133,789 $ 137,803 $ 141,937
--------------------------------------------------------------
EFFECTIVE GROSS INCOME $1,423,564 $1,466,271 $1,510,260 $1,555,567 $1,602,234
OPERATING EXPENSES:
Taxes $ 88,670 $ 91,330 $ 94,070 $ 96,892 $ 99,799
Insurance $ 33,016 $ 34,006 $ 35,026 $ 36,077 $ 37,159
Utilities $ 70,748 $ 72,870 $ 75,056 $ 77,308 $ 79,627
Repair & Maintenance $ 24,526 $ 25,262 $ 26,019 $ 26,800 $ 27,604
Cleaning $ 6,603 $ 6,801 $ 7,005 $ 7,215 $ 7,432
Landscaping $ 24,526 $ 25,262 $ 26,019 $ 26,800 $ 27,604
Security $ 1,887 $ 1,943 $ 2,001 $ 2,062 $ 2,123
Marketing & Leasing $ 47,165 $ 48,580 $ 50,037 $ 51,539 $ 53,085
General Administrative $ 207,526 $ 213,752 $ 220,165 $ 226,770 $ 233,573
Management $ 71,178 $ 73,314 $ 75,513 $ 77,778 $ 80,112
Miscellaneous $ 28,299 $ 29,148 $ 30,022 $ 30,923 $ 31,851
--------------------------------------------------------------
TOTAL OPERATING EXPENSES $ 604,143 $ 622,268 $ 640,936 $ 660,164 $ 679,969
Reserves $ 47,165 $ 48,580 $ 50,037 $ 51,539 $ 53,085
--------------------------------------------------------------
NET OPERATING INCOME $ 772,256 $ 795,424 $ 819,286 $ 843,865 $ 869,181
Operating Expense Ratio (% of EGI) 42.4% 42.4% 42.4% 42.4% 42.4%
Operating Expense Per Unit $ 3,824 $ 3,938 $ 4,057 $ 4,178 $ 4,304
Estimated Stabilized
NOI $657,856 Sales Expense Rate 2.00%
Months to Stabilized 1 Discount Rate 13.00%
Stabilized Occupancy 96.0% Terminal Cap Rate 12.00%
Gross Residual Sale Price $7,243,174 Deferred Maintenance $ 0
Less: Sales Expense $ 144,863 Add: Excess Land $ 0
---------- ----------
Net Residual Sale Price $7,098,310 Other Adjustments $ 0
PV of Reversion $2,091,080 Value Indicated By "DCF" $6,234,516
Add: NPV of NOI $4,143,436 Rounded $6,200,000
----------
PV Total $6,234,516
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE
----------------------------------------------------------
TOTAL VALUE 12.50% 12.75% 13.00% 13.25% 13.50%
- -------------------------------------------------------------------------------------
11.50% $6,519,162 $6,421,275 $6,325,432 $6,231,584 $6,139,681
11.75% $6,470,631 $6,373,810 $6,279,007 $6,186,173 $6,095,260
TERMINAL CAP RATE 12.00% $6,424,123 $6,328,323 $6,234,516 $6,142,654 $6,052,691
12.25% $6,379,513 $6,284,692 $6,191,841 $6,100,912 $6,011,859
12.50% $6,336,687 $6,242,806 $6,150,873 $6,060,839 $5,972,660
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
INCOME LOSS DURING LEASE-UP
The subject is currently near or at a stabilized condition. Therefore, there is
no income loss during lease-up at the subject property.
CONCESSIONS
Concessions have historically not been utilized at the subject property or in
the subject's market. Therefore, no adjustment was included for concessions.
DIRECT CAPITALIZATION METHOD
After having projected the income and expenses for the property, the next step
in the valuation process is to capitalize the net income into an estimate of
value. The selected overall capitalization rate ("OAR") covers both return on
and return of capital. It is the overall rate of return an investor expects.
