FOXFIRE APARTMENTS
6664 PEACHTREE INDUSTRIAL BLVD.
DORAVILLE, GEORGIA
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]
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: FOXFIRE APARTMENTS
6664 PEACHTREE INDUSTRIAL BLVD.
DORAVILLE, DEKALB 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 266 units with a
total of 280,700 square feet of rentable area. The improvements were built in
1972. The improvements are situated on 24 acres. Overall, the improvements are
in average condition. As of the date of this appraisal, the subject property is
67% 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
FOXFIRE APARTMENTS, DORAVILLE, 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 9, 2003 is:
($10,300,000)
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:
Phillip McGinnis
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
FOXFIRE APARTMENTS, DORAVILLE, 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................................................. 38
ADDENDA
Exhibit A - Photographs of Subject Property
Exhibit B - Summary of Rent Comparables and Photograph of Comparables
Exhibit C - Assumptions and Limiting Conditions
Exhibit D - Certificate of Appraiser
Exhibit E - Qualifications
General Service Conditions
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 4
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: Foxfire Apartments
LOCATION: 6664 Peachtree Industrial Blvd.
Doraville, 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 9, 2003
DATE OF REPORT: July 17, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 24 acres, or 1,045,440 square feet
Assessor Parcel No.: 18-356-01-025
Floodplain: Community Panel No. 1300650016H (May 7, 2001)
Flood Zone X, an area outside the floodplain.
Zoning: RM-100 (Multifamily Residential)
BUILDING:
No. of Units: 266 Units
Total NRA: 280,700 Square Feet
Average Unit Size: 1,055 Square Feet
Apartment Density: 11.1 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 900 $630 $0.70 $ 90,720 $1,088,640
2BR/2BA-2A20 1,150 $750 $0.65 $ 37,500 $ 450,000
3BR/2BA-3A20 1,300 $900 $0.69 $ 64,800 $ 777,600
Total $193,020 $2,316,240
OCCUPANCY: 67%
ECONOMIC LIFE: 45 Years
EFFECTIVE AGE: 25 Years
REMAINING ECONOMIC LIFE: 20 Years
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
SUBJECT PHOTOGRAPHS
[VIEW OF ENTRANCE SIGNAGE PICTURE] [VIEW OF LEASING OFFICE PICTURE]
AREA MAP
[MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
FOXFIRE APARTMENTS, DORAVILLE, 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
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
PART TWO - ECONOMIC INDICATORS
INCOME CAPITALIZATION APPROACH
Amount $/Unit
------ ------
DIRECT CAPITALIZATION
Potential Rental Income $2,316,240 $8,708
Effective Gross Income $2,198,116 $8,264
Operating Expenses $1,001,006 $3,763 45.5% of EGI
Net Operating Income: $1,130,611 $4,250
Capitalization Rate 10.50%
DIRECT CAPITALIZATION VALUE $10,400,000 * $39,098 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 18%
Stabilized Vacancy & Collection Loss: 14%
Lease-up / Stabilization Period 12 months
Terminal Capitalization Rate 11.50%
Discount Rate 12.00%
Selling Costs 3.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $10,400,000 * $39,098 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $10,400,000 $39,098 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $35,473 to $49,847
Range of Sales $/Unit (Adjusted) $34,937 to $41,158
VALUE INDICATION - PRICE PER UNIT $10,200,000 * $38,346 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 4.23 to 6.38
Selected EGIM for Subject 4.75
Subject's Projected EGI $2,198,116
EGIM ANALYSIS CONCLUSION $10,100,000 * $37,970 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $10,200,000 * $38,346 / UNIT
RECONCILED SALES COMPARISON VALUE $10,200,000 $38,346 / 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
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $10,200,000
NOI Per Unit $10,200,000
EGIM Multiplier $10,100,000
INDICATED VALUE BY SALES COMPARISON $10,200,000 $38,346 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $10,400,000
Discounted Cash Flow Method: $10,400,000
INDICATED VALUE BY THE INCOME APPROACH $10,400,000 $39,098 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $10,300,000 $38,722 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 6664 Peachtree Industrial Blvd., Doraville,
DeKalb County, Georgia. Doraville identifies it as 18-356-01-025.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by Phillip McGinnis
on May 9, 2003. Michael Bates, MAI has not made a personal inspection of the
subject property. Phillip McGinnis performed the research, valuation analysis
and wrote the report. Michael Bates, MAI reviewed the report and concurs with
the value. Michael Bates, MAI and Phillip McGinnis 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 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
FOXFIRE APARTMENTS, DORAVILLE, 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 Shelter Properties V,
LP. 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
FOXFIRE APARTMENTS, DORAVILLE, 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 the city of Doraville, Georgia. Overall, the neighborhood
is characterized as a suburban setting with the predominant land use being
multi-family residential. The subject's neighborhood is generally defined by the
following boundaries.
NEIGHBORHOOD BOUNDARIES
East - Winters Chapel Road
West - Peeler Road
South - I-285
North - Jimmy Carter Blvd.
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 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
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
NEIGHBORHOOD DEMOGRAPHICS
AREA
-------------------------------------------
CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA
- -------------------------------------------------------------------------------------------
POPULATION TRENDS
Current Population 9,043 79,336 183,538 4,326,075
5-Year Population 10,284 85,147 196,525 4,877,672
% Change CY-5Y 13.7% 7.3% 7.1% 12.8%
Annual Change CY-5Y 2.7% 1.5% 1.4% 2.6%
HOUSEHOLDS
Current Households 4,995 37,664 79,503 1,580,438
5-Year Projected Households 5,658 40,011 84,746 1,773,314
% Change CY - 5Y 13.3% 6.2% 6.6% 12.2%
Annual Change CY-5Y 2.7% 1.2% 1.3% 2.4%
INCOME TRENDS
Median Household Income $ 53,019 $ 55,021 $ 59,653 $ 61,400
Per Capita Income $ 32,579 $ 34,473 $ 37,883 $ 25,922
Average Household Income $ 63,672 $ 73,622 $ 87,077 $ 70,955
Source: Demographics Now
The subject neighborhood's population is expected to show increases above 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 70.36% 57.37% 47.33% 30.54%
5-Year Projected % Renting 70.84% 56.67% 47.34% 29.71%
% of Households Owning 14.23% 28.39% 40.99% 61.85%
5-Year Projected % Owning 14.74% 29.35% 41.40% 63.29%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Apartments
South - Residential
East - Office
West - Apartments
CONCLUSIONS
The subject is well located within the city of Doraville. 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
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
MARKET ANALYSIS
The subject property is located in the city of Doraville in DeKalb County. The
overall pace of development in the subject's market is more or less stable.
