TATES CREEK VILLAGE
3051 KIRKLEVINGTON DRIVE
LEXINGTON, KENTUCKY
MARKET VALUE -
FEE SIMPLE ESTATE
AS OF NOVEMBER 19, 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]
UNITED STATES INTERNATIONAL
Atlanta Milwaukee [AMERICAN APPRAISAL ASSOCIATES(R) LOGO] Brazil Mexico
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Los Angeles
FEBRUARY 13, 2004
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: TATES CREEK VILLAGE
3051 KIRKLEVINGTON DRIVE
LEXINGTON, LEXINGTON-FAYETTE COUNTY, KENTUCKY
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 204 units with a
total of 194,910 square feet of rentable area. The improvements were built in
1970. The improvements are situated on 12 acres. Overall, the improvements are
in average condition. As of the date of this appraisal, the subject property is
89% occupied.
It is our understanding the appraisal will be used by the clients to assist the
San Mateo Superior Court in the settlement of litigation between the above
mentioned clients. The appraisal is intended to conform to the Uniform Standards
of Professional Appraisal Practice ("USPAP") as promulgated by the Appraisal
Standards Board of the Appraisal Foundation and the Code of Professional Ethics
and Standards of Professional Practice of the Appraisal Institute. The appraisal
is presented in a summary report, and the Departure Provision of USPAP has not
been invoked in this appraisal. It is entirely inappropriate to use this value
conclusion or the report for any purpose other than the one stated.
AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 2
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 November 19, 2003 is:
($6,500,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
By: /s/ JEFF W. BRIGGS
February 13, 2004 Jeff Briggs, MAI
#053272 Engagement Director, Real Estate Group
Commonwealth of Kentucky State Certified General
Real Property Appraiser #002611
Report By:
Daniel Salcedo
Commonwealth of Kentucky
Temporary Practice Permit #18794
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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........................................................ 15
Improvement Analysis................................................. 15
Highest and Best Use................................................. 16
VALUATION
Valuation Procedure.................................................. 17
Sales Comparison Approach............................................ 19
Income Capitalization Approach....................................... 25
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
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: Tates Creek Village
LOCATION: 3051 Kirklevington Drive
Lexington, Kentucky
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: November 19, 2003
DATE OF REPORT: February 13, 2004
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 12 acres, or 522,720 square feet
Assessor Parcel No.: 1262900
Floodplain: Community Panel No. 210067-0090 C (September 3, 1992)
Flood Zone X, an area outside the floodplain.
Zoning: R-3 (Planned Neighborhood Residential)
BUILDING:
No. of Units: 204 Units
Total NRA: 194,910 Square Feet
Average Unit Size: 955 Square Feet
Apartment Density: 17.0 units per acre
Year Built: 1970
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 - A 640 $520 $0.81 $ 16,640 $ 199,680
1Br/1Ba - B 720 $540 $0.75 $ 24,300 $ 291,600
1Br/1Ba - w/ Large Frt Dr 720 $560 $0.78 $ 3,920 $ 47,040
1Br/1Ba - w/o Large Frt 720 $560 $0.78 $ 560 $ 6,720
1Br/1Ba - B 720 $560 $0.78 $ 17,360 $ 208,320
2Br/1.5 - C 1,200 $700 $0.58 $ 21,700 $ 260,400
3Br/1.5Ba-D 1,250 $720 $0.58 $ 22,320 $ 267,840
3Br/2.5 Ba -E 1,500 $900 $0.60 $ 5,400 $ 64,800
3Br/2.5 Ba -F 1,550 $950 $0.61 $ 17,100 $ 205,200
1Br/1Ba - Efficiency 550 $450 $0.82 $ 900 $ 10,800
----- ---- ----- -------- ----------
Total $130,200 $1,562,400
==========================================================================
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
OCCUPANCY: 89%
ECONOMIC LIFE: 45 Years
EFFECTIVE AGE: 30 Years
REMAINING ECONOMIC LIFE: 15 Years
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
[SUBJECT PHOTOGRAPHS]
[PICTURE] [PICTURE]
EXTERIOR EXTERIOR - LANDSCAPE
AREA MAP
[MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
PART TWO - ECONOMIC INDICATORS
INCOME CAPITALIZATION APPROACH
Amount $/Unit
------ ------
DIRECT CAPITALIZATION
Potential Rental Income $1,562,400 $7,659
Effective Gross Income $1,461,240 $7,163
Operating Expenses $726,882 $3,563 49.7% of EGI
Net Operating Income: $673,158 $3,300
Capitalization Rate 10.50%
DIRECT CAPITALIZATION VALUE $6,400,000 * $31,373 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 14%
Stabilized Vacancy & Collection Loss: 10%
Lease-up / Stabilization Period N/A
Terminal Capitalization Rate 11.50%
Discount Rate 12.50%
Selling Costs 2.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $6,800,000 * $33,333 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $6,500,000 $31,863 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $26,180 to $50,702
Range of Sales $/Unit (Adjusted) $26,180 to $34,653
VALUE INDICATION - PRICE PER UNIT $6,600,000 * $32,353 / UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 4.41 to 8.11
Selected EGIM for Subject 4.25
Subject's Projected EGI $ 1,461,240
EGIM ANALYSIS CONCLUSION $6,200,000 * $30 ,392 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $6,500,000 * $31,863 / UNIT
RECONCILED SALES COMPARISON VALUE $6,500,000 * $31,863 / 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
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $6,600,000
NOI Per Unit $6,500,000
EGIM Multiplier $6,200,000
INDICATED VALUE BY SALES COMPARISON $6,500,000 $31,863 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $6,400,000
Discounted Cash Flow Method: $6,800,000
INDICATED VALUE BY THE INCOME APPROACH $6,500,000 $31,863 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $6,500,000 $31,863 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 3051 Kirklevington Drive, Lexington,
Lexington-Fayette County, Kentucky. Lexington-Fayette County identifies it as
tax parcel number 1262900.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by Daniel Salcedo on
November 19, 2003. Jeff Briggs, MAI has not made a personal inspection of the
subject property. Daniel Salcedo performed the research, valuation analysis and
wrote the report. Jeff Briggs, MAI reviewed the report and concurs with the
value. Both, Jeff Briggs, MAI and Daniel Salcedo 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 November 19, 2003.
The date of the report is February 13, 2004.
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
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 CCP 3. 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. The subject has been listed
for sale for approximately six months at a listed price of $7,050,000. However,
the potential buyer wanted a lower price due to maintenance issues and the deal
fell through.
