LAKE JOHNSON MEWS
4233 AVENT FERRY ROAD
RALEIGH, NORTH CAROLINA
MARKET VALUE -
FEE SIMPLE ESTATE
AS OF MAY 12, 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 2, 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: LAKE JOHNSON MEWS
4233 AVENT FERRY ROAD
RALEIGH, WAKE COUNTY, NORTH CAROLINA
In accordance with your authorization, we have completed the appraisal of the
above-referenced property. This complete appraisal is intended to report our
analysis and conclusions in a summary format.
The subject property consists of an apartment project having 201 units with a
total of 188,440 square feet of rentable area. The improvements were built in
1972. The improvements are situated on 20.13 acres. Overall, the improvements
are in average condition. As of the date of this appraisal, the subject property
is 91% occupied.
It is our understanding the appraisal will be used by the clients to assist the
San Mateo Superior Court in the settlement of litigation between the above
mentioned clients. The appraisal is intended to conform to the Uniform Standards
of Professional Appraisal Practice ("USPAP") as promulgated by the Appraisal
Standards Board of the Appraisal Foundation and the Code of Professional Ethics
and Standards of Professional Practice of the Appraisal Institute. The appraisal
is presented in a summary report, and the Departure Provision of USPAP has not
been invoked in this appraisal. It is entirely inappropriate to use this value
conclusion or the report for any purpose other than the one stated.
AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 2
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
The opinions expressed in this appraisal cover letter can only be completely
understood by reading the narrative report, addenda, and other data, which is
attached. The appraisal is subject to the attached general assumptions and
limiting conditions and general service conditions.
As a result of our investigation, it is our opinion that the fee simple market
value of the subject, effective May 12, 2003 is:
($9,500,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
-s- Frank Fehribach
July 2, 2003 Frank Fehribach, MAI
#053272 Managing Principal, Real Estate Group
North Carolina Temporary Practice Permit #2578
Report By:
Jimmy Pat James, MAI
North Carolina Temporary Practice Permit #2603
Assisted By:
J. Chad Walker
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
TABLE OF CONTENTS
Cover
Letter of Transmittal
Table of Contents
APPRAISAL DATA
Executive Summary .............................................. 4
Introduction ................................................... 9
Area Analysis .................................................. 11
Market Analysis ................................................ 14
Site Analysis .................................................. 16
Improvement Analysis ........................................... 16
Highest and Best Use ........................................... 17
VALUATION
Valuation Procedure ............................................ 18
Sales Comparison Approach ...................................... 20
Income Capitalization Approach ................................. 26
Reconciliation and Conclusion .................................. 37
ADDENDA
Exhibit A - Photographs of Subject Property
Exhibit B - Summary of Rent Comparables and Photograph of Comparables
Exhibit C - Assumptions and Limiting Conditions
Exhibit D - Certificate of Appraiser
Exhibit E - Qualifications
General Service Conditions
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 4
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: Lake Johnson Mews
LOCATION: 4233 Avent Ferry Road
Raleigh, North Carolina
INTENDED USE OF ASSIGNMENT: Court Settlement
PURPOSE OF APPRAISAL: "As Is" Market Value of the Fee Simple Estate
INTEREST APPRAISED: Fee simple estate
DATE OF VALUE: May 12, 2003
DATE OF REPORT: July 2, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 20.13 acres, or 876,863 square feet
Assessor Parcel No.: 783525953
Floodplain: Community Panel No. 37183C0507E (March 3, 1992)
Flood Zone X, an area outside the floodplain.
Zoning: R-10 (Residential-10 Continued Use District)
BUILDING:
No. of Units: 201 Units
Total NRA: 188,440 Square Feet
Average Unit Size: 938 Square Feet
Apartment Density: 10.0 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
- ---------------------------------------------------------------------------------------------
1A10 - The Ashe 748 $ 629 $ 0.84 $ 65,416 $ 784,992
2A20 - The Burke 1,070 $ 759 $ 0.71 $ 45,540 $ 546,480
2A25 - The Dave 1,224 $ 839 $ 0.69 $ 14,263 $ 171,156
3A20 - The Franklin 1,282 $ 1,096 $ 0.85 $ 21,920 $ 263,040
- ---------------------------------------------------------------------------------------------
Total $ 147,139 $ 1,765,668
=============================================================================================
OCCUPANCY: 91%
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
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
EXTERIOR - PROPERTY SIGN EXTERIOR - OFFICE
AREA MAP
[MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
NEIGHBORHOOD MAP
[MAP]
HIGHEST AND BEST USE:
As Vacant: Hold for future multi-family development
As Improved: Continuation as its current use
METHOD OF VALUATION: In this instance, the Sales Comparison and Income
Approaches to value were utilized.
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 7
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
PART TWO - ECONOMIC INDICATORS
INCOME CAPITALIZATION APPROACH
Amount $/Unit
------ ------
DIRECT CAPITALIZATION
Potential Rental Income $ 1,765,668 $ 8,784
Effective Gross Income $ 1,661,028 $ 8,264
Operating Expenses $ 684,041 $ 3,403 41.2% of EGI
Net Operating Income: $ 926,736 $ 4,611
Capitalization Rate 9.50%
DIRECT CAPITALIZATION VALUE $ 9,700,000 * $ 48,259 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 10%
Stabilized Vacancy & Collection Loss: 9%
Lease-up / Stabilization Period N/A
Terminal Capitalization Rate 10.00%
Discount Rate 11.50%
Selling Costs 3.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $ 9,500,000 * $ 47,264 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $ 9,500,000 $ 47,264 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $ 38,375 to $ 61,500
Range of Sales $/Unit (Adjusted) $ 43,050 to $ 47,969
VALUE INDICATION - PRICE PER UNIT $ 9,200,000 * $ 45,771 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 5.64 to 6.90
Selected EGIM for Subject 5.75
Subject's Projected EGI $ 1,661,028
EGIM ANALYSIS CONCLUSION $ 9,500,000 * $ 47,264 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $ 9,600,000 * $ 47,761 / UNIT
RECONCILED SALES COMPARISON VALUE $ 9,200,000 $ 45,771 / 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
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $ 9,200,000
NOI Per Unit $ 9,600,000
EGIM Multiplier $ 9,500,000
INDICATED VALUE BY SALES COMPARISON $ 9,200,000 $ 45,771 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $ 9,700,000
Discounted Cash Flow Method: $ 9,500,000
INDICATED VALUE BY THE INCOME APPROACH $ 9,500,000 $ 47,264 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $ 9,500,000 $ 47,264 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 4233 Avent Ferry Road, Raleigh, Wake County,
North Carolina. Raleigh identifies it as 783525953.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by J. Chad Walker on
May 12, 2003. Jimmy Pat James, MAI and Frank Fehribach, MAI have not made a
personal inspection of the subject property. J. Chad Walker assisted Jimmy Pat
James, MAI in the research, valuation analysis and writing the report. Frank
Fehribach, MAI reviewed the report and concurs with the value. Frank Fehribach,
MAI, Jimmy Pat James, MAI, and J. Chad Walker have extensive experience in
appraising similar properties and meet the USPAP competency provision.
The scope of this investigation comprises the inspection of the property and the
collection, verification, and analysis of general and specific data pertinent to
the subject property. We have researched current improved sales and leases of
similar properties, analyzing them as to their comparability, and adjusting them
accordingly. We completed the Sales Comparison and Income Capitalization
Approaches to value. From these approaches to value, a concluded overall value
was made.
DATE OF VALUE AND REPORT
This appraisal was made to express the opinion of value as of May 12, 2003. The
date of the report is July 2, 2003.
PURPOSE AND USE OF APPRAISAL
The purpose of the appraisal is to estimate the market value of the fee simple
interest in the subject property. It is understood that the appraisal is
intended to assist the clients in litigation settlement proceedings. The
appraisal was not based on a requested minimum valuation, a specific valuation,
or the approval of a loan.
PROPERTY RIGHTS APPRAISED
We have appraised the Fee Simple Estate in the subject property (as applied in
the Sales &
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
Income Approaches), subject to the existing short-term leases. A Fee Simple
Estate is defined in The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago:
Appraisal Institute, 1993), as:
"Absolute ownership unencumbered by any other interest or estate, subject
only to the limitations imposed by the governmental powers of taxation,
eminent domain, police power, and escheat."
MARKETING/EXPOSURE PERIOD
MARKETING PERIOD: 6 to 12 months
EXPOSURE PERIOD: 6 to 12 months
HISTORY OF THE PROPERTY
Ownership in the subject property is currently vested in 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
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
AREA / NEIGHBORHOOD ANALYSIS
NEIGHBORHOOD ANALYSIS
A neighborhood is a group of complementary land uses. The function of the
neighborhood analysis is to describe the immediate surrounding environs. The
subject is located in the city of Raleigh, North Carolina. Overall, the
neighborhood is characterized as a suburban setting with the predominant land
use being residential. The subject's neighborhood is generally defined by the
following boundaries.
NEIGHBORHOOD BOUNDARIES
East - Gorman Street
West - Interstate Highway 440
South - Interstate Highway 40
North - Western Boulevard
MAJOR EMPLOYERS
Major employers in the subject's area include MCI Telecommunications; Nortel;
Cisco Systems; IBM; State of North Carolina; Wake County Public School; North
Carolina State University; Wake County: and the City of Raleigh. The overall
economic outlook for the area is considered favorable.
DEMOGRAPHICS
We have reviewed demographic data within the neighborhood. The following table
summarizes the key data points.