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 11.00% 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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
CEDAR BROOKE APARTMENTS
TOTAL PER Sq. Ft. PER UNIT % OF EGI
--------------------------------------------
Revenue
Base Rent $1,179,840 $ 7.97 $ 7,467
Less: Vacancy & Collection Loss 7.00% $ 82,589 $ 0.56 $ 523
Plus: Other Income
Laundry Income $ 19,750 $ 0.13 $ 125 1.64%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 86,900 $ 0.59 $ 550 7.22%
Subtotal Other Income $ 106,650 $ 0.72 $ 675 8.86%
EFFECTIVE GROSS INCOME $1,203,901 $ 8.13 $ 7,620
OPERATING EXPENSES:
Taxes $ 74,260 $ 0.50 $ 470 6.17%
Insurance $ 27,650 $ 0.19 $ 175 2.30%
Utilities $ 59,250 $ 0.40 $ 375 4.92%
Repair & Maintenance $ 20,540 $ 0.14 $ 130 1.71%
Cleaning $ 5,530 $ 0.04 $ 35 0.46%
Landscaping $ 20,540 $ 0.14 $ 130 1.71%
Security $ 1,580 $ 0.01 $ 10 0.13%
Marketing & Leasing $ 39,500 $ 0.27 $ 250 3.28%
General Administrative $ 173,800 $ 1.17 $ 1,100 14.44%
Management 5.00% $ 60,195 $ 0.41 $ 381 5.00%
Miscellaneous $ 23,700 $ 0.16 $ 150 1.97%
TOTAL OPERATING EXPENSES $ 506,545 $ 3.42 $ 3,206 42.08%
Reserves $ 39,500 $ 0.27 $ 250 3.28%
NET OPERATING INCOME $ 657,856 $ 4.44 $ 4,164 54.64%
"GOING IN" CAPITALIZATION RATE 11.00%
VALUE INDICATION $5,980,510 $40.41 $37,851
{OTHER VALUE ADJUSTMENTS}
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $5,980,510
ROUNDED $6,000,000 $40.54 $37,975
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- -----------------------------------------------------------
10.25% $6,418,109 $6,400,000 $ 40,506 $ 43.24
10.50% $6,265,297 $6,300,000 $ 39,873 $ 42.57
10.75% $6,119,592 $6,100,000 $ 38,608 $ 41.21
11.00% $5,980,510 $6,000,000 $ 37,975 $ 40.54
11.25% $5,847,610 $5,800,000 $ 36,709 $ 39.19
11.50% $5,720,488 $5,700,000 $ 36,076 $ 38.51
11.75% $5,598,776 $5,600,000 $ 35,443 $ 37.84
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $6,000,000.
CORRELATION AND CONCLUSION BY THE INCOME APPROACH
The two methods used to estimate the market value of the subject property by the
income approach resulted in the following indications of value:
Discounted Cash Flow Analysis $6,200,000
Direct Capitalization Method $6,000,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$6,100,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
RECONCILIATION AND CONCLUSION
This appraisal was made to express an opinion as of the Market Value of the fee
simple estate in the property.
AS IS MARKET VALUE OF THE FEE SIMPLE ESTATE
Cost Approach Not Utilized
Sales Comparison Approach $6,000,000
Income Approach $6,100,000
Reconciled Value $6,100,000
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 9, 2003 the market value of the fee simple estate in the property is:
$6,100,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
ENTRANCE TO SUBJECT EXTERIOR - TYPICAL VIEW OF BUILDINGS
[PICTURE] [PICTURE]
VIEW OF COURTYARD POOL
[PICTURE] [PICTURE]
VIEW OF LAUNDRY TYPICAL INTERIOR VIEW - CLUBHOUSE
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
INTERIOR VIEW - CLUBHOUSE INTERIOR VIEW - MODEL UNIT
[PICTURE] [PICTURE]
INTERIOR - MODEL UNIT INTERIOR -MODEL UNIT
[PICTURE] [PICTURE]
INTERIOR -MODEL UNIT INTERIOR - VACANT UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
STONEYBROOKE OF RAYTOWN GRANDBORO ARMS APARTMENTS BROADWAY VILLAGE APARTMENTS
9805 East 61st Street 13902 Grandboro Lane 209 NW 63rd Street
Raytown, MO Grandview, MO Gladstone, MO
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
CANDLELITE APARTMENTS THE PINES APARTMENTS
6522 East 125th Street 9530 Mission Road
Grandview, MO Overland Park, KS
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
- -----------------------------------------------------------------------------------------------------------------------------------
Property Name Cedar Brooke Apartments Williamsburg Square
Management Company AIMCO Laramar Properties
LOCATION:
Address 3100 Quail Creek Drive 4430 South Liberty Ave
City, State Independence, Missouri Independence, MO
County Jackson Jackson
Proximity to Subject 1.8 miles NW of subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 148,008 NA
Year Built 1972 1989
Effective Age 25 14
Building Structure Type Vinyl siding, flat roofs Wood siding, brick,composition shingle roofs