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 11
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 Lexington, Kentucky. 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 - Alumni Road
West - SH-27
South - Man of War Blvd
North - Loop 4
MAJOR EMPLOYERS
Major employers in the subject's area include University of Kentucky, Toyota
Motor Manufacturing, Lexmark International, Fayette County Public School
District, University of Kentucky Hospital, Lexington-Fayette Urban Government
Central Baptist Hospital, Saint Joseph Hospital, and Kentucky Utilities. 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
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
NEIGHBORHOOD DEMOGRAPHICS
AREA
----------------------------------------
CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA
- -------- ------------ ------------ ------------ ---
POPULATION TRENDS
Current Population 10,881 64,181 151,323 491,951
5-Year Population 11,036 65,845 156,585 525,624
% Change CY-5Y 1.4% 2.6% 3.5% 6.8%
Annual Change CY-5Y 0.3% 0.5% 0.7% 1.4%
HOUSEHOLDS
Current Households 4,664 25,740 63,128 198,231
5-Year Projected Households 4,811 27,312 67,171 217,751
% Change CY - 5Y 3.2% 6.1% 6.4% 9.8%
Annual Change CY-5Y 0.6% 1.2% 1.3% 2.0%
INCOME TRENDS
Median Household Income $ 28,955 $ 28,621 $ 34,386 $ 37,645
Per Capita Income $ 17,919 $ 17,383 $ 22,221 $ 22,105
Average Household Income $ 41,425 $ 42,749 $ 53,396 $ 54,857
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 53.55% 47.95% 41.26% 37.32%
5-Year Projected % Renting 53.59% 48.16% 41.13% 37.02%
% of Households Owning 38.10% 44.60% 50.62% 56.12%
5-Year Projected % Owning 38.45% 44.87% 51.27% 56.94%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Loop 4
South - Apartments
East - Apartments
West - Apartments
CONCLUSIONS
The subject is well located within the city of Lexington. 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
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
MARKET ANALYSIS
The subject property is located in the city of Lexington in Lexington-Fayette
County. The overall pace of development in the subject's market is more or less
stable. Any new development is minimal with most expected growth towards the
south of the subject. The following table illustrates historical vacancy rates
for the subject's market.
HISTORICAL VACANCY RATE
Period Region Submarket
- ------ ------ ---------
2002 8.2% 8.5%
2003 9.9% 8.4%
CB Richard Ellis
Occupancy trends in the subject's market are a stable. Historically speaking,
the subject's submarket has equated the overall market. Historically stabilized
occupancy is around 91.0% to 92.0% with current occupancy at 90.1%. Employment
is expected to slowly recover in the coming year thus triggering a slight
increase in occupancy.
Market rents in the subject's market have been following stable trend. The
following table illustrates historical rental rates for the subject's market.
HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change
- ------ ------ -------- --------- --------
2002 $715 - $518 -
2003 $723 1.1% $521 0.6%
Reis, Inc.
The following table illustrates a summary of the subject's competitive set.
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
- --- ------------- ----- ----- ---------- --------------------
R-1 Breckinridge Court 382 91% 1987 1-mile south of the subject
R-2 Chinoe Creek 356 93% 1983 2-miles northeast of subject
R-3 Sonnet Cove Apartments 332 90% 1972 3 miles northeast of the subject
R-4 Patchen Place 202 93% 1973 3 miles northeast of subject
R-5 Old Farm Apartments 330 91% 1985 1 mile south of subject
Subject Tates Creek Village 204 89% 1970
Market rental rates are expected to remain stable in the next year.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 15
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 12 acres, or 522,720 square feet
Shape Irregular
Topography Level
Utilities All necessary utilities are available to the site.
Soil Conditions Stable
Easements Affecting Site None other than typical utility easements
Overall Site Appeal Good
Flood Zone:
Community Panel 210067-0090 C, dated September 3, 1992
Flood Zone Zone X
Zoning R-3, the subject improvements represent a legal conforming
use of the site.
REAL ESTATE TAXES
ASSESSED VALUE - 2002
---------------------------- TAX RATE / PROPERTY
PARCEL NUMBER LAND BUILDING TOTAL MILL RATE TAXES
- ------------- ---- -------- ----- --------- -----
1262900 $1,220,000 $4,880,000 $6,100,000 0.00958 $58,408
IMPROVEMENT ANALYSIS
Year Built 1970
Number of Units 204
Net Rentable Area 194,910 Square Feet
Construction:
Foundation Concrete pier and beam
Frame Wood frame
Exterior Walls Wood or vinyl siding
Roof Built-up asphalt with or without gravel over a wood truss
structure
Project Amenities Amenities at the subject include a swimming pool, sand
volleyball, tennis court, gym room, tanning room, meeting
hall, laundry room, and parking area.
Unit Amenities Individual unit amenities include washer dryer connections.
Appliances available in each unit include a refrigerator,
stove, dishwasher, water heater, garbage disposal, and oven
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
--------- --------------- ---------
1Br/1Ba - A 32 640
1Br/1Ba - B 45 720
1Br/1Ba - w/ Large Frt Dr 7 720
1Br/1Ba - w/o Large Frt Dr 1 720
1Br/1Ba - B 31 720
2Br/1.5 - C 31 1,200
3 Br/1.5Ba -D 31 1,250
3 Br/2.5 Ba -E 6 1,500
3 Br/2.5 Ba -F 18 1,550
IBr/1Ba - Efficiency 2 550
Overall Condition Average
Effective Age 30 years
Economic Life 45 years
Remaining Economic Life 15 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
1970 and consist of a 204-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 17
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 18
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 19
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 20
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- -------------------------------- ----------------------------- ----------------------------- ---------------------------
Property Name Tates Creek Village Breckinridge Court Chinoe Creek Apartments
LOCATION:
Address 3051 Kirklevington Drive 420-430 Redding Road 3520-3558 Creekwood Drive
City, State Lexington, Kentucky Lexington, KY Lexington, KY