There are currently no apartment complexes under construction in the submarket.
The following table illustrates historical vacancy rates for the subject's
market.
HISTORICAL VACANCY RATE
Period Region Submarket
- --------------------------------------------------------------------------
1Q03 11.3% 9.9%
4Q02 10.5% 9.2%
1 Year 9.4% 8.6%
3 Years 7.5% 7.2%
5 Years 7.3% 6.9%
5 Year Forecast 11.7% 10.4%
Source: Reis, Atlanta, Apartment: Sandy Springs/Dunwoody - 1st Quarter 2003
Occupancy trends in the subject's market are decreasing. Historically speaking,
the subject's submarket has outperformed the overall market. Occupancy Rates
have been decreasing over the past 5 years and are anticipated to continue to
decline. Current economic conditions have made home ownership easier therefore
many apartment residents are leaving to buy single-family residences.
Market rents in the subject's market have been following a decreasing trend. The
following table illustrates historical rental rates for the subject's market.
HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change
- ----------------------------------------------------------------------------------
1998 N/A - $866 -
1999 N/A N/A $894 3.2%
2000 N/A N/A $930 4.0%
2001 N/A N/A $894 -3.9%
2002 N/A N/A $851 -4.8%
2003 Forecast N/A N/A $831 -2.4%
2004 Forecast N/A N/A $838 0.8%
2005 Forecast N/A N/A $855 2.0%
2006 Forecast N/A N/A $876 2.5%
2007 Forecast N/A N/A $902 3.0%
The following table illustrates a summary of the subject's competitive set.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
- -------------------------------------------------------------------------------------------
R-1 The Landings 490 90% 1980 Less than .5 mile.
R-2 Kendal Creek 308 85% 1973 Less than .5 mile.
R-3 North Chase 519 90% 1970 Less than .5 miles.
R-4 Peachtree Place North 309 85% 1970 Less than .5 miles.
Subject Foxfire Apartments 266 67% 1972
Since 2000, average rents have declined at nearly 4% per year. The market rate
is forecast to begin a slow climb, however over the next five years is not
expected to reach the high established in 2000.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 24 acres, or 1,045,440 square feet
Shape Generally rectangular
Topography Rolling
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 1300650016H, dated May 7, 2001
Flood Zone Zone X
Zoning RM-100, 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
- --------------------------------------------------------------------------------------------------------------
18-356-01-025 $6,408,300 $4,168,800 $10,577,100 $0.04 $159,968
IMPROVEMENT ANALYSIS
Year Built 1972
Number of Units 266
Net Rentable Area 280,700 Square Feet
Construction:
Foundation Reinforced concrete slab
Frame Heavy or light wood
Exterior Walls Stucco wall
Roof Composition shingle over a wood truss
structure
Project Amenities Amenities at the subject include a swimming
pool, tennis court, gym room, car wash,
barbeque equipment, meeting hall, business
office, and parking area.
Unit Amenities Individual unit amenities include a balcony,
cable TV connection, and washer dryer
connection. Appliances available in each unit
include a refrigerator, stove, dishwasher,
water heater, garbage disposal, washer/dryer
and oven. Washer & Dryers are included in
1Br/1Ba units
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
only. All other units have connections for washers & dryers.
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
- ---------------------------------------------------------
1BR/1BA-1A10 144 900
2BR/2BA-2A20 50 1,150
3BR/2BA-3A20 72 1,300
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 266-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
FOXFIRE APARTMENTS, DORAVILLE, 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
FOXFIRE APARTMENTS, DORAVILLE, 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
FOXFIRE APARTMENTS, DORAVILLE, 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
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- -----------------------------------------------------------------------------------------------------------------------------------
Property Name Foxfire Apartments Concord Crossing Meadowrun Apartments
LOCATION:
Address 6664 Peachtree Industrial Blvd. 2935 Old Concord Rd, SE 3800 Brockett Trail
City, State Doraville, Georgia Smyrna, GA Clarkston, Georgia
County DeKalb Cobb DeKalb
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 280,700 207,460 328,050
Year Built 1972 1975 1973
Number of Units 266 190 276
Unit Mix: Type Total Type Total Type Total
1BR/1BA-1A10 144 1BR/1BA 30 1BR/1BA 42
2BR/2BA-2A20 50 2BR/2BA 127 2BR/2BA 138
3BR/2BA-3A20 72 3BR/2BA 33 3BR/2BA 96
Average Unit Size (SF) 1,055 1,092 1,189
Land Area (Acre) 24.0000 15.7800 19.1500
Density (Units/Acre) 11.1 12.0 14.4
Parking Ratio (Spaces/Unit) 2.07 N/A 2.78
Parking Type (Gr., Cov., etc.) Garage, Open Covered Open Open
CONDITION: 0 Good Good
APPEAL: 0 Fair Good
AMENITIES:
Pool/Spa Yes/No Yes/Yes Yes/Yes
Gym Room Yes Yes No
Laundry Room No No Yes
Secured Parking No No No
Sport Courts Yes Yes Yes
Fireplace No No No
Balcony Yes No Yes
OCCUPANCY: 67% 91% 90%
TRANSACTION DATA:
Sale Date July, 2002 August, 2000
Sale Price ($) $9,200,000 $10,150,000
Grantor Garden Woodsong Thurman Dallas 1976
Grantee Woodsong Apartments Graoch Associates #69
Sale Documentation 13561/2533 11552/0794
Verification Public Records Public Records
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $1,601,328 $8,428 $7.72 N/A
Vacancy/Credit Loss $ 160,133 $ 843 $0.77 N/A
Effective Gross Income $1,441,195 $7,585 $6.95 $2,329,560 $8,440 $7.10
Operating Expenses $ 627,000 $3,300 $3.02 $ 966,000 $3,500 $2.94
Net Operating Income $ 814,195 $4,285 $3.92 $1,363,560 $4,940 $4.16
NOTES:
PRICE PER UNIT $48,421 $36,775
PRICE PER SQUARE FOOT $ 44.35 $ 30.94
EXPENSE RATIO 43.5% 41.5%
EGIM 6.38 4.36
OVERALL CAP RATE 8.85% 13.43%
Cap Rate based on Pro Forma or Actual Income? PRO FORMA PRO FORMA
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- ------------------------------------------------------------------------------------------------------------------------------
Property Name Highland Heights Apartments Lincoln Parc Apartments Kenridge Apartments
LOCATION:
Address 3028 Chamblee Tucker Road 2100 Winters Park Drive 3893 Kensington Road
City, State Chamblee, Georgia Atlanta, Georgia Decatur, Georgia
County DeKalb DeKalb DeKalb
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 220,665 407,670 319,150
Year Built 1970 1986 1988
Number of Units 181 444 326
Unit Mix: Type Total Type Total Type Total
1BR/1BA 20 1BR/1BA 216 1BR/1BA 40
2BR/2BA 161 2BR/2BA 228 2BR/1BA 80
2BR/2BA 206
Average Unit Size (SF) 1,219 918 979
Land Area (Acre) 11.5000 27.7400 24.8500
Density (Units/Acre) 15.7 16.0 13.1
Parking Ratio (Spaces/Unit) 2.54 2.20 2.44
Parking Type (Gr., Cov., etc.) Open Open Open
CONDITION: Good Good Good
APPEAL: Good Good Good
AMENITIES:
Pool/Spa Yes/Yes Yes/Yes
Gym Room Yes Yes
Laundry Room Yes Yes
Secured Parking no Yes
Sport Courts Yes Yes
Fireplace No No
Balcony No No
OCCUPANCY: 90% 90% 90%
TRANSACTION DATA:
Sale Date December, 2000 November, 2000 May, 2001
Sale Price ($) $8,568,000 $15,750,000 $16,250,000
Grantor Chapelwood Apartments, LP Park Associates, Ltd. Kenridge, Ltd.