Parking Type (Gr., Cov., etc.) Open Open, carports
Number of Units 158 144
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba - 1A10 802 40 $552 1 1Br/1Ba 720 NA $610
2 1Br/1Ba - 1B10 842 40 $568 2 2Br/1Ba 950 NA $680
3 2Br/1Ba - 2A15 1,032 39 $660 2 2Br/1Ba 950 NA $710
4 2Br/1Ba - 2B15 1,072 35 $695
5 2Br/1Ba - 2C15 1,120 4 $676
Average Unit Size (SF) 937 NA
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: Average Average
APPEAL: Good Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace Other X Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash X Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall Sand Volley Ball Meeting Hall
Tennis Court Secured Parking Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
Gym Room X Gym Room
OCCUPANCY: 96% 96%
LEASING DATA:
Available Leasing Terms 6 to 12 Months 6 or 12 months
Concessions 1 mo free with 18 month lease None
Pet Deposit $200 $300
Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas
Water Trash Water Trash
Confirmation May 9, 2003; Susan Smith (Property Manager) May 28, 2003; (Leasing Agent)
Telephone Number (816)373-8500 (816)373-7254
NOTES:
COMPARISON TO SUBJECT: Slightly Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
- -----------------------------------------------------------------------------------------------------------------------------------
Property Name Quail Creek Cliffside Apartments
Management Company Tarantino NA
LOCATION:
Address 4610 Brentwood 17401 East US Highway 40
City, State Independence, MO Independence, MO
County Jackson Jackson
Proximity to Subject Just S of subject 2 miles E of subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) NA NA
Year Built 1981 1990
Effective Age 22 13
Building Structure Type Wood siding, brick veneer, pitched comp roofs Wood siding, brick veneer, pitched comp
roofs
Parking Type (Gr., Cov., etc.) Open, garages is townhome units Open
Number of Units 180 100
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1Br/1Ba 753 NA $509 1 1Br/1Ba 720 NA $515
2 1Br/1Ba 753 NA $519 2 1Br/1Ba 815 NA $555
3 2Br/1Ba 938 NA $629 3 2Br/1Ba 922 NA $615
5 2Br/1.5Ba TH 1,115 NA $729 4 2Br/1Ba 922 NA $625
Average Unit Size (SF) NA NA
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: Average Average
APPEAL: Average Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
Balcony W/D Connect. X Balcony W/D Connect.
Fireplace Other X Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash \X Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking Tennis Court Secured Parking
Racquet Ball Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
Gym Room Gym Room
OCCUPANCY: 99% 98%
LEASING DATA:
Available Leasing Terms 3, 6 or 12 months 12 months
Concessions None None
Pet Deposit $300 $300
Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas
Water Trash Water Trash
Confirmation May 27, 2003; (Leasing Agent) May 27, 2003; (Leasing Agent)
Telephone Number (816)373-7666 (816)373-8510
NOTES: Located opposite the subject
COMPARISON TO SUBJECT: Slightly Inferior Slightly Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 4 R - 5
- ------------------------------------------------------------------------------------------------------------------------------------
Property Name Coventry Park The Mansions
Management Company CRES Whitney
LOCATION:
Address 3926 Redwood 2905 Lee's Summit Road
City, State Independence, MO Independence, MO
County Jackson Jackson
Proximity to Subject 3 miles NE of subject 4 miles N of subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) NA NA
Year Built 1975 1990
Effective Age 28 13
Building Structure Type Stucco, flat and mansard roof Brick, siding, composition shingle roofs
Parking Type (Gr., Cov., etc.) Open, carports Open
Number of Units 155 550
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1Br/1Ba 722 NA $630 1 1Br/1Ba 722 NA $630
2 2Br/1Ba 853 NA $675 3 2Br/1Ba 853 NA $675
3 2Br/2Ba 917 NA $635 2 2Br/2Ba 917 NA $710
4 2Br/1Ba 945 NA $675 5 3Br/2Ba 1,157 NA $865
4 2Br/1.5Ba 945 NA $690
Average Unit Size (SF) NA
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: Good Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage X Vaulted Ceiling
X Balcony W/D Connect. X Balcony X W/D Connect.