County Lexington-Fayette Fayette-Lexington Fayette-Lexington
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 194,910 268,650 297,810
Year Built 1970 1987 1983
Number of Units 204 382 356
Unit Mix: Type Total Type Total Type Total
1Br/1Ba - A 32 1Br/1Ba 246 1Br/1Ba 180
1Br/1Ba - B 45 2Br/2Ba 136 2Br/2Ba 176
1Br/1Ba - w/Large Frt 7
1Br/1Ba - w/o Large Frt 1
1Br/1Ba - B 31
2Br/1.5 - C 31
3 Br/1.5 Ba - D 31
3 Br/2.5 Ba - E 6
3 Br/2.5 Ba - F 18
1Br/1Ba - Efficiency 2
Average Unit Size (SF) 955 703 837
Land Area (Acre) 12.0000 15.7200 28.1300
Density (Units/Acre) 17.0 24.3 12.7
Parking Ratio (Spaces/Unit) 1.00 1.00 1.00
Parking Type (Gr., Cov., etc.) Garage, Open Covered Open, Covered Open, Covered
CONDITION: Good Average Good
APPEAL: Average Good Good
AMENITIES:
Pool/Spa Yes/No Yes/Yes Yes/Yes
Gym Room Yes Yes Yes
Laundry Room Yes Yes Yes
Secured Parking No No No
Sport Courts Yes Yes Yes
Washer/Dryer Connection Yes Yes Yes
OCCUPANCY: 89% 91% 93%
TRANSACTION DATA:
Sale Date September, 2003 May, 2003
Sale Price ($) $17,800,000 $18,050,000
Grantor Capreit Breckinridge LP Lexington Oxford Associates
Grantee Breckinridge Court Associates Sr Chinoe Creek Holdings
Sale Documentation Book 2399, Page 736 N/A
Verification Nelson S. Keesey Nelson S. Keesey
Telephone Number 859.246.2722 859.246.2722
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
---------- ------ ----- ---------- ------ -----
Potential Gross Income $2,667,888 $6,984 $9.93 $2,388,048 $6,708 $8.02
Vacancy/Credit Loss $ 215,303 $ 564 $0.80 $ 161,182 $ 453 $0.54
---------- ------ ----- ---------- ------ -----
Effective Gross Income $2,452,585 $6,420 $9.13 $2,226,866 $6,255 $7.48
Operating Expenses $ 825,514 $2,161 $3.07 $ 779,403 $2,189 $2.62
---------- ------ ----- ---------- ------ -----
Net Operating Income $1,627,071 $4,259 $6.06 $1,447,463 $4,066 $4.86
---------- ------ ----- ---------- ------ -----
NOTES: None None
PRICE PER UNIT $46,597 $50,702
PRICE PER SQUARE FOOT $ 66.26 $ 60.61
EXPENSE RATIO 33.7% 35.0%
EGIM 7.26 8.11
OVERALL CAP RATE 9.14% 8.02%
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 Cloisters Apartments Patchen Place Old Farm Apartments
LOCATION:
Address 3501-3550 Pimilco Parkway 200 Patchen Drive 3751 Appian Way
City, State Lexington, KY Lexington, KY Lexington, KY
County Fayette-Lexington Fayette-Lexington Fayette-Lexington
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 242,253 166,080 281,244
Year Built 1972 1973 1985
Number of Units 228 202 330
Unit Mix: Type Total Type Total Type Total
1Br/1Ba 60 1Br/1Ba 88 1Br/1Ba 144
2Br/2Ba 132 2Br/2Ba 94 2Br/2Ba 186
3Br/2Ba 36 3Br/2Ba 20
Average Unit Size (SF) 1,063 822 852
Land Area (Acre) 15.4800 13.7500 18.8300
Density (Units/Acre) 14.7 14.7 17.5
Parking Ratio (Spaces/Unit) 1.00 1.00 1.00
Parking Type (Gr., Cov., etc.) Open, Covered Garage, Open, Covered Open, Covered
CONDITION: Average Very Good Very Good
APPEAL: Average Average Very Good
AMENITIES:
Pool/Spa Yes/Yes Yes/Yes Yes/Yes
Gym Room Yes Yes Yes
Laundry Room Yes Yes No
Secured Parking No No No
Sport Courts No Yes Yes
Washer/Dryer Connection Yes Yes Yes
OCCUPANCY: 90% 93% 91%
TRANSACTION DATA:
Sale Date October, 2003 October, 2003 February, 2003
Sale Price ($) $5,969,000 $7,000,000 $12,927,793
Grantor Bruce C/ Strohn, et al National Property Investors Aimco Old Farm
Grantee Aslan Cloisters Vermeil Socrates Associates
Sale Documentation Book 2406, Page 329 Book 2410, Page 35 Book 2345, Page 306
Verification Nelson S. Keesey Nelson S. Keesey Nelson S. Keesey
Telephone Number 859.246.2722 859.246.2722 859.246.2722
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF
---------- ------ ----- ---------- ------ ----- ---------- ------ -----
Potential Gross Income $1,504,800 $6,600 $6.21 $1,306,536 $6,468 $7.87 $2,174,040 $6,588 $7.73
Vacancy/Credit Loss $ 150,480 $ 660 $0.62 $ 91,457 $ 453 $0.55 $ 195,663 $ 593 $0.70
---------- ------ ----- ---------- ------ ----- ---------- ------ -----
Effective Gross Income $1,354,320 $5,940 $5.59 $1,215,079 $6,015 $7.32 $1,978,377 $5,995 $7.03
Operating Expenses $ 612,987 $2,689 $2.53 $ 486,031 $2,406 $2.93 $ 791,350 $2,398 $2.81
---------- ------ ----- ---------- ------ ----- ---------- ------ -----
Net Operating Income $ 741,333 $3,251 $3.06 $ 729,048 $3,609 $4.39 $1,187,027 $3,597 $4.22
---------- ------ ----- ---------- ------ ----- ---------- ------ -----
NOTES: None None None
PRICE PER UNIT $26,180 $34,653 $39,175
PRICE PER SQUARE FOOT $ 24.64 $ 42.15 $ 45.97
EXPENSE RATIO 45.3% 40.0% 40.0%
EGIM 4.41 5.76 6.53
OVERALL CAP RATE 12.42% 10.41% 9.18%
Cap Rate based on Pro Forma or
Actual Income? PRO FORMA PRO FORMA PRO FORMA
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 21
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
IMPROVED SALES MAP
[MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $26,180 to $50,702 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 $26,180 to $34,653 per unit with a mean or average adjusted price
of $31,158 per unit. The median adjusted price is $32,618 per unit. Based on the
following analysis, we have concluded to a value of $32,500 per unit, which
results in an "as is" value of $6,600,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- ----------------------------------- ------------------------ ---------------------- -------------------------
Property Name Tates Creek Village Breckinridge Court Chinoe Creek Apartments
Address 3051 Kirklevington Drive 420-430 Redding Road 3520-3558 Creekwood Drive
City Lexington, Kentucky Lexington, KY Lexington, KY
Sale Date September, 2003 May, 2003
Sale Price ($) $17,800,000 $18,050,000
Net Rentable Area (SF) 194,910 268,650 297,810
Number of Units 204 382 356
Price Per Unit $46,597 $50,702
Year Built 1970 1987 1983
Land Area (Acre) 12.0000 15.7200 28.1300
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 09-2003 0% 05-2003 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $46,597 $50,702
Location Comparable 0% Comparable 0%
Number of Units 204 382 -10% 356 -10%
Quality / Appeal Good Superior -15% Superior -15%
Age / Condition 1970 1987 / Average -10% 1983 / Good -10%
Occupancy at Sale 89% 91% 0% 93% 0%
Amenities Good Comparable 0% Comparable 0%
Average Unit Size (SF) 955 703 5% 837 0%
PHYSICAL ADJUSTMENT -30% -35%