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 12
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
NEIGHBORHOOD DEMOGRAPHICS
AREA
--------------------------------------------
CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA
- ------------------------------------------------------------------------------------------------
POPULATION TRENDS
Current Population 8,525 58,057 155,883 1,249,659
5-Year Population 9,099 64,871 169,642 1,408,794
% Change CY-5Y 6.7% 11.7% 8.8% 12.7%
Annual Change CY-5Y 1.3% 2.3% 1.8% 2.5%
HOUSEHOLDS
Current Households 4,064 21,716 61,981 484,776
5-Year Projected Households 4,267 24,169 67,356 545,189
% Change CY - 5Y 5.0% 11.3% 8.7% 12.5%
Annual Change CY-5Y 1.0% 2.3% 1.7% 2.5%
INCOME TRENDS
Median Household Income $ 38,591 $ 37,512 $ 48,687 $ 55,832
Per Capita Income $ 23,719 $ 19,514 $ 25,647 $ 25,814
Average Household Income $ 51,832 $ 52,920 $ 64,839 $ 66,544
Source: Demographics Now
The subject neighborhood's population is expected to show increases below that
of the region. The immediate market offers inferior income levels as compared to
the broader market.
The following table illustrates the housing statistics in the subject's
immediate area, as well as the MSA region.
HOUSING TRENDS
AREA
--------------------------------------------
CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA
- ------------------------------------------------------------------------------------------------
HOUSING TRENDS
% of Households Renting 60.41% 56.66% 46.41% 33.18%
5-Year Projected % Renting 58.59% 56.55% 46.04% 32.28%
% of Households Owning 31.95% 37.22% 47.45% 61.69%
5-Year Projected % Owning 33.89% 37.65% 48.05% 63.00%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Apartments
South - Lake Johnson
East - Residential Condominiums
West - Avent Ferry Road and single-family residential
CONCLUSIONS
The subject is well located within the city of Raleigh. The neighborhood is
characterized as being mostly suburban in nature and is currently in the stable
stage of development. The economic outlook for the neighborhood is judged to be
favorable with a good economic base.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 14
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
MARKET ANALYSIS
The subject property is located in the city of Raleigh in Wake County. The
overall pace of development in the subject's market is more or less stable. 48
units were completed over the past six months at Trinity Commons. There were 72
units started at the same time period at the Bostic Brothers site at Gorman
Street and Avent Ferry Road. The following table illustrates historical vacancy
rates for the subject's market.
HISTORICAL VACANCY RATE
Period Region Submarket
- ------ ------ ---------
1Q01 8.1% 5.2%
3Q01 9.6% 8.2%
1Q02 12.5% 8.8%
3Q02 12.0% 13.3%
1Q03 12.6% 13.8%
Source: REAL DATA Real Estate Information Services Apartment Index 1Q03
Occupancy trends in the subject's market are decreasing. Historically speaking,
the subject's submarket has equated the overall market. The Raleigh-Durham
apartment as a whole is reporting a high vacancy rate of 12.6% for 1Q03. Vacancy
rates in the Triangle (Raleigh, Durham, Chapel Hill) area have steadily been
steadily rising since 1996, according to REAL DATA Real Estate Information
Services Apartment Index 1Q03. In comparison, the Raleigh-Central Submarket is
posting vacancy rates of 13.8%. The vacancy rate has continued to increase in
this submarket as more apartment complexes have been built.
Market rents in the subject's market have been following a decreasing trend. The
following table illustrates historical rental rates for the subject's market.
HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change
- ------ ------ -------- --------- --------
1Q01 $ 746 - $ 663 -
3Q01 $ 763 2.3% $ 677 2.1%
1Q02 $ 764 0.1% $ 683 0.9%
3Q02 $ 761 -0.4% $ 667 -2.3%
1Q03 $ 758 -0.4% $ 664 -0.4%
Source: REAL DATA Real Estate Information Services Apartment Index 1Q03
The following table illustrates a summary of the subject's competitive set.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
--- ------------- ----- ----- ---------- --------------------
R-1 Summit at Avent Ferry 222 86% 1985 0.50 mile east of the subject
R-2 Dominion Walnut Creek 576 92% 1985 0.50 mile southeast of the subject
R-3 Remington Place 136 99% 1985 0.75 mile southeast of the subject
R-4 Clarion Crossing 260 90% 1972 0.75 mile east of the subject
R-5 Sumter Square 391 86% 1970 0.90 mile northwest of the subject
Subject Lake Johnson Mews 201 91% 1972
The Raleigh-Central submarket as well as the Triangle as a whole has experienced
declining apartment rental rates over the past two years. This is due in part to
the economic slowdown of the national economy and low interest rates currently
being offered. As of 1Q03, the average rental rate for the Southwest submarket
was $664, which is $94 above the Region at $758. However, rates are currently
stabilizing and remain at these levels in the short-term. As the national
economy improves so should contract rental rates.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 20.13 acres, or 876,863 square feet
Shape Irregular
Topography Slightly slope
Utilities All necessary utilities are available to the site.
Soil Conditions Stable
Easements Affecting Site None other than typical utility easements
Overall Site Appeal Average
Flood Zone:
Community Panel 37183C0507E, dated March 3, 1992
Flood Zone Zone X
Zoning R-10, the subject improvements represent a legal
conforming use of the site.
REAL ESTATE TAXES
ASSESSED VALUE - 2002
------------------------------------------- TAX RATE / PROPERTY
PARCEL NUMBER LAND BUILDING TOTAL MILL RATE TAXES
- ----------------------------------------------------------------------------------------------
783525953 $ 1,407,000 $ 7,555,115 $ 8,962,115 0.00994 $ 89,070
IMPROVEMENT ANALYSIS
Year Built 1972
Number of Units 201
Net Rentable Area 188,440 Square Feet
Construction:
Foundation Reinforced concrete slab
Frame Heavy or light wood
Exterior Walls Wood or vinyl siding
Roof Composition shingle over a wood truss structure
Project Amenities Amenities at the subject include a swimming pool,
tennis court, jogging track, laundry room, and
parking area.
Unit Amenities Individual unit amenities include a balcony,
fireplace, cable TV connection, vaulted ceiling, and
washer dryer connection. Appliances available in
each unit include a refrigerator, stove, dishwasher,
water heater, garbage disposal, washer/dryer, and
oven.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
- --------------------------------------------------
1A10 -The Ashe 104 748
2A20 - The Burke 60 1,070
2A25 - The Dave 17 1,224
3A20 - The Franklin 20 1,282
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 201-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
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
THE VALUATION PROCEDURE
There are three traditional approaches, which can be employed in establishing
the market value of the subject property. These approaches and their
applicability to the valuation of the subject are summarized as follows:
THE COST APPROACH
The application of the Cost Approach is based on the principle of substitution.
This principle may be stated as follows: no one is justified in paying more for
a property than that amount by which he or she can obtain, by purchase of a site
and construction of a building, without undue delay, a property of equal
desirability and utility. In the case of a new building, no deficiencies in the
building should exist.
In the case of income-producing real estate, the cost of construction plays a
minor and relatively insignificant role in determining market value. The Cost
Approach is typically only a reliable indicator of value for: (a) new
properties; (b) special use properties; and (c) where the cost of reproducing
the improvements is easily and accurately quantified and there is no economic
obsolescence. In all instances, the issue of an appropriate entrepreneurial
profit - the reward for undertaking the risk of construction, remains a highly
subjective factor especially in a market lacking significant speculative
development.
THE SALES COMPARISON APPROACH
The Sales Comparison Approach is an estimate of value based upon a process of
comparing recent sales of similar properties in the surrounding or competing
areas to the subject property. Inherent in this approach is the principle of
substitution.
The application of this approach consists of comparing the subject property with
similar properties of the same general type, which have been sold recently or
currently are available for sale in competing areas. This comparative process
involves judgment as to the similarity of the subject property and the
comparable sale with respect to many value factors such as location, contract
rent levels, quality of construction, reputation and prestige, age and
condition, among others. The estimated value through this approach represents
the probable price at which a willing seller would sell the subject property to
a willing and knowledgeable buyer as of the date of value.
AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 19
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
THE INCOME CAPITALIZATION APPROACH
The theory of the Income Capitalization Approach is based on the premise that
present value is the value of the cash flow and reversionary value the property
will produce over a reasonable holding (ownership) period.
The Discounted Cash Flow Analysis will convert equity cash flows (including cash
flows and equity reversion) into a present value utilizing an internal rate of
return (or discount rate). The Internal Rate of Return (IRR) will be derived
from a comparison of alternate investments, a comparative analysis of IRR's used
by recent buyers of similar properties, and a review of published industry
surveys.
The Direct Capitalization Analysis converts one year of income into an overall
value using overall capitalization rates from similar sales. The overall rates
take into consideration buyers assumptions of the market over the long-term.
The results of the Income Capitalization Analysis are usually the primary value
indicator for income producing properties. Investors expect a reasonable rate of
return on their equity investment based on the ownership risks involved; this
approach closely parallels the investment decision process.
RECONCILIATION
In this instance, we have completed the Sales Comparison and Income
Capitalization Approaches to value. As an income producing property, the income
approach is a primary approach to value. The Sales Comparison Approach is also
considered reliable as investors are buying similar buildings in the market.
Our research indicates that market participants are generally not buying,
selling, investing, or lending with reliance placed on the methodology of the
Cost Approach to establish the value. Therefore, we have decided that the Cost
Approach is not a reliable indicator of value for the subject, and this approach
has not been utilized.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 20
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
SALES COMPARISON APPROACH
Use of market or comparable sales requires the collection and analysis of
comparable sales data. Similar properties recently sold are compared to the
subject and adjusted based on any perceived differences. This method is based on
the premise that the costs of acquiring a substitute property would tend to
establish a value for the subject property. The premise suggests that if a
substitute is unavailable in the market, the reliability of the approach may be
subordinate to the other approaches.
The reliance on substitute properties produces shortcomings in the validity of
this approach. Geographic and demographic characteristics from each submarket
restrict which sales may be selected. Recent sales with a similar physical
characteristics, income levels, and location are usually limited. The sales we
have identified, however, do establish general valuation parameters as well as
provide support to our conclusion derived through the income approach method.
The standard unit of comparison among similar properties is the sales price per
unit and price per square foot of net rentable area. To accurately adjust prices
to satisfy the requirements of the sales comparison approach, numerous
calculations and highly subjective judgments would be required including
consideration of numerous income and expense details for which information may
be unreliable or unknown. The sales price per unit and square foot are
considered relevant to the investment decision, but primarily as a parameter
against which value estimates derived through the income approach can be judged
and compared.