Grantee Miles - Barrington, LLC I.S. Lincoln Parc LP F.P.C./Kenridge Apartments,
LP
Sale Documentation 11728/0592 11693/0188 12094/0615
Verification Public Records Public Records Public Records
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income N/A N/A N/A
Vacancy/Credit Loss N/A N/A N/A
Effective Gross Income $1,751,016 $9,674 $7.94 $3,721,608 $8,382 $9.13 $2,629,560 $8,066 $8.24
Operating Expenses $ 579,200 $3,200 $2.62 $1,332,000 $3,000 $3.27 $ 910,568 $2,793 $2.85
Net Operating Income $1,171,816 $6,474 $5.31 $2,389,608 $5,382 $5.86 $1,718,992 $5,273 $5.39
NOTES:
PRICE PER UNIT $47,337 $35,473 $49,847
PRICE PER SQUARE FOOT $ 38.83 $38.63 $ 50.92
EXPENSE RATIO 33.1% 35.8% 34.6%
EGIM 4.89 4.23 6.18
OVERALL CAP RATE 13.68% 15.17% 10.58%
Cap Rate based on Pro Forma or Actual
Income? PRO FORMA PRO FORMA PRO FORMA
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
IMPROVED SALES MAP
[MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $35,473 to $49,847 per
unit. Adjustments have been made to the sales to reflect differences in
location, age/condition and quality/appeal. Generally speaking, larger
properties typically have a lower price per unit when compared to smaller
properties, all else being equal. Similarly, those projects with a higher
average unit size will generally have a higher price per unit. After appropriate
adjustments are made, the improved sales demonstrate an adjusted range for the
subject from $34,937 to $41,158 per unit with a mean or average adjusted price
of $38,336 per unit. The median adjusted price is $39,877 per unit. Based on the
following analysis, we have concluded to a value of $40,000 per unit, which
results in an "as is" value of $10,200,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- --------------------------------------------------------------------------------------------------------------------
Property Name Foxfire Apartments Concord Crossing Meadowrun Apartments
Address 6664 Peachtree 2935 Old Concord Rd, SE 3800 Brockett Trail
Industrial Blvd.
City Doraville, Georgia Smyrna, GA Clarkston, Georgia
Sale Date July, 2002 August, 2000
Sale Price ($) $9,200,000 $10,150,000
Net Rentable Area (SF) 280,700 207,460 328,050
Number of Units 266 190 276
Price Per Unit $48,421 $36,775
Year Built 1972 1975 1973
Land Area (Acre) 24.0000 15.7800 19.1500
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 07-2002 0% 08-2000 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $48,421 $36,775
Location Superior -10% Comparable 0%
Number of Units 266 190 0% 276 0%
Quality / Appeal Good Comparable 0% Comparable 0%
Age / Condition 1972 1975 / Good 0% 1973 / Good 0%
Occupancy at Sale 67% 91% 0% 90% 0%
Amenities Good Superior -5% Superior -5%
Average Unit Size (SF) 1,055 1,092 0% 1,189 0%
PHYSICAL ADJUSTMENT -15% -5%
FINAL ADJUSTED VALUE ($/UNIT) $41,158 $34,937
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- ----------------------------------------------------------------------------------------------------------------------------------
Property Name Highland Heights Lincoln Parc Apartments Kenridge Apartments
Apartments
Address 3028 Chamblee Tucker Road 2100 Winters Park 3893 Kensington Drive Road
City Chamblee, Georgia Atlanta, Georgia Decatur, Georgia
Sale Date December, 2000 November, 2000 May, 2001
Sale Price ($) $8,568,000 $15,750,000 $16,250,000
Net Rentable Area (SF) 220,665 407,670 319,150
Number of Units 181 444 326
Price Per Unit $47,337 $35,473 $49,847
Year Built 1970 1986 1988
Land Area (Acre) 11.5000 27.7400 24.8500
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 12-2000 0% 11-2000 0% 05-2001 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $47,337 $35,473 $49,847
Location Superior -5% Comparable 0% Superior -5%
Number of Units 181 0% 444 0% 326 0%
Quality / Appeal Comparable 0% Comparable 0% Superior -5%
Age / Condition 1970 / Good -5% 1986 / Good 0% 1988 / Good 0%
Occupancy at Sale 90% 0% 90% 0% 90% 0%
Amenities Superior -5% Comparable 0% Superior -10%
Average Unit Size (SF) 1,219 0% 918 0% 979 0%
PHYSICAL ADJUSTMENT -15% 0% -20%
FINAL ADJUSTED VALUE ($/UNIT) $40,236 $35,473 $39,877
SUMMARY
VALUE RANGE (PER UNIT) $34,937 TO $41,158
MEAN (PER UNIT) $38,336
MEDIAN (PER UNIT) $39,877
VALUE CONCLUSION (PER UNIT) $40,000
VALUE OF IMPROVEMENT & MAIN SITE $10,640,000
LESS: LEASE-UP COST -$ 239,000
PV OF CONCESSIONS -$ 152,000
VALUE INDICATED BY SALES COMPARISON APPROACH $10,249,000
ROUNDED $10,200,000
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
FOXFIRE APARTMENTS, DORAVILLE, 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-1 190 $ 9,200,000 8.85% $ 814,195 $1,130,611 0.992 $48,028
$ 48,421 $ 4,285 $ 4,250
I-2 276 $10,150,000 13.43% $1,363,560 $1,130,611 0.860 $31,639
$ 36,775 $ 4,940 $ 4,250
I-3 181 $ 8,568,000 13.68% $1,171,816 $1,130,611 0.657 $31,078
$ 47,337 $ 6,474 $ 4,250
I-4 444 $15,750,000 15.17% $2,389,608 $1,130,611 0.790 $28,015
$ 35,473 $ 5,382 $ 4,250
I-5 326 $16,250,000 10.58% $1,718,992 $1,130,611 0.806 $40,180
$ 49,847 $ 5,273 $ 4,250
PRICE/UNIT
Low High Average Median
$28,015 $48,028 $35,788 $31,639
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
Estimated Price Per Unit $ 40,000
Number of Units 266
Value $10,640,000
Less: Lease-Up Cost -$ 239,000
PV of Concessions -$ 152,000
-----------
Value Based on NOI Analysis $10,249,000
Rounded $10,200,000
The adjusted sales indicate a range of value between $28,015 and $48,028 per
unit, with an average of $35,788 per unit. Based on the subject's competitive
position within the improved sales, a value of $40,000 per unit is estimated.