FINAL ADJUSTED VALUE ($/UNIT) $32,618 $32,956
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4 I - 5
- ----------------------------------- ------------------------- ---------------------- -----------------------
Property Name Cloisters Apartments Patchen Place Old Farm Apartments
Address 3501-3550 Pimilco Parkway 200 Patchen Drive 3751 Appian Way
City Lexington, KY Lexington, KY Lexington, KY
Sale Date October, 2003 October, 2003 February, 2003
Sale Price ($) $5,969,000 $7,000,000 $12,927,793
Net Rentable Area (SF) 242,253 166,080 281,244
Number of Units 228 202 330
Price Per Unit $26,180 $34,653 $39,175
Year Built 1972 1973 1985
Land Area (Acre) 15.4800 13.7500 18.8300
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 10-2003 0% 10-2003 0% 02-2003 0%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $26,180 $34,653 $39,175
Location Comparable 0% Comparable 0% Comparable 0%
Number of Units 228 0% 202 0% 330 -10%
Quality / Appeal Comparable 0% Comparable 0% Superior -15%
Age / Condition 1972 / Average 0% 1973 / Very Good 0% 1985 / Very Good -10%
Occupancy at Sale 90% 0% 93% 0% 91% 10%
Amenities Comparable 0% Comparable 0% Comparable 0%
Average Unit Size (SF) 1,063 0% 822 0% 852 0%
PHYSICAL ADJUSTMENT 0% 0% -25%
FINAL ADJUSTED VALUE ($/UNIT) $26,180 $34,653 $29,381
SUMMARY
VALUE RANGE (PER UNIT) $26,180 TO $34,653
MEAN (PER UNIT) $31,158
MEDIAN (PER UNIT) $32,618
VALUE CONCLUSION (PER UNIT) $32,500
VALUE INDICATED BY SALES COMPARISON APPROACH $6,630,000
ROUNDED $6,600,000
NET OPERATING INCOME (NOI) ANALYSIS
We have also conducted a net operating income (NOI) comparison analysis. The NOI
effectively takes into account the various physical, location, and operating
aspects of the sale. When the subject's NOI is compared to the sale NOI, a
percent adjustment can be arrived at. The following table illustrates this
analysis.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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-1 382 $17,800,000 9.14% $1,627,071 $673,158 0.775 $36,099
$ 46,597 $ 4,259 $ 3,300
I-2 356 $18,050,000 8.02% $1,447,463 $673,158 0.812 $41,149
$ 50,702 $ 4,066 $ 3,300
I-3 228 $ 5,969,000 12.42% $ 741,333 $673,158 1.015 $26,569
$ 26,180 $ 3,251 $ 3,300
I-4 202 $ 7,000,000 10.41% $ 729,048 $673,158 0.914 $31,683
$ 34,653 $ 3,609 $ 3,300
I-5 330 $12,927,793 9.18% $1,187,027 $673,158 0.917 $35,938
$ 39,175 $ 3,597 $ 3,300
PRICE/UNIT
----------
Low High Average Median
$26,569 $41,149 $34,288 $35,938
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
------------------------------------------------
Estimated Price Per Unit $ 32,000
----------
Number of Units 204
----------
Value Based on NOI Analysis $6,528,000
Rounded $6,500,000
The adjusted sales indicate a range of value between $26,569 and $41,149 per
unit, with an average of $34,288 per unit. Based on the subject's competitive
position within the improved sales, a value of $32,000 per unit is estimated.
This indicates an "as is" market value of $6,500,000 (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.
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-1 382 $17,800,000 $2,452,585 $ 825,514 33.66% 7.26
$ 46,597
I-2 356 $18,050,000 $2,226,866 $ 779,403 35.00% 8.11
$ 50,702
I-3 228 $ 5,969,000 $1,354,320 $ 612,987 45.26% 49.74% 4.41
$ 26,180
I-4 202 $ 7,000,000 $1,215,079 $ 486,031 40.00% 5.76
$ 34,653
I-5 330 $12,927,793 $1,978,377 $ 791,350 40.00% 6.53
$ 39,175
EGIM
----
Low High Average Median
4.41 8.11 6.41 6.53
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
- --------------------------------------------------
Estimate EGIM 4.25
----------
Subject EGI $1,461,240
----------
Value Based on EGIM Analysis $6,210,270
Rounded $6,200,000
Value Per Unit $ 30,392
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 24
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 49.74% before reserves. The comparable sales
indicate a range of expense ratios from 33.66% to 45.26%, while their EGIMs
range from 4.41 to 8.11. Overall, we conclude to an EGIM of 4.25, which results
in an "as is" value estimate in the EGIM Analysis of $6,200,000.
SALES COMPARISON CONCLUSION
The three valuation methods in the Sales Comparison Approach are shown below.
The overall value via the Sales Comparison Approach is estimated at $6,500,000.
Price Per Unit $6,600,000
NOI Per Unit $6,500,000
EGIM Analysis $6,200,000
Sales Comparison Conclusion $6,500,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 25
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 26
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 - A 640 $519 $ 0.81 83.3%
1Br/1Ba - B 720 $539 $ 0.75 75.0%
1Br/1Ba - w/ Large Frt Dr 720 $519 $ 0.72 85.7%
1Br/1Ba - w/o Large Frt Dr 720 $539 $ 0.75 100.0%
1Br/1Ba - B 720 $559 $ 0.78 100.0%
2Br/1.5 - C 1200 $729 $ 0.61 95.7%
3 Br/1.5 Ba -D 1250 $749 $ 0.60 96.6%
3 Br/2.5 Ba -E 1500 $919 $ 0.61 100.0%
3 Br/2.5 Ba -F 1550 $949 $ 0.61 88.9%
1Br/1Ba - Efficiency 550 $449 $ 0.82 100.0%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 27
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
RENT ANALYSIS
COMPARABLE RENTS
------------------------------------------------------------
R-1 R-2 R-3 R-4 R-5
------------------------------------------------------------
Breckinridge Sonnet Cove Patchen Old Farm
Court Chinoe Creek Apartments Place Apartments
------------------------------------------------------------
SUBJECT SUBJECT COMPARISON TO SUBJECT
SUBJECT UNIT ACTUAL ASKING ------------------------------------------------------------
DESCRIPTION TYPE RENT RENT Superior Superior Similar Superior Superior MIN MAX
- ---------------------------------------------------------------------------------------------------------------------------------
Monthly Rent 1Br/1Ba - A $ 519 $ 519 $ 582 $ 559 $ 510 $ 499 $ 655 $ 499 $ 655
Unit Area (SF) 640 640 708 676 650 656 635 635 708
Monthly Rent
Per Sq. Ft. $ 0.81 $ 0.81 $ 0.82 $ 0.83 $ 0.78 $ 0.76 $ 1.03 $ 0.76 $ 1.03
Monthly Rent 1Br/1Ba - B $ 539 $ 539 $ 599 $ 599 $ 599
Unit Area (SF) 720 720 919 919 919
Monthly Rent
Per Sq. Ft. $ 0.75 $ 0.75 $ 0.65 $ 0.65 $ 0.65
Monthly Rent 1Br/1Ba - w/ Large $ 559 $ 559 $ 629 $ 775 $ 629 $ 775
Unit Area (SF) Frt Dr 720 720 1,000 759 759 1,000
Monthly Rent
Per Sq. Ft. $ 0.78 $ 0.78 $ 0.63 $ 1.02 $ 0.63 $ 1.02