In examining the comparable sales, we have applied a subjective adjustment
analysis, which includes specific adjustments derived from our experience and
consulting with the market participants.
SALES COMPARISON ANALYSIS
Detailed on the following pages are sales transactions involving properties
located in the subject's competitive investment market.
Photographs of the sale transactions are located in the Addenda. Following the
summary of sales is an adjustment grid that is used to arrive at a value.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 21
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2 I - 3
- ---------------------- ------------------------- -------------------------- ------------------------ -----------------------
Property Name Lake Johnson Mews Calibre Chase Cardinal Woods Treybrooke
LOCATION:
Address 4233 Avent Ferry Road 231 Calibre Chase Drive 1331 Wicklow Drive 201 Treybrooke
City, State Raleigh, North Carolina Raleigh, North Carolina Cary, North Carolina Raleigh, North Carolina
County Wake Wake Wake Wake
PHYSICAL
CHARACTERISTICS:
Net Rentable Area(SF) 188,440 171,312 140,480 228,000
Year Built 1972 1988 1977 1989
Number of Units 201 192 184 200
Unit Mix: Type Total Type Total Type Total Type Total
1A10 - The Ashe 104 1Br/1Ba - Type 1 48 1Br/1Ba 88 1Br/1Ba 40
2A20 - The Burke 60 1Br/1Ba - Type 2 48 2Br/1.5Ba 96 2Br/1.5Ba 40
2A25 - The Dave 17 1Br/1Ba - Type 3 24 2Br/2Ba 80
3A20 - The Franklin 20 2Br/2Ba 72 3Br/2.5Ba 40
Average Unit Size(SF) 938 892 763 1,140
Land Area (Acre) 20.1300 23.4800 14.7700 20.2000
Density (Units/
Acre) 10.0 8.2 12.5 9.9
Parking Ratio
(Spaces/Unit) 1.67 N/A N/A N/A
Parking Type
(Gr., Cov., etc.) Open Open Open Open
CONDITION: Average Average Average Average
APPEAL: Average Average Average Average
AMENITIES:
Pool/Spa Yes/No Yes/No Yes/No Yes/No
Gym Room No Yes No Yes
Laundry Room Yes No Yes Yes
Secured Parking No No No Yes
Sport Courts No Yes No No
Washer/Dryer
Connection Yes Yes Yes Yes
Other
Other
OCCUPANCY: 91% 98% 90% 92%
TRANSACTION DATA:
Sale Date November, 2001 October, 2001 April, 2001
Sale Price ($) $11,755,000 $7,061,000 $12,300,000
Grantor SWA Acquisitions LTD Excel Realty Richard M.
Trust Drew
Grantee Wilson Investment CK Cardinal Treybrooke
Properties Inc. Woods LLC Associates LTD
Partnership
Sale Documentation Book 9142, Book 9100, Book 8875,
Page 2745 Page 1740 Page 2226
Verification Wake County Wake County Wake County
Records Records Records
Telephone Number
ESTIMATED PRO-FORMA: Total$ $/Unit $/SF Total$ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross
Income $1,890,720 $9,848 $11.04 $1,390,560 $7,557 $9.90 $1,937,760 $9,689 $8.50
Vacancy/Credit Loss $ 75,629 $ 394 $ 0.44 $ 139,056 $ 756 $0.99 $ 155,021 $ 775 $0.68
Effective Gross
Income $1,815,091 $9,454 $10.60 $1,251,504 $6,802 $8.91 $1,782,739 $8,914 $7.82
Operating Expenses $ 706,073 $3,677 $ 4.12 $ 500,602 $2,721 $3.56 $ 713,096 $3,565 $3.13
Net Operating Income $1,109,018 $5,776 $ 6.47 $ 750,902 $4,081 $5.35 $1,069,643 $5,348 $4.69
NOTES: None None None
PRICE PER UNIT $ 61,224 $ 38,375 $ 61,500
PRICE PER SQUARE FOOT $ 68.62 $ 50.26 $ 53.95
EXPENSE RATIO 38.9% 40.0% 40.0%
EGIM 6.48 5.64 6.90
OVERALL CAP RATE 9.43% 10.63% 8.70%
Cap Rate based on Pro Forma or
Actual Income? ACTUAL PRO FORMA PRO FORMA
COMPARABLE COMPARABLE
DESCRIPTION I - 4 I - 5
- ---------------------- ------------------------ ----------------------
Property Name Oxford Square Oak Hollow
LOCATION:
Address 1000 Village Greenway 100 Kempwood Drive
City, State Raleigh, North Carolina Raleigh, North Carolina
County Wake Wake
PHYSICAL
CHARACTERISTICS:
Net Rentable Area (SF) 155,560 213,200
Year Built 1975 1985
Number of Units 184 240
Unit Mix: Type Total Type Total
1Br/1Ba - Type 1 8 1Br/1Ba - Type 1 40
1Br/1Ba - Type 2 12 1Br/1Ba - Type 2 20
1Br/1Ba - Type 3 8 1Br/1Ba - Type 3 10
1Br/1Ba - Type 4 12 1Br/1Ba - Type 4 90
2Br/1Ba - Type 1 36 2Br/2Ba 80
2Br/1Ba - Type 2 18
2Br/1Ba - Type 3 12
2Br/2Ba 54
3Br/1.5Ba - Type1 12
3Br/1.5Ba - Type2 4
3Br/1.5Ba - Type3 6
3Br/1.5Ba - Type4 2
Average Unit Size(SF) 845 888
Land Area (Acre) 15.1900 27.3300
Density (Units/
Acre) 12.1 8.8
Parking Ratio
(Spaces/Unit) N/A N/A
Parking Type
(Gr., Cov., etc.) Open Open
CONDITION: Average Good
APPEAL: Average Average
AMENITIES:
Pool/Spa Yes/No Yes/Yes
Gym Room Yes No
Laundry Room Yes Yes
Secured Parking No No
Sport Courts No Yes
Washer/Dryer
Connection Yes Yes
Other
Other
OCCUPANCY: 89% 83%
TRANSACTION DATA:
Sale Date August, 2000 December, 2000
Sale Price ($) $8,650,000 $12,250,000
Grantor Oxford Square LLC Affiliates
Equities Real
Estate Trust
Grantee Oxford Square Cary BNP Realty
LLC LLC
Sale Documentation Book 8648, Page 1690 Book 8782, Page 2508
Verification Wake County Records Wake County Records
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross
Income $1,470,528 $7,992 $9.45 $2,196,480 $9,152 $10.30
Vacancy/Credit Loss $ 117,642 $ 639 $0.76 $ 263,578 $1,098 $ 1.24
Effective Gross
Income $1,352,886 $7,353 $8.70 $1,932,902 $8,054 $ 9.07
Operating Expenses $ 541,154 $2,941 $3.48 $ 773,161 $3,222 $ 3.63
Net Operating Income $ 811,732 $4,412 $5.22 $1,159,741 $4,832 $ 5.44
NOTES: None None
PRICE PER UNIT $ 47,011 $ 51,042
PRICE PER SQUARE FOOT $ 55.61 $ 57.46
EXPENSE RATIO 40.0% 40.0%
EGIM 6.39 6.34
OVERALL CAP RATE 9.38% 9.47%
Cap Rate based on Pro Forma or
Actual Income? PRO FORMA PRO FORMA
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
IMPROVED SALES MAP
[MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $38,375 to $61,500 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 $43,050 to $47,969 per unit with a mean or average adjusted price
of $45,977 per unit. The median adjusted price is $45,938 per unit. Based on the
following analysis, we have concluded to a value of $46,000 per unit, which
results in an "as is" value of $9,200,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2 I - 3
- ---------------------- ----------------- ------------------- ------------------ -----------------
Property Name Lake Johnson Mews Calibre Chase Cardinal Woods Treybrooke
Address 4233 Avent 231 Calibre 1331 201
Ferry Road Chase Drive Wicklow Treybrooke
Drive
City Raleigh, Raleigh, Cary, Raleigh,
North Carolina North North North
Carolina Carolina Carolina
Sale Date November, 2001 October, 2001 April, 2001
Sale Price ($) $11,755,000 $7,061,000 $12,300,000
Net Rentable Area (SF) 188,440 171,312 140,480 228,000
Number of Units 201 192 184 200
Price Per Unit $61,224 $38,375 $61,500
Year Built 1972 1988 1977 1989
Land Area (Acre) 20.1300 23.4800 14.7700 20.2000
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Fee Simple Fee Simple Fee Simple Fee Simple
Conveyed Estate Estate 0% Estate 0% Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 11-2001 0% 10-2001 0% 04-2001 0%
VALUE AFTER TRANS.
ADJUST. ($/UNIT) $61,224 $38,375 $61,500
Location Comparable 0% Inferior 20% Superior - 5%
Number of Units 201 192 0% 184 0% 200 0%
Quality / Appeal Good Superior - 5% Comparable 0% Superior - 5%
Age / Condition 1972 1988/Average -10% 1977/Average 0% 1989/Average -10%
Occupancy at Sale 91% 98% - 5% 90% 0% 92% 0%
Amenities Good Superior - 5% Comparable 0% Superior - 5%
Average Unit Size (SF) 938 892 0% 763 5% 1,140 - 5%
PHYSICAL ADJUSTMENT -25% 25% -30%
FINAL ADJUSTED VALUE
($/UNIT) $45,918 $47,969 $43,050
COMPARABLE COMPARABLE
DESCRIPTION I - 4 I - 5
- ---------------------- ------------------- ------------------
Property Name Oxford Square Oak Hollow
Address 1000 Village Greenway 100 Kempwood Drive
City Raleigh, Raleigh,
North North
Carolina Carolina
Sale Date August, 2000 December, 2000
Sale Price ($) $8,650,000 $12,250,000
Net Rentable Area (SF) 155,560 213,200
Number of Units 184 240
Price Per Unit $47,011 $51,042
Year Built 1975 1985
Land Area (Acre) 15.1900 27.3300
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Fee Simple Fee Simple
Conveyed Estate 0% Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 08-2000 0% 12-2000 0%
VALUE AFTER TRANS.