This indicates an "as is" market value of $10,200,000 (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
FOXFIRE APARTMENTS, DORAVILLE, 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-1 190 $ 9,200,000 $ 1,441,195 $ 627,000 43.51% 6.38
$ 48,421
I-2 276 $10,150,000 $ 2,329,560 $ 966,000 41.47% 4.36
$ 36,775
I-3 181 $ 8,568,000 $ 1,751,016 $ 579,200 33.08% 4.89
45.54%
$ 47,337
I-4 444 $15,750,000 $ 3,721,608 $1,332,000 35.79% 4.23
$ 35,473
I-5 326 $16,250,000 $ 2,629,560 $ 910,568 34.63% 6.18
$ 49,847
EGIM
Low High Average Median
- --- ---- ------- ------
4.23 6.38 5.21 4.89
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
Estimate EGIM 4.75
Subject EGI $ 2,198,116
Value $10,441,053
Less: Lease-Up Cost -$ 239,000
PV of Concessions -$ 152,000
------------
Value Based on EGIM Analysis $10,050,053
Rounded $10,100,000
Value Per Unit $ 37,970
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 45.54% before reserves. The comparable sales
indicate a range of expense ratios from 33.08% to 43.51%, while their EGIMs
range from 4.23 to 6.38. Overall, we conclude to an EGIM of 4.75, which results
in an "as is" value estimate in the EGIM Analysis of $10,100,000.
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 $10,200,000.
Price Per Unit $10,200,000
NOI Per Unit $10,200,000
EGIM Analysis $10,100,000
Sales Comparison Conclusion $10,200,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
FOXFIRE APARTMENTS, DORAVILLE, 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
FOXFIRE APARTMENTS, DORAVILLE, 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-1A10 900 $602 $0.67 62.5%
2BR/2BA-2A20 1150 $697 $0.61 74.0%
3BR/2BA-3A20 1300 $837 $0.64 69.4%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
RENT ANALYSIS
COMPARABLE RENTS
-------------------------------------------
R-1 R-2 R-3 R-4
-------------------------------------------
The Kendal Peachtree
Landings Creek North Chase Place North
-------------------------------------------
COMPARISON TO SUBJECT
SUBJECT SUBJECT -------------------------------------------
SUBJECT UNIT ACTUAL ASKING Slightly
DESCRIPTION TYPE RENT RENT Similar Similar Similar Superior
- ------------------------------------------------------------------------------------------------------
Monthly Rent 1BR/1BA-1A10 $ 602 $ 691 $ 635 $ 655 $ 625 $ 600
Unit Area (SF) 900 900 880 710 700 800
Monthly Rent Per Sq. Ft. $ 0.67 $ 0.77 $ 0.72 $ 0.92 $ 0.89 $ 0.75
Monthly Rent 2BR/2BA-2A20 $ 697 $ 801 $ 818 $ 790 $ 625 $ 755
Unit Area (SF) 1,150 1,150 1,215 880 775 1,152
Monthly Rent Per Sq. Ft. $ 0.61 $ 0.70 $ 0.67 $ 0.90 $ 0.81 $ 0.66
Monthly Rent 3BR/2BA-3A20 $ 837 $ 911 $ 958 $ 978 $ 690 $ 850
Unit Area (SF) 1,300 1,300 1,410 1,337 1,338 1,352
Monthly Rent Per Sq. Ft. $ 0.64 $ 0.70 $ 0.68 $ 0.73 $ 0.52 $ 0.63
DESCRIPTION MIN MAX MEDIAN AVERAGE
- ---------------------------------------------------------------
Monthly Rent $ 600 $ 655 $ 630 $ 629
Unit Area (SF) 700 880 755 773
Monthly Rent Per Sq. Ft. $ 0.72 $ 0.92 $ 0.82 $ 0.82
Monthly Rent $ 625 $ 818 $ 773 $ 747
Unit Area (SF) 775 1,215 1,016 1,006
Monthly Rent Per Sq. Ft. $ 0.66 $ 0.90 $ 0.74 $ 0.76
Monthly Rent $ 690 $ 978 $ 904 $ 869
Unit Area (SF) 1,337 1,410 1,345 1,359
Monthly Rent Per Sq. Ft. $ 0.52 $ 0.73 $ 0.65 $ 0.64
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 144 900 $630 $0.70 $ 90,720 $1,088,640
2BR/2BA-2A20 50 1,150 $750 $0.65 $ 37,500 $ 450,000
3BR/2BA-3A20 72 1,300 $900 $0.69 $ 64,800 $ 777,600
-------- ----------
Total $193,020 $2,316,240
======== ==========
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
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
SUMMARY OF HISTORICAL INCOME & EXPENSES
FISCAL YEAR 2000 FISCAL YEAR 2001 FISCAL YEAR 2002 FISCAL YEAR 2003
----------------------- ----------------------- ---------------------- -----------------------
ACTUAL ACTUAL ACTUAL MANAGEMENT BUDGET
----------------------- ----------------------- ---------------------- -----------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT
- ----------------------------------------------------------------------------------------------------------------------------------
Revenues
Rental Income $2,268,475 $ 8,528 $2,357,095 $ 8,861 $2,301,640 $ 8,653 $2,280,000 $ 8,571
Vacancy $ 121,535 $ 457 $ 171,109 $ 643 $ 327,081 $ 1,230 $ 338,000 $ 1,271
Credit Loss/Concessions $ 49,442 $ 186 $ 87,275 $ 328 $ 98,007 $ 368 $ 63,300 $ 238
-----------------------------------------------------------------------------------------------------
Subtotal $ 170,977 $ 643 $ 258,384 $ 971 $ 425,088 $ 1,598 $ 401,300 $ 1,509
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 103,944 $ 391 $ 92,477 $ 348 $ 202,306 $ 761 $ 141,300 $ 531
-----------------------------------------------------------------------------------------------------
Subtotal Other Income $ 103,944 $ 391 $ 92,477 $ 348 $ 202,306 $ 761 $ 141,300 $ 531
-----------------------------------------------------------------------------------------------------
Effective Gross Income $2,201,442 $ 8,276 $2,191,188 $ 8,238 $2,078,858 $ 7,815 $2,020,000 $ 7,594
Operating Expenses
Taxes $ 146,542 $ 551 $ 161,745 $ 608 $ 160,306 $ 603 $ 131,316 $ 494
Insurance $ 34,247 $ 129 $ 51,599 $ 194 $ 51,260 $ 193 $ 54,439 $ 205