Monthly Rent 1Br/1Ba - w/o Large $ 559 $ 559
Unit Area (SF) Frt Dr 720 720
Monthly Rent
Per Sq. Ft. $ 0.78 $ 0.78
Monthly Rent 1Br/1Ba - B $ 559 $ 559
Unit Area (SF) 720 720
Monthly Rent
Per Sq. Ft. $ 0.78 $ 0.78
Monthly Rent 2Br/1.5 - C $ 729 $ 729 $ 774 $ 599 $ 689 $ 599 $ 774
Unit Area (SF) 1,200 1,200 1,080 1,050 1,100 1,050 1,100
Monthly Rent
Per Sq. Ft. $ 0.61 $ 0.61 $ 0.72 $ 0.57 $ 0.63 $ 0.57 $ 0.72
Monthly Rent 3 Br/1.5 Ba -D $ 749 $ 749 $ 727 $ 727 $ 727
Unit Area (SF) 1,250 1,250 1,200 1,200 1,200
Monthly Rent
Per Sq. Ft. $ 0.60 $ 0.60 $ 0.61 $ 0.61 $ 0.61
Monthly Rent 3 Br/2.5 Ba -E $ 919 $ 919 $ 804 $ 804 $ 804
Unit Area (SF) 1,500 1,500 1,400 1,400 1,400
Monthly Rent
Per Sq. Ft. $ 0.61 $ 0.61 $ 0.57 $ 0.57 $ 0.57
Monthly Rent 3 Br/2.5 Ba -F $ 949 $ 949
Unit Area (SF) 1,550 1,550
Monthly Rent
Per Sq. Ft. $ 0.61 $ 0.61
Monthly Rent 1Br/1Ba - $ 449 $ 449
Efficiency
Unit Area (SF) 550 550
Monthly Rent
Per Sq. Ft. $ 0.82 $ 0.82
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:
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 - A 32 640 $ 520 $ 0.81 $ 16,640 $ 199,680
1Br/1Ba - B 45 720 $ 540 $ 0.75 $ 24,300 $ 291,600
1Br/1Ba - w/ Large Frt Dr 7 720 $ 560 $ 0.78 $ 3,920 $ 47,040
1Br/1Ba - w/o Large Frt Dr 1 720 $ 560 $ 0.78 $ 560 $ 6,720
1Br/1Ba - B 31 720 $ 560 $ 0.78 $ 17,360 $ 208,320
2Br/1.5 - C 31 1,200 $ 700 $ 0.58 $ 21,700 $ 260,400
3 Br/1.5 Ba -D 31 1,250 $ 720 $ 0.58 $ 22,320 $ 267,840
3 Br/2.5 Ba -E 6 1,500 $ 900 $ 0.60 $ 5,400 $ 64,800
3 Br/2.5 Ba -F 18 1,550 $ 950 $ 0.61 $ 17,100 $ 205,200
1Br/1Ba - Efficiency 2 550 $ 450 $ 0.82 $ 900 $ 10,800
-------- ----------
Total $130,200 $1,562,400
======== ==========
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
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 $ 1,555,640 $ 7,626 $ 1,675,314 $8,212 $ 1,055,779 $ 5,175 $ 1,303,760 $ 6,391
Vacancy $ 94,724 $ 464 $ 101,500 $ 498 $ 130,055 $ 638 $ 87,270 $ 428
Credit Loss/Concessions $ 84,916 $ 416 $ 29,802 $ 146 $ 14,540 $ 71 $ 16,200 $ 79
----------------------------------------------------------------------------------------------
Subtotal $ 179,640 $ 881 $ 131,302 $ 644 $ 144,595 $ 709 $ 103,470 $ 507
Laundry Income $ 6,445 $ 32 $ 5,046 $ 25 $ 2,418 $ 12 $ 3,000 $ 15
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 53,960 $ 265 $ 50,387 $ 247 $ 36,790 $ 180 $ 54,400 $ 267
----------------------------------------------------------------------------------------------
Subtotal Other Income $ 60,405 $ 296 $ 55,433 $ 272 $ 39,208 $ 192 $ 57,400 $ 281
----------------------------------------------------------------------------------------------
Effective Gross Income $ 1,436,405 $ 7,041 $ 1,599,445 $7,840 $ 950,392 $ 4,659 $ 1,257,690 $ 6,165
Operating Expenses
Taxes $ 49,411 $ 242 $ 50,840 $ 249 $ 48,080 $ 236 $ 53,507 $ 262
Insurance $ 19,459 $ 95 $ 25,831 $ 127 $ 22,606 $ 111 $ 27,074 $ 133
Utilities $ 262,452 $ 1,287 $ 318,225 $1,560 187,126 $ 917 $ 221,200 $ 1,084
Repair & Maintenance $ 109,437 $ 536 $ 113,595 $ 557 $ 71,236 $ 349 $ 96,205 $ 472
Cleaning $ 21,074 $ 103 $ 28,996 $ 142 $ 4,350 $ 21 $ 0 $ 0
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 34,468 $ 169 $ 32,576 $ 160 $ 12,512 $ 61 $ 16,500 $ 81
General Administrative $ 193,249 $ 947 $ 201,775 $ 989 $ 92,767 $ 455 $ 125,650 $ 616
Management $ 76,446 $ 375 $ 79,895 $ 392 $ 47,985 $ 235 $ 61,835 $ 303
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------------------
Total Operating Expenses $ 765,996 $ 3,755 $ 851,733 $4,175 $ 486,662 $ 2,386 $ 601,971 $ 2,951
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
----------------------------------------------------------------------------------------------
Net Income $ 670,409 $ 3,286 $ 747,712 $3,665 $ 463,730 $ 2,273 $ 655,719 $ 3,214
ANNUALIZED 2003
-----------------------
PROJECTION AAA PROJECTION
----------------------- ---------------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT %
- -----------------------------------------------------------------------------
Revenues
Rental Income $ 1,602,792 $ 7,857 $1,562,400 $7,659 100.0%
Vacancy $ 169,303 $ 830 $ 124,992 $ 613 8.0%
Credit Loss/Concessions $ 73,715 $ 361 $ 31,248 $ 153 2.0%
----------------------------------------------------
Subtotal $ 243,018 $ 1,191 $ 156,240 $ 766 10.0%
Laundry Income $ 581 $ 3 $ 2,040 $ 10 0.1%
Garage Revenue $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 57,515 $ 282 $ 53,040 $ 260 3.4%
----------------------------------------------------
Subtotal Other Income $ 58,096 $ 285 $ 55,080 $ 270 3.5%
----------------------------------------------------
Effective Gross Income $ 1,417,870 $ 6,950 $1,461,240 $7,163 100.0%
Operating Expenses
Taxes $ 64,212 $ 315 $ 61,200 $ 300 4.2%
Insurance $ 38,533 $ 189 $ 30,600 $ 150 2.1%
Utilities $ 299,615 $ 1,469 $ 285,600 $1,400 19.5%
Repair & Maintenance $ 131,077 $ 643 $ 112,200 $ 550 7.7%
Cleaning $ 9,390 $ 46 $ 15,300 $ 75 1.0%
Landscaping $ 0 $ 0 $ 0 $ 0 0.0%
Security $ 0 $ 0 $ 0 $ 0 0.0%
Marketing & Leasing $ 16,661 $ 82 $ 16,320 $ 80 1.1%
General Administrative $ 128,964 $ 632 $ 132,600 $ 650 9.1%
Management $ 68,056 $ 334 $ 73,062 $ 358 5.0%
Miscellaneous $ 0 $ 0 $ 0 $ 0 0.0%
----------------------------------------------------
Total Operating Expenses $ 756,508 $ 3,708 $ 726,882 $3,563 49.7%
Reserves $ 0 $ 0 $ 61,200 $ 300 8.4%
----------------------------------------------------
Net Income $ 661,362 $ 3,242 $ 673,158 $3,300 46.1%
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 10% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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 $300 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 $300 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 5.50% 9.50% 6.00% 10.00%
AVERAGE 7.61% 8.14%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
SUMMARY OF OVERALL
CAPITALIZATION RATES
- ------------------------------------------------
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
- --------- --------- ------ ---------- -----
I-1 Sep-03 91% $ 46,597 9.14%
I-2 May-03 93% $ 50,702 8.02%
I-3 Oct-03 90% $ 26,180 12.42%
I-4 Oct-03 93% $ 34,653 10.41%
I-5 Feb-03 91% $ 39,175 9.18%
High 12.42%
Low 8.02%
Average 9.84%
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 12.50%.