ADJUST. ($/UNIT) $47,011 $51,042
Location Inferior 5% Comparable 0%
Number of Units 184 0% 240 0%
Quality / Appeal Comparable 0% Superior - 5%
Age / Condition 1975/Average 0% 1985 / Good - 5%
Occupancy at Sale 89% 0% 83% 5%
Amenities Superior -5% Superior - 5%
Average Unit Size (SF) 845 0% 888 0%
PHYSICAL ADJUSTMENT 0% -10%
FINAL ADJUSTED VALUE
($/UNIT) $47,011 $45,938
SUMMARY
VALUE RANGE (PER UNIT) $43,050 to $47,969
MEAN (PER UNIT) $45,977
MEDIAN (PER UNIT) $45,938
VALUE CONCLUSION (PER UNIT) $46,000
VALUE OF IMPROVEMENT & MAIN SITE $9,246,000
PV OF CONCESSIONS -$ 66,000
VALUE INDICATED BY SALES COMPARISON APPROACH $9,180,000
ROUNDED $9,200,000
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
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
NOI PER UNIT COMPARISON
- ----------------------------------------------------------------------------------------------------------
SALE PRICE NOI/ SUBJECT NOI
COMPARABLE NO. OF ----------- ----------- --------------- ADJUSTMENT INDICATED
NO. UNITS PRICE/UNIT OAR NOI/UNIT SUBJ. NOI/UNIT FACTOR VALUE/UNIT
- ----------------------------------------------------------------------------------------------------------
I-1 192 $11,755,000 9.43% $ 1,109,018 $ 926,736 0.798 $ 48,870
$ 61,224 $ 5,776 $ 4,611
I-2 184 $ 7,061,000 10.63% $ 750,902 $ 926,736 1.130 $ 43,355
$ 38,375 $ 4,081 $ 4,611
I-3 200 $12,300,000 8.70% $ 1,069,643 $ 926,736 0.862 $ 53,018
$ 61,500 $ 5,348 $ 4,611
I-4 184 $ 8,650,000 9.38% $ 811,732 $ 926,736 1.045 $ 49,132
$ 47,011 $ 4,412 $ 4,611
I-5 240 $12,250,000 9.47% $ 1,159,741 $ 926,736 0.954 $ 48,701
$ 51,042 $ 4,832 $ 4,611
PRICE/UNIT
Low High Average Median
$43,355 $53,018 $48,615 $48,870
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
Estimated Price Per Unit $ 48,000
----------
Number of Units 201
Value $9,648,000
PV of Concessions -$ 66,000
----------
Value Based on NOI Analysis $9,582,000
Rounded $9,600,000
The adjusted sales indicate a range of value between $43,355 and $53,018 per
unit, with an average of $48,615 per unit. Based on the subject's competitive
position within the improved sales, a value of $48,000 per unit is estimated.
This indicates an "as is" market value of $9,600,000 (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
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
EFFECTIVE GROSS INCOME MULTIPLIER COMPARISON
- -------------------------------------------------------------------------------------------
SALE PRICE
COMPARABLE NO. OF ----------- EFFECTIVE OPERATING SUBJECT
NO. UNITS PRICE/UNIT GROSS INCOME EXPENSE OER PROJECTED OER EGIM
- -------------------------------------------------------------------------------------------
I-1 192 $11,755,000 $ 1,815,091 $ 706,073 38.90% 6.48
$ 61,224
I-2 184 $ 7,061,000 $ 1,251,504 $ 500,602 40.00% 5.64
$ 38,375
I-3 200 $12,300,000 $ 1,782,739 $ 713,096 40.00% 41.18% 6.90
$ 61,500
I-4 184 $ 8,650,000 $ 1,352,886 $ 541,154 40.00% 6.39
$ 47,011
I-5 240 $12,250,000 $ 1,932,902 $ 773,161 40.00% 6.34
$ 51,042
EGIM
Low High Average Median
5.64 6.90 6.35 6.39
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
Estimate EGIM 5.75
--------------
Subject EGI $ 1,661,028
Value $ 9,550,910
PV of Concessions - $ 66,000
--------------
Value Based on EGIM Analysis $ 9,484,910
Rounded $ 9,500,000
Value Per Unit $ 47,264
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 41.18% before reserves. The comparable sales
indicate a range of expense ratios from 38.90% to 40.00%, while their EGIMs
range from 5.64 to 6.90. Overall, we conclude to an EGIM of 5.75, which results
in an "as is" value estimate in the EGIM Analysis of $9,500,000.
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 $9,200,000.
Price Per Unit $9,200,000
NOI Per Unit $9,600,000
EGIM Analysis $9,500,000
Sales Comparison Conclusion $9,200,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
INCOME CAPITALIZATION APPROACH
The income capitalization approach is based on the premise that value is created
by the expectation of future benefits. We estimated the present value of those
benefits to derive an indication of the amount that a prudent, informed
purchaser-investor would pay for the right to receive them as of the date of
value.
This approach requires an estimate of the NOI of a property. The estimated NOI
is then converted to a value indication by use of either the direct
capitalization or the discounted cash flow analysis (yield capitalization).
Direct capitalization uses a single year's stabilized NOI as a basis for a value
indication by dividing the income by a capitalization rate. The rate chosen
accounts for a recapture of the investment by the investor and should reflect
all factors that influence the value of the property, such as tenant quality,
property condition, neighborhood change, market trends, interest rates, and
inflation. The rate may be extracted from local market transactions or, when
transaction evidence is lacking, obtained from trade sources.
A discounted cash flow analysis focuses on the operating cash flows expected
from the property and the proceeds of a hypothetical sale at the end of a
holding period (the reversion). The cash flows and reversion are discounted to
their present values using a market-derived discount rate and are added together
to obtain a value indication. Because benefits to be received in the future are
worth less than the same benefits received in the present, this method weights
income in the early years more heavily than the income and the sale proceeds to
be received later. The strength of the discounted cash flow method is its
ability to recognize variations in projected net income, such as those caused by
inflation, stepped leases, neighborhood change, or tenant turnover. Its weakness
is that it requires many judgments regarding the actions of likely buyers and
sellers of the property in the future.
In some situations, both methods yield a similar result. The discounted cash
flow method is typically more appropriate for the analysis of investment
properties with multiple or long-term leases, particularly leases with
cancellation clauses or renewal options. It is especially useful for
multi-tenant properties in volatile markets. The direct capitalization
AMERICAN APPRAISAL ASSOCIATES, INC INCOME CAPITALIZATION APPROACH PAGE 27
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
method is normally more appropriate for properties with relatively stable
operating histories and expectations.
A pro forma analysis for the first year of the investment is made to estimate a
reasonable potential net operating income for the Subject Property. Such an
analysis entails an estimate of the gross income the property should command in
the marketplace. From this total gross income must be deducted an allowance for
vacancy/collection loss and operating expenses as dictated by general market
conditions and the overall character of the subject's tenancy and leased income
to arrive at a projected estimate of net operating income. Conversion of the net
operating income to an indication of value is accomplished by the process of
capitalization, as derived primarily from market data.
MARKET RENT ANALYSIS
In order to determine a market rental rate for the subject, a survey of
competing apartment communities was performed. This survey was displayed
previously in the market analysis section of the report. Detailed information
pertaining to each of the comparable rental communities, along with photographs,
is presented in the Addenda of this report.
The following charts display the subject's current asking and actual rent rates
as well as a comparison with the previous referenced comparable rental
properties.