Utilities $ 152,986 $ 575 $ 160,596 $ 604 $ 183,873 $ 691 $ 176,000 $ 662
Repair & Maintenance $ 61,568 $ 231 $ 75,015 $ 282 $ 142,884 $ 537 $ 172,960 $ 650
Cleaning $ 63,903 $ 240 $ 80,761 $ 304 $ 100,200 $ 377 $ 69,500 $ 261
Landscaping $ 30,120 $ 113 $ 29,100 $ 109 $ 45,125 $ 170 $ 0 $ 0
Security $ 27,801 $ 105 $ 24,960 $ 94 $ 6,648 $ 25 $ 0 $ 0
Marketing & Leasing $ 23,076 $ 87 $ 13,675 $ 51 $ 35,999 $ 135 $ 43,500 $ 164
General Administrative $ 285,032 $ 1,072 $ 293,831 $ 1,105 $ 269,050 $ 1,011 $ 220,892 $ 830
Management $ 110,452 $ 415 $ 115,767 $ 435 $ 106,588 $ 401 $ 103,500 $ 389
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
-----------------------------------------------------------------------------------------------------
Total Operating Expenses $ 935,727 $ 3,518 $1,007,049 $ 3,786 $1,101,933 $ 4,143 $ 972,107 $ 3,655
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
-----------------------------------------------------------------------------------------------------
Net Income $1,265,715 $ 4,758 $1,184,139 $ 4,452 $ 976,925 $ 3,673 $1,047,893 $ 3,939
-----------------------------------------------------------------------------------------------------
ANNUALIZED 2003
-----------------------
PROJECTION AAA PROJECTION
----------------------- --------------------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT %
- ---------------------------------------------------------------------------------------
Revenues
Rental Income $2,277,552 $ 8,562 $2,316,240 $ 8,708 100.0%
Vacancy $ 761,868 $ 2,864 $ 254,786 $ 958 11.0%
Credit Loss/Concessions $ 59,524 $ 224 $ 69,487 $ 261 3.0%
---------------------------------------------------------
Subtotal $ 821,392 $ 3,088 $ 324,274 $ 1,219 14.0%
Laundry Income $ 0 $ 0 $ 0 $ 0 0.0%
Garage Revenue $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 213,628 $ 803 $ 206,150 $ 775 8.9%
---------------------------------------------------------
Subtotal Other Income $ 213,628 $ 803 $ 206,150 $ 775 8.9%
---------------------------------------------------------
Effective Gross Income $1,669,788 $ 6,277 $2,198,116 $ 8,264 100.0%
Operating Expenses
Taxes $ 132,008 $ 496 $ 133,000 $ 500 6.1%
Insurance $ 52,680 $ 198 $ 53,200 $ 200 2.4%
Utilities $ 162,612 $ 611 $ 172,900 $ 650 7.9%
Repair & Maintenance $ 115,240 $ 433 $ 133,000 $ 500 6.1%
Cleaning $ 90,704 $ 341 $ 79,800 $ 300 3.6%
Landscaping $ 35,932 $ 135 $ 34,580 $ 130 1.6%
Security $ 8,292 $ 31 $ 7,980 $ 30 0.4%
Marketing & Leasing $ 41,952 $ 158 $ 37,240 $ 140 1.7%
General Administrative $ 262,636 $ 987 $ 239,400 $ 900 10.9%
Management $ 78,588 $ 295 $ 109,906 $ 413 5.0%
Miscellaneous $ 0 $ 0 $ 0 $ 0 0.0%
---------------------------------------------------------
Total Operating Expenses $ 980,644 $ 3,687 $1,001,006 $ 3,763 45.5%
Reserves $ 0 $ 0 $ 66,500 $ 250 6.6%
---------------------------------------------------------
Net Income $ 689,144 $ 2,591 $1,130,611 $ 4,250 51.4%
----------------------------------------------------------
REVENUES AND EXPENSES
The subject's revenue and expense projections are displayed on the previous
chart. Rental income is based on the market analysis previously discussed. Other
income consists of forfeited deposits, laundry income, late rent payments, month
to month fees, pet fees, vending machine revenue, etc.
We forecasted the property's annual operating expenses after reviewing its
historical performance at the subject property. We analyzed each item of expense
and attempted to forecast amounts a typical informed investor would consider
reasonable.
VACANCY AND COLLECTION LOSS
An investor is primarily interested in the annual revenue an income property is
likely to produce over a specified period of time, rather than the income it
could produce if it were always 100% occupied and all tenants were paying their
rent in full and on time. An investor normally expects some income loss as
tenants vacate, fail to pay rent, or pay their rent late.
We have projected a stabilized vacancy and collection loss rate of 14% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30
FOXFIRE APARTMENTS, DORAVILLE, 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
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
SUMMARY OF OVERALL
CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
- ---------------------------------------------------------
I-1 Jul-02 91% $ 48,421 8.85%
I-2 Aug-00 90% $ 36,775 13.43%
I-3 Dec-00 90% $ 47,337 13.68%
I-4 Nov-00 90% $ 35,473 15.17%
I-5 May-01 90% $ 49,847 10.58%
High 15.17%
Low 8.85%
Average 12.34%
Based on this information, we have concluded the subject's overall
capitalization rate should be 10.50%. The terminal capitalization rate is
applied to the net operating income estimated for the year following the end of
the holding period. Based on the concluded overall capitalization rate, the age
of the property and the surveyed information, we have concluded the subject's
terminal capitalization rate to be 11.50%. Finally, the subject's discount rate
or yield rate is estimated based on the previous investor survey and an
examination of returns available on alternative investments in the market. Based
on this analysis, the subject's discount rate is estimated to be 12.00%.