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 2.00% of the sale amount is applied.
DISCOUNTED CASH FLOW CONCLUSION
Discounting the annual cash flows and the equity reversion at the selected rate
of 12.50% indicates a value of $6,800,000. In this instance, the reversion
figure contributes approximately 35% of the total value. Investors surveyed for
this assignment indicated they
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
TATES CREEK VILLAGE
AIMCO
<Table>
<Caption>
YEAR OCT-2004 OCT-2005 OCT-2006 OCT-2007 OCT-2008 OCT-2009
FISCAL YEAR 1 2 3 4 5 6
- ------------------------------------- ========== ========== ========== ========== ========== ==========
REVENUE
Base Rent $1,562,400 $1,609,272 $1,657,550 $1,707,277 $1,758,495 $1,811,250
Vacancy $ 124,992 $ 128,742 $ 132,604 $ 136,582 $ 140,680 $ 144,900
Credit Loss $ 31,248 $ 32,185 $ 33,151 $ 34,146 $ 35,170 $ 36,225
Concessions $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ---------- ----------
Subtotal $ 156,240 $ 160,927 $ 165,755 $ 170,728 $ 175,849 $ 181,125
Laundry Income $ 2,040 $ 2,101 $ 2,164 $ 2,229 $ 2,296 $ 2,365
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 53,040 $ 54,631 $ 56,270 $ 57,958 $ 59,697 $ 61,488
---------- ---------- ---------- ---------- ---------- ----------
Subtotal Other Income $ 55,080 $ 56,732 $ 58,434 $ 60,187 $ 61,993 $ 63,853
---------- ---------- ---------- ---------- ---------- ----------
EFFECTIVE GROSS INCOME $1,461,240 $1,505,077 $1,550,230 $1,596,736 $1,644,638 $1,693,978
OPERATING EXPENSES:
Taxes $ 61,200 $ 63,036 $ 64,927 $ 66,875 $ 68,881 $ 70,948
Insurance $ 30,600 $ 31,518 $ 32,464 $ 33,437 $ 34,441 $ 35,474
Utilities $ 285,600 $ 294,168 $ 302,993 $ 312,083 $ 321,445 $ 331,089
Repair & Maintenance $ 112,200 $ 115,566 $ 119,033 $ 122,604 $ 126,282 $ 130,071
Cleaning $ 15,300 $ 15,759 $ 16,232 $ 16,719 $ 17,220 $ 17,737
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 16,320 $ 16,810 $ 17,314 $ 17,833 $ 18,368 $ 18,919
General Administrative $ 132,600 $ 136,578 $ 140,675 $ 144,896 $ 149,242 $ 153,720
Management $ 73,062 $ 75,254 $ 77,511 $ 79,837 $ 82,232 $ 84,699
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $ 726,882 $ 748,688 $ 771,149 $ 794,284 $ 818,112 $ 842,655
Reserves $ 61,200 $ 63,036 $ 64,927 $ 66,875 $ 68,881 $ 70,948
---------- ---------- ---------- ---------- ---------- ----------
NET OPERATING INCOME $ 673,158 $ 693,353 $ 714,153 $ 735,578 $ 757,645 $ 780,375
========== ========== ========== ========== ========== ==========
Operating Expense Ratio (% of EGI) 49.7% 49.7% 49.7% 49.7% 49.7% 49.7%
Operating Expense Per Unit $ 3,563 $ 3,670 $ 3,780 $ 3,894 $ 4,010 $ 4,131
========== ========== ========== ========== ========== ==========
<Caption>
YEAR OCT-2010 OCT-2011 OCT-2012 OCT-2013 OCT-2014
FISCAL YEAR 7 8 9 10 11
- ------------------------------------- ========== ========== ========== ========== ==========
REVENUE
Base Rent $1,865,587 $1,921,555 $1,979,202 $2,038,578 $2,099,735
Vacancy $ 149,247 $ 153,724 $ 158,336 $ 163,086 $ 167,979
Credit Loss $ 37,312 $ 38,431 $ 39,584 $ 40,772 $ 41,995
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ----------
Subtotal $ 186,559 $ 192,155 $ 197,920 $ 203,858 $ 209,973
Laundry Income $ 2,436 $ 2,509 $ 2,584 $ 2,662 $ 2,742
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 63,333 $ 65,233 $ 67,189 $ 69,205 $ 71,281
---------- ---------- ---------- ---------- ----------
Subtotal Other Income $ 65,768 $ 67,741 $ 69,774 $ 71,867 $ 74,023
---------- ---------- ---------- ---------- ----------
EFFECTIVE GROSS INCOME $1,744,797 $1,797,141 $1,851,055 $1,906,587 $1,963,784
OPERATING EXPENSES:
Taxes $ 73,076 $ 75,268 $ 77,526 $ 79,852 $ 82,248
Insurance $ 36,538 $ 37,634 $ 38,763 $ 39,926 $ 41,124
Utilities $ 341,021 $ 351,252 $ 361,790 $ 372,643 $ 383,823
Repair & Maintenance $ 133,973 $ 137,992 $ 142,132 $ 146,396 $ 150,787
Cleaning $ 18,269 $ 18,817 $ 19,382 $ 19,963 $ 20,562
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 19,487 $ 20,072 $ 20,674 $ 21,294 $ 21,933
General Administrative $ 158,331 $ 163,081 $ 167,974 $ 173,013 $ 178,203
Management $ 87,240 $ 89,857 $ 92,553 $ 95,329 $ 98,189
Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $ 867,935 $ 893,973 $ 920,792 $ 948,416 $ 976,869
Reserves $ 73,076 $ 75,268 $ 77,526 $ 79,852 $ 82,248
---------- ---------- ---------- ---------- ----------
NET OPERATING INCOME $ 803,786 $ 827,899 $ 852,736 $ 878,319 $ 904,668
========== ========== ========== ========== ==========
Operating Expense Ratio (% of EGI) 49.7% 49.7% 49.7% 49.7% 49.7%
Operating Expense Per Unit $ 4,255 $ 4,382 $ 4,514 $ 4,649 $ 4,789
========== ========== ========== ========== ==========
</Table>
<Table>
Estimated Stabilized NOI $ 673,158
Months to Stabilized 1
Stabilized Occupancy 92.0%
</Table>
<Table>
Sales Expense Rate 2.00%
Discount Rate 12.50%
Terminal Cap Rate 11.50%
</Table>
"DCF" VALUE ANALYSIS
<Table>
Gross Residual Sale Price $ 7,866,679
Less: Sales Expense $ 157,334
-----------
Net Residual Sale Price $ 7,709,345
PV of Reversion $ 2,374,063
Add: NPV of NOI $ 4,400,992
-----------
PV Total $ 6,775,055
</Table>
<Table>
Deferred Maintenance $ 0
Add: Excess Land $ 0
Other Adjustments $ 0
-----------
Value Indicated By "DCF" $ 6,775,055
Rounded $ 6,800,000
</Table>
"DCF" VALUE SENSITIVITY TABLE
<Table>
<Caption>
DISCOUNT RATE
--------------------------------------------------------------
TOTAL VALUE 12.00% 12.25% 12.50% 12.75% 13.00%
- --------------------- ---------- ---------- ---------- ---------- ----------
TERMINAL CAP 11.00% $7,098,202 $6,989,436 $6,882,967 $6,778,738 $6,676,692
RATE 11.25% $7,040,534 $6,933,041 $6,827,812 $6,724,793 $6,623,930
11.50% $6,985,374 $6,879,097 $6,775,055 $6,673,195 $6,573,461
11.75% $6,932,562 $6,827,449 $6,724,543 $6,623,792 $6,525,140
12.00% $6,881,949 $6,777,952 $6,676,136 $6,576,447 $6,478,833
</Table>
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
INCOME LOSS DURING LEASE-UP
The subject is currently near or at a stabilized condition. Therefore, there is
no income loss during lease-up at the subject property.