SUMMARY OF ACTUAL AVERAGE RENTS
- --------------------------------------------------------------------------
Average
Unit Area ----------------
Unit Type (Sq. Ft.) Per Unit Per SF %Occupied
- ------------------- ----------------------------------------------
1A10 - The Ashe 748 $ 626 $ 0.84 91.3%
2A20 - The Burke 1070 $ 755 $ 0.71 95.0%
2A25 - The Dave 1224 $ 832 $ 0.68 94.1%
3A20 - The Franklin 1282 $1,096 $ 0.85 75.0%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
RENT ANALYSIS
COMPARABLE RENTS
-----------------------------------------------
R-1 R-2 R-3 R-4 R-5
-----------------------------------------------
Dominion
Summit at Walnut Remington Clarion Sumter
Avent Ferry Creek Place Crossing Square
-----------------------------------------------
COMPARISON TO SUBJECT
SUBJECT SUBJECT -----------------------------------------------
SUBJECT UNIT ACTUAL ASKING Slightly
DESCRIPTION TYPE RENT RENT Superior Similar Similar Similar Similar MIN MAX MEDIAN AVERAGE
- -----------------------------------------------------------------------------------------------------------------------------------
Monthly Rent 1A10 -THE ASHE $ 626 $ 649 $ 685 $ 541 $ 715 $ 615 $ 565 $ 541 $ 715 $ 615 $ 624
Unit Area (SF) 748 748 700 701 933 696 700 696 933 700 746
Monthly Rent Per
Sq. Ft. $ 0.84 $ 0.87 $ 0.98 $ 0.77 $ 0.77 $ 0.88 $ 0.81 $ 0.77 $ 0.98 $ 0.81 $ 0.84
Monthly Rent 2A20 - THE $ 755 $ 799 $ 835 $ 720 $ 815 $ 720 $ 835 $ 815 $ 790
Unit Area (SF) BURKE 1,070 1,070 1,050 963 1,060 963 1,060 1,050 1,024
Monthly Rent Per
Sq. Ft. $ 0.71 $ 0.75 $ 0.80 $ 0.75 $ 0.77 $ 0.75 $ 0.80 $ 0.77 $ 0.77
Monthly Rent 2A25 - THE DAVE $ 832 $ 899 $ 895 $ 635 $ 635 $ 895 $ 765 $ 765
Unit Area (SF) 1,224 1,224 1,343 800 800 1,343 1,072 1,072
Monthly Rent Per
Sq. Ft. $ 0.68 $ 0.73 $ 0.67 $ 0.79 $0.67 $ 0.79 $ 0.73 $ 0.73
Monthly Rent 3A20 - THE $ 1,096 $ 1,029 $ 1,024 $ 1,037 $1,024 $1,037 $1,031 $ 1,031
Unit Area (SF) FRANKLIN 1,282 1,282 1,100 1,184 1,100 1,184 1,142 1,142
Monthly Rent Per
Sq. Ft. $ 0.85 $ 0.80 $ 0.93 $ 0.88 $ 0.88 $ 0.93 $ 0.90 $ 0.90
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
- ---------------------------------------------------------------------------------------------------
1A10 -The Ashe 104 748 $ 629 $ 0.84 $ 65,416 $ 784,992
2A20 - The Burke 60 1,070 $ 759 $ 0.71 $ 45,540 $ 546,480
2A25 - The Dave 17 1,224 $ 839 $ 0.69 $ 14,263 $ 171,156
3A20 - The Franklin 20 1,282 $ 1,096 $ 0.85 $ 21,920 $ 263,040
Total $147,139 $1,765,668
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
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
SUMMARY OF HISTORICAL INCOME & EXPENSES
FISCAL YEAR 2000 FISCAL YEAR 2001 FISCAL YEAR 2002 FISCAL YEAR 2003
-------------------------------------------------------------------------------------------
DESCRIPTION ACTUAL ACTUAL ACTUAL MANAGEMENT BUDGET
-------------------------------------------------------------------------------------------
TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT
- ------------------------ -------------------------------------------------------------------------------------------
Revenues
Rental Income $1,822,332 $ 9,066 $1,843,700 $ 9,173 $1,704,498 $ 8,480 $ 1,704,536 $ 8,480
Vacancy $ 112,623 $ 560 $ 144,414 $ 718 $ 124,550 $ 620 $ 111,305 $ 554
Credit Loss/Concessions $ 54,885 $ 273 $ 101,627 $ 506 $ 39,022 $ 194 $ 32,100 $ 160
------------------------------------------------------------------------------------------
Subtotal $ 167,508 $ 833 $ 246,041 $ 1,224 $ 163,572 $ 814 $ 143,405 $ 713
Laundry Income $ 3,752 $ 19 $ 2,012 $ 10 $ 2,995 $ 15 $ 9,312 $ 46
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 24,158 $ 120 $ 48,776 $ 243 $ 59,693 $ 297 $ 48,850 $ 243
------------------------------------------------------------------------------------------
Subtotal Other Income $ 27,910 $ 139 $ 50,788 $ 253 $ 62,688 $ 312 $ 58,162 $ 289
------------------------------------------------------------------------------------------
Effective Gross Income $1,682,734 $ 8,372 $1,648,447 $ 8,201 $1,603,614 $ 7,978 $ 1,619,293 $ 8,056
------------------------------------------------------------------------------------------
Operating Expenses
Taxes $ 94,297 $ 469 $ 46,734 $ 233 $ 134,881 $ 671 $ 94,775 $ 472
Insurance $ 24,322 $ 121 $ 38,100 $ 190 $ 36,458 $ 181 $ 38,944 $ 194
Utilities $ 65,054 $ 324 $ 63,091 $ 314 $ 71,271 $ 355 $ 63,600 $ 316
Repair & Maintenance $ 102,117 $ 508 $ 107,540 $ 535 $ 95,723 $ 476 $ 86,400 $ 430
Cleaning $ 3,136 $ 16 $ 2,085 $ 10 $ 1,675 $ 8 $ 0 $ 0
Landscaping $ 21,645 $ 108 $ 21,381 $ 106 $ 19,118 $ 95 $ 39,444 $ 196
Security $ 1,946 $ 10 $ 1,263 $ 6 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 43,084 $ 214 $ 28,612 $ 142 $ 31,028 $ 154 $ 34,608 $ 172
General Administrative $ 212,556 $ 1,057 $ 247,034 $ 1,229 $ 213,028 $ 1,060 $ 154,012 $ 766
Management $ 87,825 $ 437 $ 87,695 $ 436 $ 84,210 $ 419 $ 86,400 $ 430
Miscellaneous ($ 14,649) -$ 73 ($ 8,805) -$ 44 ($ 647) -$ 3 $ 0 $ 0
------------------------------------------------------------------------------------------
Total Operating Expenses $ 641,333 $ 3,191 $ 634,730 $ 3,158 $ 686,745 $ 3,417 $ 598,183 $ 2,976
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------------------------------
Net Income $1,041,401 $ 5,181 $1,013,717 $ 5,043 $ 916,869 $ 4,562 $ 1,021,110 $ 5,080
ANNUALIZED 2003
-------------------
DESCRIPTION PROJECTION AAA PROJECTION
----------------------------------------------
TOTAL PER UNIT TOTAL PER UNIT %
- -----------------------------------------------------------------------
Revenues
Rental Income $1,647,396 $ 8,196 $1,765,668 $ 8,784 100.0%
Vacancy $ 194,100 $ 966 $ 123,597 $ 615 7.0%
Credit Loss/Concessions $ 44,580 $ 222 $ 35,313 $ 176 2.0%
----------------------------------------------
Subtotal $ 238,680 $ 1,187 $ 158,910 $ 791 9.0%
Laundry Income $ 9,188 $ 46 $ 6,030 $ 30 0.3%
Garage Revenue $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 41,804 $ 208 $ 48,240 $ 240 2.7%
----------------------------------------------
Subtotal Other Income $ 50,992 $ 254 $ 54,270 $ 270 3.1%
----------------------------------------------
Effective Gross Income $1,459,708 $ 7,262 $1,661,028 $ 8,264 100.0%
Operating Expenses
Taxes $ 95,300 $ 474 $ 90,450 $ 450 5.4%
Insurance $ 72,120 $ 359 $ 35,175 $ 175 2.1%
Utilities $ 86,032 $ 428 $ 75,375 $ 375 4.5%
Repair & Maintenance $ 153,112 $ 762 $ 100,500 $ 500 6.1%
Cleaning $ 5,820 $ 29 $ 3,015 $ 15 0.2%
Landscaping $ 39,524 $ 197 $ 40,200 $ 200 2.4%
Security $ 0 $ 0 $ 0 $ 0 0.0%
Marketing & Leasing $ 60,312 $ 300 $ 35,175 $ 175 2.1%
General Administrative $ 230,096 $ 1,145 $ 221,100 $ 1,100 13.3%
Management $ 70,648 $ 351 $ 83,051 $ 413 5.0%
Miscellaneous $ 0 $ 0 $ 0 $ 0 0.0%
----------------------------------------------
Total Operating Expenses $ 812,964 $ 4,045 $ 684,041 $ 3,403 41.2%
Reserves $ 0 $ 0 $ 50,250 $ 250 7.3%
----------------------------------------------
Net Income $ 646,744 $ 3,218 $ 926,736 $ 4,611 55.8%
----------------------------------------------
REVENUES AND EXPENSES
The subject's revenue and expense projections are displayed on the previous
chart. Rental income is based on the market analysis previously discussed. Other
income consists of forfeited deposits, laundry income, late rent payments, month
to month fees, pet fees, vending machine revenue, etc.
We forecasted the property's annual operating expenses after reviewing its
historical performance at the subject property. We analyzed each item of expense
and attempted to forecast amounts a typical informed investor would consider
reasonable.
VACANCY AND COLLECTION LOSS
An investor is primarily interested in the annual revenue an income property is
likely to produce over a specified period of time, rather than the income it
could produce if it were always 100% occupied and all tenants were paying their
rent in full and on time. An investor normally expects some income loss as
tenants vacate, fail to pay rent, or pay their rent late.
We have projected a stabilized vacancy and collection loss rate of 9% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
RESERVES FOR REPLACEMENT
"Reserves for replacements" is a contingency account allocated to the expenses
of the property to provide for replacement of short-lived items and for
unforeseen necessary capital expenditures. We have utilized the Korpacz Real
Estate Investor Survey of the national apartment market, which reports a range
of replacement reserves between $150 and $400 per unit. For purposes of this
analysis, we have included an allowance of $250 per unit for reserves for
replacement.
CAPITAL EXPENDITURES
Capital expenditures represent expenses for immediate repair or replacement of
items that have average to long lives. Based on our inspection of the property
as well as discussions with property management personnel, there are no major
items remaining in need of repair or replacement that would require an expense
beyond our reserves for replacement. Therefore an allowance of $250 per unit
should be satisfactory in our reserves for replacement to cover future capital
expenditures.
DISCOUNTED CASH FLOW ANALYSIS
As the subject is a multi-tenant income property, the Discounted Cash Flow
Method is considered appropriate. This method is especially meaningful in that
it isolates the timing of the annual cash flows and discounts them, along with
the expected equity reversion, to a present value. The present value of the cash
flow is added to the present value of the reversion, resulting in a total
property value.
INVESTMENT CRITERIA
Appropriate investment criteria will be derived for the subject based upon
analysis of comparable sales and a survey of real estate investors. The
following table summarizes the findings of Korpacz National Investor Survey for
the most recent period.
KORPACZ NATIONAL INVESTOR SURVEY
1ST QUARTER 2003
NATIONAL APARTMENT MARKET
CAPITALIZATION RATES
GOING-IN TERMINAL
-----------------------------------------------------
LOW HIGH LOW HIGH
-----------------------------------------------------
RANGE 6.00% 10.00% 7.00% 10.00%
AVERAGE 8.14% 8.47%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
SUMMARY OF OVERALL
CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
- ---------------------------------------------------------------------------------
I-1 Nov-01 98% $61,224 9.43%
I-2 Oct-01 90% $38,375 10.63%
I-3 Apr-01 92% $61,500 8.70%
I-4 Aug-00 89% $47,011 9.38%
I-5 Dec-00 83% $51,042 9.47%
High 10.63%
Low 8.70%
Average 9.52%
Based on this information, we have concluded the subject's overall
capitalization rate should be 9.50%. The terminal capitalization rate is applied
to the net operating income estimated for the year following the end of the
holding period. Based on the concluded overall capitalization rate, the age of
the property and the surveyed information, we have concluded the subject's
terminal capitalization rate to be 10.00%. Finally, the subject's discount rate
or yield rate is estimated based on the previous investor survey and an
examination of returns available on alternative investments in the market. Based
on this analysis, the subject's discount rate is estimated to be 11.50%.