HOLDING PERIOD
The survey of investors indicates that most investors are completing either
10-year cash flows or extending the analysis to the end of the lease if it is
more than 10-years. A 10-year period has been used in the analysis of the
subject with the eleventh year stabilized NOI used to determine the reversion.
SELLING COSTS
Sales of similar size properties are typically accomplished with the aid of a
broker and will also incur legal and other transaction related cost. Based on
our survey of brokers and a review of institutional investor projections, an
allowance of 3.00% of the sale amount is applied.
DISCOUNTED CASH FLOW CONCLUSION
Discounting the annual cash flows and the equity reversion at the selected rate
of 12.00% indicates a value of $10,400,000. In this instance, the reversion
figure contributes
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
approximately 36% 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
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
DISCOUNTED CASH FLOW ANALYSIS
FOXFIRE 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 $2,316,240 $2,339,402 $2,374,493 $2,421,983 $2,482,533 $2,557,009
Vacancy $ 536,559 $ 257,334 $ 261,194 $ 266,418 $ 273,079 $ 281,271
Credit Loss $ 69,487 $ 70,182 $ 71,235 $ 72,659 $ 74,476 $ 76,710
Concessions $ 146,300 $ 26,600 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------
Subtotal $ 752,347 $ 354,116 $ 332,429 $ 339,078 $ 347,555 $ 357,981
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 206,150 $ 208,212 $ 211,335 $ 215,561 $ 220,950 $ 227,579
--------------------------------------------------------------------------------
Subtotal Other Income $ 206,150 $ 208,212 $ 211,335 $ 215,561 $ 220,950 $ 227,579
--------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME $1,770,043 $2,193,498 $2,253,399 $2,298,467 $2,355,929 $2,426,607
OPERATING EXPENSES:
Taxes $ 133,000 $ 136,990 $ 141,100 $ 145,333 $ 149,693 $ 154,183
Insurance $ 53,200 $ 54,796 $ 56,440 $ 58,133 $ 59,877 $ 61,673
Utilities $ 172,900 $ 178,087 $ 183,430 $ 188,932 $ 194,600 $ 200,438
Repair & Maintenance $ 133,000 $ 136,990 $ 141,100 $ 145,333 $ 149,693 $ 154,183
Cleaning $ 79,800 $ 82,194 $ 84,660 $ 87,200 $ 89,816 $ 92,510
Landscaping $ 34,580 $ 35,617 $ 36,686 $ 37,786 $ 38,920 $ 40,088
Security $ 7,980 $ 8,219 $ 8,466 $ 8,720 $ 8,982 $ 9,251
Marketing & Leasing $ 37,240 $ 38,357 $ 39,508 $ 40,693 $ 41,914 $ 43,171
General Administrative $ 239,400 $ 246,582 $ 253,979 $ 261,599 $ 269,447 $ 277,530
Management $ 88,502 $ 109,675 $ 112,670 $ 114,923 $ 117,796 $ 121,330
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $ 979,602 $1,027,508 $1,058,038 $1,088,652 $1,120,737 $1,154,359
Reserves $ 66,500 $ 68,495 $ 70,550 $ 72,666 $ 74,846 $ 77,092
--------------------------------------------------------------------------------
NET OPERATING INCOME $ 723,941 $1,097,495 $1,124,811 $1,137,148 $1,160,345 $1,195,155
================================================================================
Operating Expense Ratio (% of EGI) 55.3% 46.8% 47.0% 47.4% 47.6% 47.6%
Operating Expense Per Unit $ 3,683 $ 3,863 $ 3,978 $ 4,093 $ 4,213 $ 4,340
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 7 8 9 10 11
- ----------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $2,633,719 $2,712,731 $2,794,113 $2,877,936 $2,964,274
Vacancy $ 289,709 $ 298,400 $ 307,352 $ 316,573 $ 326,070
Credit Loss $ 79,012 $ 81,382 $ 83,823 $ 86,338 $ 88,928
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------
Subtotal $ 368,721 $ 379,782 $ 391,176 $ 402,911 $ 414,998
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 234,406 $ 241,438 $ 248,682 $ 256,142 $ 263,826
------------------------------------------------------------------
Subtotal Other Income $ 234,406 $ 241,438 $ 248,682 $ 256,142 $ 263,826
------------------------------------------------------------------
EFFECTIVE GROSS INCOME $2,499,405 $2,574,387 $2,651,618 $2,731,167 $2,813,102
OPERATING EXPENSES:
Taxes $ 158,809 $ 163,573 $ 168,480 $ 173,535 $ 178,741
Insurance $ 63,524 $ 65,429 $ 67,392 $ 69,414 $ 71,496
Utilities $ 206,452 $ 212,645 $ 219,025 $ 225,595 $ 232,363
Repair & Maintenance $ 158,809 $ 163,573 $ 168,480 $ 173,535 $ 178,741
Cleaning $ 95,285 $ 98,144 $ 101,088 $ 104,121 $ 107,245
Landscaping $ 41,290 $ 42,529 $ 43,805 $ 45,119 $ 46,473
Security $ 9,529 $ 9,814 $ 10,109 $ 10,412 $ 10,724
Marketing & Leasing $ 44,467 $ 45,801 $ 47,175 $ 48,590 $ 50,047
General Administrative $ 285,856 $ 294,432 $ 303,265 $ 312,363 $ 321,734
Management $ 124,970 $ 128,719 $ 132,581 $ 136,558 $ 140,655
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------
TOTAL OPERATING EXPENSES $1,188,990 $1,224,660 $1,261,400 $1,299,242 $1,338,219
Reserves $ 79,404 $ 81,787 $ 84,240 $ 86,767 $ 89,370
------------------------------------------------------------------
NET OPERATING INCOME $1,231,010 $1,267,940 $1,305,979 $1,345,158 $1,385,513
==================================================================
Operating Expense Ratio (% of EGI) 47.6% 47.6% 47.6% 47.6% 47.6%
Operating Expense Per Unit $ 4,470 $ 4,604 $ 4,742 $ 4,884 $ 5,031
Estimated Stabilized NOI $1,130,611 Sales Expense Rate 3.00%
Months to Stabilized 12 Discount Rate 12.00%
Stabilized Occupancy 89.0% Terminal Cap Rate 11.50%
Gross Residual Sale Price $12,047,936 Deferred Maintenance $ 0
Less: Sales Expense $ 361,438 Add: Excess Land $ 0
-----------
Net Residual Sale Price $11,686,498 Other Adjustments $ 0
-----------
PV of Reversion $ 3,762,740 Value Indicated By "DCF" $10,442,544
Add: NPV of NOI $ 6,679,805 Rounded $10,400,000
-----------
PV Total $10,442,544
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE
---------------------------------------------------------------------------
TOTAL VALUE 11.50% 11.75% 12.00% 12.25% 12.50%
- ----------------------------------------------------------------------------------------------------------
11.00% $10,955,228 $10,782,566 $10,613,578 $10,448,173 $10,286,264
11.25% $10,863,811 $10,693,173 $10,526,161 $10,362,684 $10,202,655
TERMINAL CAP RATE 11.50% $10,776,368 $10,607,667 $10,442,544 $10,280,911 $10,122,681
11.75% $10,692,646 $10,525,800 $10,362,486 $10,202,618 $10,046,111
12.00% $10,612,413 $10,447,343 $10,285,763 $10,127,587 $ 9,972,731
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
INCOME LOSS DURING LEASE-UP
The subject is currently 67% occupied, below our stabilized occupancy
projection. We have estimated a 12-month lease-up period. An adjustment must be
made to bring the subject to a stabilized operating level. To account for this
income loss during lease-up, we have compared the current DCF analysis to an "as
stabilized" DCF analysis assuming the subject's occupancy were stabilized. The
difference in net operating income during the lease-up period is discounted to a
present value figure of $239,000 as shown in the following table.