CONCESSIONS
Concessions have historically not been utilized at the subject property or in
the subject's market. Therefore, no adjustment was included for concessions.
DIRECT CAPITALIZATION METHOD
After having projected the income and expenses for the property, the next step
in the valuation process is to capitalize the net income into an estimate of
value. The selected overall capitalization rate ("OAR") covers both return on
and return of capital. It is the overall rate of return an investor expects.
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 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 35
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
TATES CREEK VILLAGE
TOTAL PER SQ. FT. PER UNIT %OF EGI
----- ----------- -------- -------
REVENUE
Base Rent $1,562,400 $ 8.02 $ 7,659
Less: Vacancy & Collection Loss 10.00% $ 156,240 $ 0.80 $ 766
Plus: Other Income
Laundry Income $ 2,040 $ 0.01 $ 10 0.14%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 53,040 $ 0.27 $ 260 3.63%
---------- --------- ------- ----
Subtotal Other Income $ 55,080 $ 0.28 $ 270 3.77%
EFFECTIVE GROSS INCOME $1,461,240 $ 7.50 $ 7,163
OPERATING EXPENSES:
Taxes $ 61,200 $ 0.31 $ 300 4.19%
Insurance $ 30,600 $ 0.16 $ 150 2.09%
Utilities $ 285,600 $ 1.47 $ 1,400 19.55%
Repair & Maintenance $ 112,200 $ 0.58 $ 550 7.68%
Cleaning $ 15,300 $ 0.08 $ 75 1.05%
Landscaping $ 0 $ 0.00 $ 0 0.00%
Security $ 0 $ 0.00 $ 0 0.00%
Marketing & Leasing $ 16,320 $ 0.08 $ 80 1.12%
General Administrative $ 132,600 $ 0.68 $ 650 9.07%
Management 5.00% $ 73,062 $ 0.37 $ 358 5.00%
Miscellaneous $ 0 $ 0.00 $ 0 0.00%
TOTAL OPERATING EXPENSES $ 726,882 $ 3.73 $ 3,563 49.74%
Reserves $ 61,200 $ 0.31 $ 300 4.19%
---------- --------- ------- -----
NET OPERATING INCOME $ 673,158 $ 3.45 $ 3,300 46.07%
========== ========= ======= =====
"GOING IN" CAPITALIZATION RATE 10.50%
VALUE INDICATION $6,411,029 $ 32.89 $31,427
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $6,411,029
ROUNDED $6,400,000 $ 32.84 $31,373
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- -------- ----- ------- ------ ----
9.75% $6,904,185 $6,900,000 $33,824 $35.40
10.00% $6,731,580 $6,700,000 $32,843 $34.37
10.25% $6,567,395 $6,600,000 $32,353 $33.86
10.50% $6,411,029 $6,400,000 $31,373 $32.84
10.75% $6,261,935 $6,300,000 $30,882 $32.32
11.00% $6,119,618 $6,100,000 $29,902 $31.30
11.25% $5,983,627 $6,000,000 $29,412 $30.78
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $6,400,000.
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 $6,800,000
Direct Capitalization Method $6,400,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$6,500,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
RECONCILIATION AND CONCLUSION
This appraisal was made to express an opinion as of the Market Value of the fee
simple estate in the property.
AS IS MARKET VALUE OF THE FEE SIMPLE ESTATE
Cost Approach Not Utilized
Sales Comparison Approach $6,500,000
Income Approach $6,500,000
Reconciled Value $6,500,000
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
November 19, 2003 the market value of the fee simple estate in the property is:
$6,500,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
EXTERIOR EXTERIOR - LANDSCAPE
[PICTURE] [PICTURE]
EXTERIOR - APARTMENT BUILDING INTERIOR - APARTMENT UNIT
[PICTURE] [PICTURE]
EXTERIOR - TENNIS COURT EXTERIOR - ENTRANCE GATE
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
EXTERIOR - VOLLEYBALL COURT EXTERIOR - FACADE
[PICTURE] [PICTURE]
EXTERIOR - ACCESS INTERIOR - ACCESS
[PICTURE] [PICTURE]
EXTERIOR - POOL EXTERIOR - CLUB HOUSE
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
BRECKINRIDGE COURT CHINOE CREEK APARTMENTS CLOISTERS APARTMENTS
420-430 Redding Road 3520-3558 Creekwood Drive 3501-3550 Pimilco Parkway
Lexington, KY Lexington, KY Lexington, KY
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
PATCHEN PLACE OLD FARM APARTMENTS
200 Patchen Drive 3751 Appian Way
Lexington, KY Lexington, KY
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
----------- ------- -----
Property Name Tates Creek Village Breckinridge Court
Management Company AIMCO
LOCATION:
Address 3051 Kirklevington Drive 420-420 Redding Road
City, State Lexington, Kentucky Lexington, KY
County Lexington-Fayette Fayette-Lexington
Proximity to Subject 1-mile south of the subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 194,910 268,650
Year Built 1970 1987
Effective Age 30 16
Building Structure Type Brick & wood siding walls; asphalt shingle roof Brick & wood siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc) Garage, Open Covered Open, Covered
Number of Units 204 382
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba - A 640 32 $519 1 1Br/1Ba 708 246 $582
2 1Br/1Ba - B 720 45 $539 6 2Br/1.5Ba 1,080 136 $774
3 1Br/1Ba - w/ Large 720 7 $519
4 1Br/1Ba - w/o Large 720 1 $539
5 1Br/1Ba - B 720 31 $559
6 2Br/1.5 - C 1,200 31 $729
7 3 Br/1.5 Ba -D 1,250 31 $749
8 3 Br/2.5 Ba -E 1,500 6 $919
9 3 Br/2.5 Ba -F 1,550 18 $949
10 1Br/1Ba - Efficiency 550 2 $449
Average Unit Size (SF) 955 840
Unit Breakdown: Efficiency 0% 2-Bedroom 39% Efficiency 0% 2-Bedroom 64%
1-Bedroom 61% 3-Bedroom 0% 1-Bedroom 36% 3-Bedroom 0%
CONDITION: Good Good
APPEAL: Average Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
Balcony X W/D Connect. Balcony X W/D Connect.