HOLDING PERIOD
The survey of investors indicates that most investors are completing either
10-year cash flows or extending the analysis to the end of the lease if it is
more than 10-years. A 10-year period has been used in the analysis of the
subject with the eleventh year stabilized NOI used to determine the reversion.
SELLING COSTS
Sales of similar size properties are typically accomplished with the aid of a
broker and will also incur legal and other transaction related cost. Based on
our survey of brokers and a review of institutional investor projections, an
allowance of 3.00% of the sale amount is applied.
DISCOUNTED CASH FLOW CONCLUSION
Discounting the annual cash flows and the equity reversion at the selected rate
of 11.50% indicates a value of $9,500,000. In this instance, the reversion
figure contributes
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
approximately 39% of the total value. Investors surveyed for this assignment
indicated they would prefer to have the cash flow contribute anywhere from 50%
to 60%. Overall, the blend seems reasonable. The cash flow and pricing matrix
are located on the following pages.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 33
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
DISCOUNTED CASH FLOW ANALYSIS
LAKE JOHNSON MEWS
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009
FISCAL YEAR 1 2 3 4 5 6
- --------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $1,765,668 $1,765,668 $1,792,153 $1,827,996 $1,882,836 $1,939,321
Vacancy $ 123,597 $ 123,597 $ 125,451 $ 127,960 $ 131,799 $ 135,752
Credit Loss $ 35,313 $ 35,313 $ 35,843 $ 36,560 $ 37,657 $ 38,786
Concessions $ 35,313 $ 26,485 $ 17,922 $ 0 $ 0 $ 0
------------------------------------------------------------------------
Subtotal $ 194,223 $ 185,395 $ 179,215 $ 164,520 $ 169,455 $ 174,539
Laundry Income $ 6,030 $ 6,030 $ 6,120 $ 6,243 $ 6,430 $ 6,623
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 48,240 $ 48,240 $ 48,964 $ 49,943 $ 51,441 $ 52,984
------------------------------------------------------------------------
Subtotal Other Income $ 54,270 $ 54,270 $ 55,084 $ 56,186 $ 57,871 $ 59,607
EFFECTIVE GROSS INCOME $1,625,715 $1,634,543 $1,668,022 $1,719,662 $1,771,252 $1,824,390
------------------------------------------------------------------------
OPERATING EXPENSES:
Taxes $ 90,450 $ 93,164 $ 95,958 $ 98,837 $ 101,802 $ 104,856
Insurance $ 35,175 $ 36,230 $ 37,317 $ 38,437 $ 39,590 $ 40,777
Utilities $ 75,375 $ 77,636 $ 79,965 $ 82,364 $ 84,835 $ 87,380
Repair & Maintenance $ 100,500 $ 103,515 $ 106,620 $ 109,819 $ 113,114 $ 116,507
Cleaning $ 3,015 $ 3,105 $ 3,199 $ 3,295 $ 3,393 $ 3,495
Landscaping $ 40,200 $ 41,406 $ 42,648 $ 43,928 $ 45,245 $ 46,603
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 35,175 $ 36,230 $ 37,317 $ 38,437 $ 39,590 $ 40,777
General Administrative $ 221,100 $ 227,733 $ 234,565 $ 241,602 $ 248,850 $ 256,315
Management $ 81,286 $ 81,727 $ 83,401 $ 85,983 $ 88,563 $ 91,219
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $ 682,276 $ 700,747 $ 720,991 $ 742,701 $ 764,982 $ 787,932
Reserves $ 50,250 $ 51,758 $ 53,310 $ 54,910 $ 56,557 $ 58,254
------------------------------------------------------------------------
NET OPERATING INCOME $ 893,189 $ 882,039 $ 893,720 $ 922,052 $ 949,713 $ 978,204
========================================================================
Operating Expense Ratio (% of EGI) 42.0% 42.9% 43.2% 43.2% 43.2% 43.2%
Operating Expense Per Unit $ 3,394 $ 3,486 $ 3,587 $ 3,695 $ 3,806 $ 3,920
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 7 8 9 10 11
- -----------------------------------------------------------------------------------------------
REVENUE
Base Rent $1,997,501 $2,057,426 $2,119,148 $2,182,723 $2,248,205
Vacancy $ 139,825 $ 144,020 $ 148,340 $ 152,791 $ 157,374
Credit Loss $ 39,950 $ 41,149 $ 42,383 $ 43,654 $ 44,964
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------
Subtotal $ 179,775 $ 185,168 $ 190,723 $ 196,445 $ 202,338
Laundry Income $ 6,822 $ 7,026 $ 7,237 $ 7,454 $ 7,678
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 54,574 $ 56,211 $ 57,897 $ 59,634 $ 61,423
----------------------------------------------------------
Subtotal Other Income $ 61,396 $ 63,238 $ 65,135 $ 67,089 $ 69,101
EFFECTIVE GROSS INCOME $1,879,121 $1,935,495 $1,993,560 $2,053,367 $2,114,968
----------------------------------------------------------
OPERATING EXPENSES:
Taxes $ 108,002 $ 111,242 $ 114,579 $ 118,017 $ 121,557
Insurance $ 42,001 $ 43,261 $ 44,559 $ 45,895 $ 47,272
Utilities $ 90,002 $ 92,702 $ 95,483 $ 98,347 $ 101,298
Repair & Maintenance $ 120,002 $ 123,602 $ 127,310 $ 131,130 $ 135,064
Cleaning $ 3,600 $ 3,708 $ 3,819 $ 3,934 $ 4,052
Landscaping $ 48,001 $ 49,441 $ 50,924 $ 52,452 $ 54,025
Security $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 42,001 $ 43,261 $ 44,559 $ 45,895 $ 47,272
General Administrative $ 264,005 $ 271,925 $ 280,083 $ 288,485 $ 297,140
Management $ 93,956 $ 96,775 $ 99,678 $ 102,668 $ 105,748
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------
TOTAL OPERATING EXPENSES $ 811,570 $ 835,917 $ 860,994 $ 886,824 $ 913,429
Reserves $ 60,001 $ 61,801 $ 63,655 $ 65,565 $ 67,532
----------------------------------------------------------
NET OPERATING INCOME $1,007,551 $1,037,777 $1,068,910 $1,100,978 $1,134,007
==========================================================
Operating Expense Ratio (% of EGI) 43.2% 43.2% 43.2% 43.2% 43.2%
Operating Expense Per Unit $ 4,038 $ 4,159 $ 4,284 $ 4,412 $ 4,544
Gross Residual Sale Price $11,340,071 Deferred Maintenance $ 0
Estimated Stabilized NOI $926,736 Sales Expense Rate 3.00% Less: Sales Expense $ 340,202 Add: Excess Land $ 0
-----------
Months to Stabilized 1 Discount Rate 11.50% Net Residual Sale Price $10,999,869 Other Adjustments $ 0
-----------
Stabilized Occupancy 93.0% Terminal Cap Rate 10.00% PV of Reversion $ 3,703,726 Value Indicated By $ 9,534,848
"DCF"
Add: NPV of NOI $ 5,831,122 Rounded $ 9,500,000
-----------
PV Total $ 9,534,848
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE
-------------------------------------------------------------------
TOTAL VALUE 11.00% 11.25% 11.50% 11.75% 12.00%
- ---------------------------- -------------------------------------------------------------------
TERMINAL 9.50% $10,046,921 $9,886,618 $9,729,781 $9,576,322 $9,426,157
CAP RATE 9.75% $ 9,942,360 $9,784,384 $9,629,815 $9,478,570 $9,330,566
10.00% $ 9,843,027 $9,687,260 $9,534,848 $9,385,706 $9,239,754
10.25% $ 9,748,540 $9,594,875 $9,444,513 $9,297,372 $9,153,372
10.50% $ 9,658,552 $9,506,889 $9,358,480 $9,213,245 $9,071,103
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
INCOME LOSS DURING LEASE-UP
The subject is currently near or at a stabilized condition. Therefore, there is
no income loss during lease-up at the subject property.
CONCESSIONS
Due to softness in the market, concessions have been utilized at the subject
property and within the market. Based on our discussions with the subject's
property manager and those at competing properties, these concessions are
expected to continue in the near term until the market returns to a stabilized
level. Concessions have been included as a line item deduction within the
discounted cash flow analysis. The present value of these concessions equates to
$66,000 (rounded). This amount has been deducted from the Direct Capitalization
analysis, as well as the Sales Comparison Approach value.
DIRECT CAPITALIZATION METHOD
After having projected the income and expenses for the property, the next step
in the valuation process is to capitalize the net income into an estimate of
value. The selected overall capitalization rate ("OAR") covers both return on
and return of capital. It is the overall rate of return an investor expects.