Fireplace Other X Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash X Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall Sand Volley Ball X Meeting Hall
Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball X Laundry Room X Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
Gym Room X Gym Room
OCCUPANCY: 94% 89%
LEASING DATA:
Available Leasing Terms 6 to 12 Months 6 or 12 months
Concessions $99 move in $100 off 6-month lease; $200 off
12-month
Pet Deposit $300 $350
Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas
Water Trash Water Trash
Confirmation May 27, 2003; (Leasing Agent) May 27, 2003; (Leasing Agent)
Telephone Number (816)373-6239 (816)478-2100
NOTES:
COMPARISON TO SUBJECT: Superior Superior
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
WILLIAMSBURG SQUARE QUAIL CREEK CLIFFSIDE APARTMENTS
4430 South Liberty Ave 4610 Brentwood 17401 East US Highway 40
Independence, MO Independence, MO Independence, MO
[PICTURE] [PICTURE]
COMPARABLE R-4 COMPARABLE R-5
COVENTRY PARK THE MANSIONS
3926 Redwood 2905 Lee's Summit Road
Independence, MO Independence, MO
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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. Kim Cook provided
significant real property appraisal assistance in the preparation of
this report.
I am currently in compliance with the Appraisal Institute's continuing
education requirements.
-s- Frank Fehribach
--------------------------------
Frank Fehribach, MAI
Managing Principal, Real Estate Group
Missouri Temporary Practice Permit
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
FRANK A. FEHRIBACH, MAI
MANAGING PRINCIPAL, REAL ESTATE GROUP
POSITION Frank A. Fehribach is a Managing Principal for the Dallas Real
Estate Group of American Appraisal Associates, Inc. ("AAA").
EXPERIENCE
Valuation Mr. Fehribach has experience in valuations for resort hotels;
Class A office buildings; Class A multifamily complexes;
industrial buildings and distribution warehousing; multitract
mixed-use vacant land; regional malls; residential subdivision
development; and special-purpose properties such as athletic
clubs, golf courses, manufacturing facilities, nursing homes,
and medical buildings. Consulting assignments include
development and feasibility studies, economic model creation
and maintenance, and market studies.
Mr. Fehribach also has been involved in overseeing appraisal
and consulting assignments in Mexico and South America.
Business Mr. Fehribach joined AAA as an engagement director in 1998.
He was promoted to his current position in 1999. Prior to
that, he was a manager at Arthur Andersen LLP. Mr. Fehribach
has been in the business of real estate appraisal for over ten
years.
EDUCATION University of Texas - Arlington
Master of Science - Real Estate
University of Dallas
Master of Business Administration - Industrial Management
Bachelor of Arts - Economics
STATE State of Arizona
CERTIFICATIONS Certified General Real Estate Appraiser, #30828
State of Arkansas
State Certified General Appraiser, #CG1387N
State of Colorado
Certified General Appraiser, #CG40000445
State of Georgia
Certified General Real Property Appraiser, #218487
State of Michigan
Certified General Appraiser, #1201008081
State of Texas
Real Estate Salesman License, #407158 (Inactive)
State of Texas
State Certified General Real Estate Appraiser, #TX-1323954-G
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
PROFESSIONAL Appraisal Institute, MAI Designated Member
AFFILIATIONS Candidate Member of the CCIM Institute pursuing Certified
Commercial Investment Member (CCIM) designation
PUBLICATIONS "An Analysis of the Determinants of Industrial Property
Valuation," Co-authored with Dr. Ronald C. Rutherford and Dr.
Mark Eakin, The Journal of Real Estate Research, Vol. 8, No.
3, Summer 1993, p. 365.
AMERICAN APPRAISAL ASSOCIATES, INC.
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
CEDAR BROOKE APARTMENTS, INDEPENDENCE, MISSOURI
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.