DESCRIPTION YEAR 1
- --------------------------------------------------
"As Is" Net Operating Income $723,941
Stabilized Net Operating Income $991,626
--------
Difference $267,684
PV of Income Loss During Lease-Up $239,004
--------
Rounded $239,000
--------
CONCESSIONS
Due to softness in the market, concessions have been utilized at the subject
property and within the market. Based on our discussions with the subject's
property manager and those at competing properties, these concessions are
expected to continue in the near term until the market returns to a stabilized
level. Concessions have been included as a line item deduction within the
discounted cash flow analysis. The present value of these concessions equates to
$152,000 (rounded). This amount has been deducted from the Direct Capitalization
analysis, as well as the Sales Comparison Approach value.
DIRECT CAPITALIZATION METHOD
After having projected the income and expenses for the property, the next step
in the valuation process is to capitalize the net income into an estimate of
value. The selected overall capitalization rate ("OAR") covers both return on
and return of capital. It is the overall rate of return an investor expects.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 10.50% percent is applicable to the
subject. The results of our direct capitalization analysis are as follows:
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
FOXFIRE APARTMENTS
TOTAL PER Sq. Ft. PER UNIT %OF EGI
- ------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $ 2,316,240 $ 8.25 $ 8,708
Less: Vacancy & Collection Loss 14.00% $ 324,274 $ 1.16 $ 1,219
Plus: Other Income
Laundry Income $ 0 $ 0.00 $ 0 0.00%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 206,150 $ 0.73 $ 775 9.38%
-----------------------------------------------------------
Subtotal Other Income $ 206,150 $ 0.73 $ 775 9.38%
EFFECTIVE GROSS INCOME $ 2,198,116 $ 7.83 $ 8,264
OPERATING EXPENSES:
Taxes $ 133,000 $ 0.47 $ 500 6.05%
Insurance $ 53,200 $ 0.19 $ 200 2.42%
Utilities $ 172,900 $ 0.62 $ 650 7.87%
Repair & Maintenance $ 133,000 $ 0.47 $ 500 6.05%
Cleaning $ 79,800 $ 0.28 $ 300 3.63%
Landscaping $ 34,580 $ 0.12 $ 130 1.57%
Security $ 7,980 $ 0.03 $ 30 0.36%
Marketing & Leasing $ 37,240 $ 0.13 $ 140 1.69%
General Administrative $ 239,400 $ 0.85 $ 900 10.89%
Management 5.00% $ 109,906 $ 0.39 $ 413 5.00%
Miscellaneous $ 0 $ 0.00 $ 0 0.00%
TOTAL OPERATING EXPENSES $ 1,001,006 $ 3.57 $ 3,763 45.54%
Reserves $ 66,500 $ 0.24 $ 250 3.03%
-----------------------------------------------------------
NET OPERATING INCOME $ 1,130,611 $ 4.03 $ 4,250 51.44%
===========================================================
"GOING IN" CAPITALIZATION RATE 10.50%
VALUE INDICATION $ 10,767,720 $ 38.36 $ 40,480
LESS: LEASE-UP COST ($ 239,000)
PV OF CONCESSIONS ($ 152,000)
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $ 10,376,720
ROUNDED $ 10,400,000 $ 37.05 $ 39,098
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 37
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- -----------------------------------------------------------------------
9.75% $11,205,006 $11,200,000 $42,105 $39.90
10.00% $10,915,106 $10,900,000 $40,977 $38.83
10.25% $10,639,347 $10,600,000 $39,850 $37.76
10.50% $10,376,720 $10,400,000 $39,098 $37.05
10.75% $10,126,308 $10,100,000 $37,970 $35.98
11.00% $ 9,887,278 $ 9,900,000 $37,218 $35.27
11.25% $ 9,658,872 $ 9,700,000 $36,466 $34.56
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $10,400,000.
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 $10,400,000
Direct Capitalization Method $10,400,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$10,400,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 38
FOXFIRE APARTMENTS, DORAVILLE, 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 $10,200,000
Income Approach $10,400,000
Reconciled Value $10,300,000
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:
$10,300,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
SUBJECT PHOTOGRAPHS
[VIEW OF ENTRANCE SIGNAGE PICTURE] [VIEW OF LEASING OFFICE PICTURE]
[TYPICAL VIEW OF POOL &
[EXTERIOR - APARTMENT BUILDING PICTURE] TENNIS COURT PICTURE]
[TYPICAL VIEW OF CLUBHOUSE PICTURE] [EXTERIOR - APARTMENT BUILDING PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
SUBJECT PHOTOGRAPHS
[TYPICAL VIEW OF KITCHEN PICTURE] [TYPICAL VIEW OF BEDROOM PICTURE]
[TYPICAL VIEW OF LIVING ROOM PICTURE] [TYPICAL VIEW OF BATHROOM PICTURE]
[TYPICAL VIEW ALONG PEACHTREE INDUSTRIAL
[TYPICAL VIEW OF PARKING AREAS PICTURE] BLVD. PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
CONCORD CROSSING MEADOWRUN APARTMENTS HIGHLAND HEIGHTS APARTMENTS
2935 Old Concord Rd, SE 3800 Brockett Trail 3028 Chamblee Tucker Road
Smyrna, GA Clarkston, Georgia Chamblee, Georgia
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
LINCOLN PARC APARTMENTS KENRIDGE APARTMENTS
2100 Winters Park Drive 3893 Kensington Road
Atlanta, Georgia Decatur, Georgia
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
- -----------------------------------------------------------------------------------------------------------------------------------
Property Name Foxfire Apartments The Landings
Management Company AIMCO
LOCATION:
Address 6664 Peachtree Industrial Blvd. 6520 Hillandal Drive
City, State Doraville, Georgia Doraville, Georgia
County DeKalb DeKalb
Proximity to Subject Less than .5 mile.