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 9.50% percent is applicable to the
subject. The results of our direct capitalization analysis are as follows:
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
LAKE JOHNSON MEWS
TOTAL PER SQ. FT. PER UNIT %OF EGI
REVENUE
Base Rent $1,765,668 $ 9.37 $ 8,784
Less: Vacancy & Collection Loss 9.00% $ 158,910 $ 0.84 $ 791
Plus: Other Income
Laundry Income $ 6,030 $ 0.03 $ 30 0.36%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 48,240 $ 0.26 $ 240 2.90%
---------- ----------- -------- ----
Subtotal Other Income $ 54,270 $ 0.29 $ 270 3.27%
EFFECTIVE GROSS INCOME $1,661,028 $ 8.81 $ 8,264
OPERATING EXPENSES:
Taxes $ 90,450 $ 0.48 $ 450 5.45%
Insurance $ 35,175 $ 0.19 $ 175 2.12%
Utilities $ 75,375 $ 0.40 $ 375 4.54%
Repair & Maintenance $ 100,500 $ 0.53 $ 500 6.05%
Cleaning $ 3,015 $ 0.02 $ 15 0.18%
Landscaping $ 40,200 $ 0.21 $ 200 2.42%
Security $ 0 $ 0.00 $ 0 0.00%
Marketing & Leasing $ 35,175 $ 0.19 $ 175 2.12%
General Administrative $ 221,100 $ 1.17 $ 1,100 13.31%
Management 5.00% $ 83,051 $ 0.44 $ 413 5.00%
Miscellaneous $ 0 $ 0.00 $ 0 0.00%
TOTAL OPERATING EXPENSES $ 684,041 $ 3.63 $ 3,403 41.18%
Reserves $ 50,250 $ 0.27 $ 250 3.03%
---------- ----------- -------- ----
NET OPERATING INCOME $ 926,736 $ 4.92 $ 4,611 55.79%
"GOING IN" CAPITALIZATION RATE 9.50%
VALUE INDICATION $9,755,121 $ 51.77 $ 48,533
PV OF CONCESSIONS ($ 66,000)
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $9,689,121
ROUNDED $9,700,000 $ 51.48 $ 48,259
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- -----------------------------------------------------------------
8.75% $10,525,274 $10,500,000 $ 52,239 $55.72
9.00% $10,231,072 $10,200,000 $ 50,746 $54.13
9.25% $ 9,952,773 $10,000,000 $ 49,751 $53.07
9.50% $ 9,689,121 $ 9,700,000 $ 48,259 $51.48
9.75% $ 9,438,990 $ 9,400,000 $ 46,766 $49.88
10.00% $ 9,201,365 $ 9,200,000 $ 45,771 $48.82
10.25% $ 8,975,332 $ 9,000,000 $ 44,776 $47.76
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $9,700,000.
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 $9,500,000
Direct Capitalization Method $9,700,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$9,500,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
RECONCILIATION AND CONCLUSION
This appraisal was made to express an opinion as of the Market Value of the fee
simple estate in the property.
AS IS MARKET VALUE OF THE FEE SIMPLE ESTATE
Cost Approach Not Utilized
Sales Comparison Approach $9,200,000
Income Approach $9,500,000
Reconciled Value $9,500,000
The Direct Capitalization Method is considered a reliable indicator of value.
Income and expenses were estimated and projected based on historical operating
statements and market oriented expenses. This method is primarily used by
investors in their underwriting analysis. Furthermore, there was good support
for an overall rate in the Direct Capitalization Method.
The Sales Comparison Approach to value supported the value conclusion by the
Income Approach and was given secondary consideration. Investment-grade,
income-producing properties such as the subject are not typically traded based
on cost. Therefore, the Cost Approach has not been considered in our valuation.
FINAL VALUE - FEE SIMPLE ESTATE
Based on the investigation and premise outlined, it is our opinion that as of
May 12, 2003 the market value of the fee simple estate in the property is:
$9,500,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
EXTERIOR - PROPERTY SIGN EXTERIOR - OFFICE
[PICTURE] [PICTURE]
INTERIOR - OFFICE EXTERIOR - APARTMENT UNIT
[PICTURE] [PICTURE]
EXTERIOR - APARTMENT UNIT EXTERIOR - APARTMENT UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
INTERIOR - TYPICAL UNIT INTERIOR - TYPICAL KITCHEN
[PICTURE] [PICTURE]
EXTERIOR - TYPICAL BALCONY EXTERIOR - SWIMMING POOL
[PICTURE] [PICTURE]
EXTERIOR - MAINTENANCE BUILDING INTERIOR - LAUNDRY FACILITY
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
CALIBRE CHASE CARDINAL WOODS TREYBROOKE
231 Calibre Chase Drive 1331 Wicklow Drive 201 Treybrooke
Raleigh, North Carolina Cary, North Carolina Raleigh, North Carolina
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
OXFORD SQUARE OAK HOLLOW
1000 Village Greenway 100 Kempwood Drive
Raleigh, North Carolina Raleigh, North Carolina
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
----------- ------- ----------
Property Name Lake Johnson Mews Summit at Avent Ferry
Management Company AIMCO Northland Investment Corp.
LOCATION:
Address 4233 Avent Ferry Road 1025 Avent Hill
City, State Raleigh, North Carolina Ralegh, North Carolina
County Wake Wake
Proximity to Subject 0.50 mile east of the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 188,440 193,200
Year Built 1972 1985
Effective Age 25 18
Building Structure Type Wood/Vinyl siding walls; composition Brick and wood/vinyl siding walls; composition
shingle roof shingle roof
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 201 222
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1A10 - The Ashe 748 104 $ 626 1 1BD/1BH - Type 1 700 80 $685
2 2A20 - The Burke 1,070 60 $ 755 1BD/1BH - Type 2 880 70 $740
3 2A25 - The Dave 1,224 17 $ 832 2 2BD/2BH 1,050 72 $835
4 3A20 - The Franklin 1,282 20 $1,096
Average Unit Size (SF) 938 870
Unit Breakdown: Efficiency 0% 2-Bedroom 38% Efficiency 0% 2-Bedroom 32%
1-Bedroom 52% 3-Bedroom 10% 1-Bedroom 68% 3-Bedroom 0%
CONDITION: Average Average
APPEAL: Average Average
AMENITIES:
Unit Amenities Attach. Garage X Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony X Balcony
X 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 X 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 X Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball Laundry Room
X Jogging Track Business Office X Jogging Track Business Office
Gym Room X Gym Room
OCCUPANCY: 91% 86%
LEASING DATA:
Available Leasing Terms 6 to 18 Months 6 to 12 Months
Concessions $400 of 1st months rent with a 12-month lease None
Pet Deposit $250 with $150 non-refundable $100
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
Water Trash Water Trash
Confirmation Kellie Goldberg Property Manager Lisa Silver
Telephone Number 919-851-3200 919-859-1700
NOTES: None
COMPARISON TO SUBJECT: Slightly Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
----------- ---------- ----------
Property Name Dominion Walnut Creek Remington Place
Management Company United Dominion Realty Trust Cornerstone Realty
LOCATION:
Address 3201 Waslnut Creek Parkway 1909 Eyrie Court
City, State Ralegh, North Carolina Ralegh, North Carolina
County Wake Wake
Proximity to Subject 0.50 mile southeast of the subject 0.75 mile southeast of the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 478,680 256,216
Year Built 1985 1985
Effective Age 18 18
Building Structure Type Brick and wood/vinyl siding walls; Wood/Vinyl siding walls; composition
composition shingle roof shingle roof
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 576 136
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1BD/1BH - Type 1 670 128 $ 494 1 1BD/1BH - Type 1 933 42 $715
1 1BD/1BH - Type 2 720 208 $ 570 1BD/1BH - Type 2 1,093 30 $765
2 2BD/2BH - Type 1 955 104 $ 670 3 2BD/2BH - Type 1 1,343 40 $895
2 2BD/2BH - Type 2 970 104 $ 770 2BD/2BH - Type 2 1,414 24 $965
4 3BD/2BH 1,100 32 $1,024
818 1,174
Average Unit Size (SF) Efficiency 0% 2-Bedroom 36% Efficiency 0% 2-Bedroom 47%
Unit Breakdown: 1-Bedroom 58% 3-Bedroom 6% 1-Bedroom 53% 3-Bedroom 0%
Average Average
CONDITION: Average Average
APPEAL:
AMENITIES: Attach. Garage X Vaulted Ceiling Attach. Garage Vaulted Ceiling
Unit Amenities X Balcony X X Balcony
X Fireplace X Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
X Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
X Basketball Court BBQ Equipment Basketball Court BBQ Equipment
X Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball Laundry Room
X Jogging Track Business Office Jogging Track X Business Office
X Gym Room X Gym Room
OCCUPANCY: 92% 99%
LEASING DATA:
Available Leasing Terms 6 to 12 Months 6 to 12 Months
Concessions Move-in special of $399 for 1st 2-months Reduced rents ($50 to $75 off)
Pet Deposit $450 $300
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water X Trash X Water Trash
Confirmation Mara Brown Jennifer Byrd
Telephone Number 919-851-5115 919-851-2211
NOTES: None None
COMPARISON TO SUBJECT: Similar Similar
COMPARABLE COMPARABLE
DESCRIPTION R - 4 R - 5
----------- ---------- ----------
Property Name Clarion Crossing Sumter Square
Management Company Cornerstone Realty Drucker & Falk LLC
LOCATION:
Address 1141 Crab Orchard Drive 613 Charleston Road
City, State Ralegh, North Carolina Ralegh, North Carolina
County Wake Wake
Proximity to Subject 0.75 mile east of the subject 0.90 mile northwest of the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 208,888 368,800
Year Built 1972 1970
Effective Age 31 33
Building Structure Type Wood/Vinyl siding walls; composition Brick and wood/vinyl siding walls; composition
shingle roof shingle
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 260 391
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1EFF 420 40 $ 399 1 1BD/1BH 700 50 $565
1BD/1BH - Type 1 562 20 $ 499 3 2BD/1BH 800 96 $635
1 1BD/1BH - Type 2 606 20 $ 560 2BD/1.5BH - Type 1 1,000 86 $665
1 1BD/1BH - Type 3 706 20 $ 595 2BD/1.5BH - Type 2 1,050 78 $695
1 1BD/1BH - Type 4 776 20 $ 690 3BD/2BH 1,100 81 $760
2BD/1BH 880 60 $ 599
2 2BD/1.5BH 1,100 48 $ 790
2 2BD/2BH 964 20 $ 875
4 3BD/2BH 1,184 12 $1,037
Average Unit Size (SF) 803 943
Unit Breakdown: Efficiency 15% 2-Bedroom 49% Efficiency 0% 2-Bedroom 66%
1-Bedroom 31% 3-Bedroom 5% 1-Bedroom 13% 3-Bedroom 21%
CONDITION: Average Average
APPEAL: Average Average
AMENITIES:
Unit Amenities Attach. Garage X 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 Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball Laundry Room Racquet Ball X Laundry Room
Jogging Track Business Office Jogging Track Business Office
Gym Room X Gym Room
OCCUPANCY: 90% 86%
LEASING DATA:
Available Leasing Terms 3 to 15 Months 6 to 12 Months
Concessions Reduced rents Reduced rents ($30 off market rent)
Pet Deposit $300 $200
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water Trash Water Trash
Confirmation Leasing agent Sara McClure
Telephone Number 919-851-1910 919-851-3343
NOTES: None None
COMPARISON TO SUBJECT: Similar Similar
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
SUMMIT AT AVENT FERRY DOMINION WALNUT CREEK REMINGTON PLACE
1025 Avent Hill 3201 Waslnut Creek Parkway 1909 Eyrie Court
Ralegh, North Carolina Ralegh, North Carolina Ralegh, North Carolina
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4 COMPARABLE R-5
CLARION CROSSING SUMTER SQUARE
1141 Crab Orchard Drive 613 Charleston Road
Ralegh, North Carolina Ralegh, North Carolina
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
No responsibility is assumed for matters legal in nature. No investigation has
been made of the title to or any liabilities against the property appraised. In
this appraisal, it is presumed that, unless otherwise noted, the owner's claim
is valid, the property rights are good and marketable, and there are no
encumbrances which cannot be cleared through normal processes.
To the best of our knowledge, all data set forth in this report are true and
accurate. Although gathered from reliable sources, no guarantee is made nor
liability assumed for the accuracy of any data, opinions, or estimates
identified as being furnished by others which have been used in formulating this
analysis.
Land areas and descriptions used in this appraisal were obtained from public
records and have not been verified by legal counsel or a licensed surveyor.
No soil analysis or geological studies were ordered or made in conjunction with
this report, nor were any water, oil, gas, or other subsurface mineral and use
rights or conditions investigated.
Substances such as asbestos, urea-formaldehyde foam insulation, other chemicals,
toxic wastes, or other potentially hazardous materials could, if present,
adversely affect the value of the property. Unless otherwise stated in this
report, the existence of hazardous substance, which may or may not be present on
or in the property, was not considered by the appraiser in the development of
the conclusion of value. The stated value estimate is predicated on the
assumption that there is no material on or in the property that would cause such
a loss in value. No responsibility is assumed for any such conditions, and the
client has been advised that the appraiser is not qualified to detect such
substances, quantify the impact on values, or develop the remedial cost.
No environmental impact study has been ordered or made. Full compliance with
applicable federal, state, and local environmental regulations and laws is
assumed unless otherwise stated, defined, and considered in the report. It is
also assumed that all required licenses, consents, or other legislative or
administrative authority from any local, state, or national government or
private entity organization either have been or can be obtained or renewed for
any use which the report covers.
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
It is assumed that all applicable zoning and use regulations and restrictions
have been complied with unless a nonconformity has been stated, defined, and
considered in the appraisal report. Further, it is assumed that the utilization
of the land and improvements is within the boundaries of the property described
and that no encroachment or trespass exists unless noted in the report.
The Americans with Disabilities Act ("ADA") became effective January 26, 1992.
We have not made a specific compliance survey and analysis of this property to
determine whether or not it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the property
together with a detailed analysis of the requirements of the ADA could reveal
that the property is not in compliance with one or more of the requirements of
the act. If so, this fact could have a negative effect on the value of the
property. Since we have no direct evidence relating to this issue, we did not
consider the possible noncompliance with the requirements of ADA in estimating
the value of the property.
We have made a physical inspection of the property and noted visible physical
defects, if any, in our report. This inspection was made by individuals
generally familiar with real estate and building construction. However, these
individuals are not architectural or structural engineers who would have
detailed knowledge of building design and structural integrity. Accordingly, we
do not opine on, nor are we responsible for, the structural integrity of the
property including its conformity to specific governmental code requirements,
such as fire, building and safety, earthquake, and occupancy, or any physical
defects which were not readily apparent to the appraiser during the inspection.
The value or values presented in this report are based upon the premises
outlined herein and are valid only for the purpose or purposes stated.
The date of value to which the conclusions and opinions expressed apply is set
forth in this report. The value opinion herein rendered is based on the status
of the national business economy and the purchasing power of the U.S. dollar as
of that date.
Testimony or attendance in court or at any other hearing is not required by
reason of this appraisal unless arrangements are previously made within a
reasonable time in advance for
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
such testimony, and then such testimony shall be at American Appraisal
Associates, Inc.'s, prevailing per diem for the individuals involved.
Possession of this report or any copy thereof does not carry with it the right
of publication. No portion of this report (especially any conclusion to use, the
identity of the appraiser or the firm with which the appraiser is connected, or
any reference to the American Society of Appraisers or the designations awarded
by this organization) shall be disseminated to the public through prospectus,
advertising, public relations, news, or any other means of communication without
the written consent and approval of American Appraisal Associates, Inc.
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
EXHIBIT D
CERTIFICATE OF APPRAISER
(1 PAGE)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D
CERTIFICATE OF APPRAISER
I certify that, to the best of my knowledge and belief:
The statements of fact contained in this report are true and correct.
The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and represent the
unbiased professional analyses, opinions, and conclusions of American
Appraisal Associates, Inc.
American Appraisal Associates, Inc. and I personally, have no present
or prospective interest in the property that is the subject of this
report and have no personal interest or bias with respect to the
parties involved.
Compensation for American Appraisal Associates, Inc. is not contingent
on an action or event resulting from the analyses, opinions, or
conclusions in, or the use of, this report.
The analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the requirements of the Uniform
Standards of Professional Appraisal Practice and the Code of
Professional Ethics and the Standards of Professional Practice of the
Appraisal Institute.
The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
I personally did not inspect the subject property. Jimmy Pat James, MAI
and J. Chad Walker provided significant real property appraisal
assistance in the preparation of this report.
I am currently in compliance with the Appraisal Institute's continuing
education requirements.
-s- Frank Fehribach
-------------------------------------
Frank Fehribach, MAI
Managing Principal, Real Estate Group
North Carolina Temporary Practice Permit
#2578
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
FRANK A. FEHRIBACH, MAI
MANAGING PRINCIPAL, REAL ESTATE GROUP
POSITION Frank A. Fehribach is a Managing Principal for the Dallas Real
Estate Group of American Appraisal Associates, Inc. ("AAA").
EXPERIENCE
Valuation Mr. Fehribach has experience in valuations for resort hotels;
Class A office buildings; Class A multifamily complexes;
industrial buildings and distribution warehousing; multitract
mixed-use vacant land; regional malls; residential subdivision
development; and special-purpose properties such as athletic
clubs, golf courses, manufacturing facilities, nursing homes,
and medical buildings. Consulting assignments include
development and feasibility studies, economic model creation
and maintenance, and market studies.
Mr. Fehribach also has been involved in overseeing appraisal
and consulting assignments in Mexico and South America.
Business Mr. Fehribach joined AAA as an engagement director in 1998. He
was promoted to his current position in 1999. Prior to that,
he was a manager at Arthur Andersen LLP. Mr. Fehribach has
been in the business of real estate appraisal for over ten
years.
EDUCATION University of Texas - Arlington
Master of Science - Real Estate
University of Dallas
Master of Business Administration - Industrial
Management
Bachelor of Arts - Economics
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
STATE CERTIFICATIONS State of Arizona, Certified General Real Estate
Appraiser, #30828
State of Arkansas, State Certified General Appraiser,
#CG1387N
State of Colorado, Certified General Appraiser,
#CG40000445
State of Georgia, Certified General Real Property
Appraiser, #218487
State of Michigan, Certified General Appraiser,
#1201008081
State of Texas, Real Estate Salesman License, #407158
(Inactive)
State of Texas, State Certified General Real Estate
Appraiser, #TX-1323954-G
PROFESSIONAL Appraisal Institute, MAI Designated Member Candidate
AFFILIATIONS Member of the CCIM Institute pursuing Certified
Commercial Investment Member (CCIM) designation
PUBLICATIONS "An Analysis of the Determinants of Industrial Property
-authored with Dr. Ronald C. Rutherford and
Dr. Mark Eakin, The Journal of Real Estate Research, Vol
. 8, No. 3, Summer 1993, p. 365.
AMERICAN APPRAISAL ASSOCIATES, INC.
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
LAKE JOHNSON MEWS, RALEIGH, NORTH CAROLINA
GENERAL SERVICE CONDITIONS
The services(s) provided by AAA will be performed in accordance with
professional appraisal standards. Our compensation is not contingent in any way
upon our conclusions of value. We assume, without independent verification, the
accuracy of all data provided to us. We will act as an independent contractor
and reserve the right to use subcontractors. All files, workpapers or documents
developed by us during the course of the engagement will be our property. We
will retain this data for at least five years.
Our report is to be used only for the specific purpose stated herein; and any
other use is invalid. No reliance may be made by any third party without our
prior written consent. You may show our report in its entirety to those third
parties who need to review the information contained herein. No one should rely
on our report as a substitute for their own due diligence. We understand that
our reports will be described in public tender offer documents distributed to
limited partners. We reserve the right to review the public tender offer
documents prior to their issuance to confirm that disclosures of facts from the
current appraisals are accurate. No reference to our name or our report, in
whole or in part, in any other SEC filing or private placement memorandum you
prepare and/or distribute to third parties may be made without our prior written
consent.
The Tender Offer Partnerships, as that term is defined in the Settlement
Agreement, agree to indemnify and hold us harmless against and from any and all
losses, claims, actions, damages, expenses or liabilities, including reasonable
attorneys' fees, to which we may become subject in connection with this
engagement except where such losses, claims, actions, damages, expenses or
liabilities, including reasonable attorney's fees, arise or result from AAA's
misconduct, bad faith or negligence. Co-Clients will not be liable for any of
our acts or omissions.
AAA is an equal opportunity employer.