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 280,700 537,685
Year Built 1972 1980
Effective Age 25 20
Building Structure Type Brick Brick
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 266 490
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1BR/1BA-1A10 900 144 $602 1 1BR/1BA 880 235 $635
2 2BR/2BA-2A20 1,150 50 $697 2 2BR/2BA 1,215 147 $818
3 3BR/2BA-3A20 1,300 72 $837 3 3BR/2BA 1,410 108 $958
Average Unit Size (SF) 1,055 1,097
Unit Breakdown: Efficiency 2-Bedroom 19% Efficiency 2-Bedroom 30%
1-Bedroom 54% 3-Bedroom 27% 1-Bedroom 48% 3-Bedroom 22%
CONDITION: Fair Average
APPEAL: Average Average
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony X Balcony
Fireplace Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi X Car Wash Spa/Jacuzzi Car Wash
Basketball Court X BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room X Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball Laundry Room X Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room X Gym Room
OCCUPANCY: 67% 90%
LEASING DATA:
Available Leasing Terms 6, 9 & 12 Months 6, 9 & 12 Months
Concessions 1 month free
Pet Deposit $300/$100 Refundable $300/$100 Refundable
Utilities Paid by Tenant: Electric Natural Gas Electric Natural Gas
Water Trash Water Trash
Confirmation
Telephone Number 877-740-7145
NOTES:
COMPARISON TO SUBJECT: Similar
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
- ----------------------------------------------------------------------------------------------------------------------------------
Property Name Kendal Creek North Chase
Management Company Waterton Property Management B&M Management
LOCATION:
Address 1700 Hunter Ridge Lane 6750 Peachtree Industrial Blvd.
City, State Norcross, Georgia Doraville, Georgia
County Gwinnett DeKalb
Proximity to Subject Less than .5 mile. Less than .5 miles.
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 283,599 394,101
Year Built 1973 1970
Effective Age 25 25
Building Structure Type Frame/Siding Brick/Siding
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 308 519
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1BR/1BA 710 160 $655 1 1BR/1BA 700 311 $625
2 2BR/2BA 880 61 $790 2 2BR/2BA 775 181 $625
3 3BR/2BA 1,337 87 $978 3 3BR/2BA 1,338 27 $690
Average Unit Size (SF) 921 759
Unit Breakdown: Efficiency 2-Bedroom 20% Efficiency 2-Bedroom 35%
1-Bedroom 52% 3-Bedroom 28% 1-Bedroom 60% 3-Bedroom 5%
CONDITION: Fair Average
APPEAL: Average Average
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
Balcony X Balcony
Fireplace X Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash X Spa/Jacuzzi X Car Wash
Basketball Court BBQ Equipment Basketball Court X BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking Tennis Court X Secured Parking
Racquet Ball X Laundry Room Racquet Ball Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room Gym Room
OCCUPANCY: 85% 90%
LEASING DATA:
Available Leasing Terms 6, 9 & 12 month leases 6, 9 & 12 month leases
Concessions 1 month free 1 month free
Pet Deposit None required N/A
Utilities Paid by Tenant: Electric Natural Gas Electric Natural Gas
Water Trash Water Trash
Confirmation
Telephone Number 866-361-2777 866-272-8117
NOTES:
COMPARISON TO SUBJECT: Similar Similar
COMPARABLE
DESCRIPTION R - 4
- -----------------------------------------------------------------------------------
Property Name Peachtree Place North
Management Company Community Living Concepts
LOCATION:
Address 4600 Peachtree Place Parkway
City, State Doraville, Georgia
County DeKalb
Proximity to Subject Less than .5 miles.
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 318,888
Year Built 1970
Effective Age 30
Building Structure Type Brick
Parking Type (Gr., Cov., etc.) Open
Number of Units 309
Unit Mix: Type Unit Qty. Mo.
1 1BR/1BA 800 140 $600
2 2BR/2BA 1,152 108 $755
3 3BR/2BA 1,352 61 $850
Average Unit Size (SF) 1,032
Unit Breakdown: Efficiency 2-Bedroom 35%
1-Bedroom 45% 3-Bedroom 20%
CONDITION:
APPEAL:
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling
X Balcony
X Fireplace
X Cable TV Ready
Project Amenities X Swimming Pool
Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment
Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall
X Tennis Court Secured Parking
Racquet Ball X Laundry Room
Jogging Track Business Office
Gym Room
OCCUPANCY: 85%
LEASING DATA:
Available Leasing Terms 12 month leases
Concessions 1 month free
Pet Deposit $200/$100 refundable
Utilities Paid by Tenant: Electric Natural Gas
Water Trash
Confirmation
Telephone Number 866-459-8419
NOTES:
COMPARISON TO SUBJECT: Slightly Superior
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
THE LANDINGS KENDAL CREEK NORTH CHASE
6520 Hillandal Drive 1700 Hunter Ridge Lane 6750 Peachtree Industrial Blvd.
Doraville, Georgia Norcross, Georgia Doraville, Georgia
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4
PEACHTREE PLACE NORTH N/A
4600 Peachtree Place Parkway
Doraville, Georgia
[PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
FOXFIRE APARTMENTS, DORAVILLE, 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
FOXFIRE APARTMENTS, DORAVILLE, 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
FOXFIRE APARTMENTS, DORAVILLE, 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
FOXFIRE APARTMENTS, DORAVILLE, 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. Phillip McGinnis
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
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
FOXFIRE APARTMENTS, DORAVILLE, 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
FOXFIRE APARTMENTS, DORAVILLE, 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
CERTIFICATIONS Appraiser, #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
FOXFIRE APARTMENTS, DORAVILLE, 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 COURSES All required 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.
FOXFIRE APARTMENTS, DORAVILLE, GEORGIA
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
FOXFIRE APARTMENTS, DORAVILLE, 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.