Fireplace Other X Fireplace Other
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 X Basketball Court BBQ Equipment
Volleyball Court Theater Room X Volleyball Court Theater Room
X Sand Volley Ball X Meeting Hall X Sand Volley Ball X Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track Business Office Jogging Track X Business Office
X Gym Room X Gym Room
X Tanning Room Tanning Room
OCCUPANCY: 89% 91%
LEASING DATA:
Available Leasing Terms 6 to 15 Months 6 to 15 Months
Concessions 2 Months 2 Months
Pet Deposit $150 to $300 $150 to $300
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water Trash X Water Trash
Confirmation Michelle Harvey/Property Manager Joseph Beard (Property Manager)
Telephone Number 859 272 3481 877 256 1850
NOTES: None
COMPARISON TO SUBJECT: Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
----------- ----- -----
Property Name Chinoe Creek Sonnet Cove Apartments
Management Company Worthing Southeast Corporation
LOCATION:
Address 3520-3558 Creekwood Drive 475-531 Lake Toer Drive
City, State Lexington, KY Lexington, KY
County Fayette-Lexington Fayette-Lexington
Proximity to Subject 2-miles northeast of subject 3 miles northeast of the subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 297,810 336,508
Year Built 1983 1972
Effective Age 20 31
Building Structure Type Brick & wood siding walls; asphalt shingle roof Brick & wood siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc) Open, Covered Open, Covered
Number of Units 356 332
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1Br/1Ba 676 180 $559 1 1 Br/1 Ba 650 99 $510
3 2Br/1Ba 1,000 176 $629 6 2Br/1.5 Ba 1,050 102 $599
7 2Br/2Ba 1,200 60 $727
8 3Br/2Ba 1,400 71 $804
Average Unit Size (SF) 836 1,033
Unit Breakdown: Efficiency 0% 2-Bedroom 49% Efficiency 0% 2-Bedroom 49%
1-Bedroom 51% 3-Bedroom 0% 1-Bedroom 29% 3-Bedroom 22%
CONDITION: Good Average
APPEAL: Good Average
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
Balcony X W/D Connect. Balcony X W/D Connect.
X Fireplace Other X Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
X Basketball Court BBQ Equipment X Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
X Sand Volley Ball X Meeting Hall X Sand Volley Ball X Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room X Gym Room
Tanning Room Tanning Room
OCCUPANCY: 93% 90%
LEASING DATA:
Available Leasing Terms 6 to 15 Months 6 to 15 Months
Concessions 3 Months Payout Lease
Pet Deposit $150 to $300 $150 to $300
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water Trash X Water Trash
Confirmation Joseph Beard (Property Manager) May 1, 2003; Joseph Beard (Property Manager)
Telephone Number 877 261 8386 877 261 8392
NOTES: None None
COMPARISON TO SUBJECT: Superior Similar
COMPARABLE COMPARABLE
DESCRIPTION R - 4 R - 5
----------- ----- -----
Property Name Patchen Place Old Farm Apartments
Management Company
LOCATION:
Address 200 Patcehn Drive 3751 Appian Way
City, State Lexington, KY Lexington, KY
County Fayette-Lexington Fayette-Lexington
Proximity to Subject 3 miles northeast of subject 1 mile south of subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 166,080 281,244
Year Built 1973 1985
Effective Age 30 18
Building Structure Type Brick & wood siding walls; asphalt shingle roof Brick & wood siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc) Open, Covered Open, Covered
Number of Units 202 330
Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo.
1 1 Br/1 Ba 656 88 $499 1 1 Br/1 Ba 635 144 $655
2 2Br/2Ba 919 94 $599 3 2Br/2Ba 759 186 $775
6 3Br/2Ba 1,100 20 $689
Average Unit Size (SF) 822 705
Unit Breakdown: Efficiency 0% 2-Bedroom 46% Efficiency 0% 2-Bedroom 57%
1-Bedroom 43% 3-Bedroom 11% 1-Bedroom 43% 3-Bedroom 0%
CONDITION: Good Good
APPEAL: Good Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage X Vaulted Ceiling
Balcony X W/D Connect. Balcony X W/D Connect.
X Fireplace Other X Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
X Basketball Court BBQ Equipment X Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
X Sand Volley Ball X Meeting Hall X Sand Volley Ball X Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room X Gym Room
Tanning Room Tanning Room
OCCUPANCY: 93% 91%
LEASING DATA:
Available Leasing Terms 6 to 15 Months 6 to 15 Months
Concessions 2 Months 2 Months
Pet Deposit $150 to $300 $150 to $300
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water Trash X Water Trash
Confirmation May 1, 2003; Joseph Beard (Property Manager) May 1, 2003; Joseph Beard (Property Manager)
Telephone Number 888 386 9390 877 261 8381
NOTES: None None
COMPARISON TO SUBJECT: Superior Superior
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
BRECKINRIDGE COURT CHINOE CREEK SONNET COVE APARTMENTS
420-420 Redding Road 3520-3558 Creekwood Drive 475-531 Lake Toer Drive
Lexington, KY Lexington, KY Lexington, KY
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4 COMPARABLE R-5
PATCHEN PLACE OLD FARM APARTMENTS
200 Patcehn Drive 3751 Appian Way
Lexington, KY Lexington, KY
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
EXHIBIT D
CERTIFICATE OF APPRAISER
(1 PAGE)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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. Daniel Salcedo
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/ Jeff W. Briggs
-----------------------------------------
Jeff Briggs, MAI
Engagement Director, Real Estate Group
Commonwealth of Kentucky State Certified
General Real Property Appraiser #002611
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
JEFF W. BRIGGS, MAI
ENGAGEMENT DIRECTOR, REAL ESTATE GROUP
POSITION Jeff W. Briggs is an engagement director for the
Dallas Real Estate Group of American Appraisal
Associates, Inc. ("AAA").
EXPERIENCE
Valuation Mr. Briggs' valuation experience includes all types
of industrial property, Class A office buildings,
regional malls, neighborhood and community shopping
centers, apartments, hotels, and both daily fee and
private golf facilities. He has appraised the vacant
land of farms and ranches, single-family residential
subdivisions, commercial subdivisions, commercial
urban properties, and conservation easements.
Special-purpose property valuations he has performed
include a large pork production facility, cemeteries,
nursing homes, and outpatient surgical clinics.
Purchase price allocation assignments included
valuation of the land components of a professional
sports stadium and a pork production facility. Mr.
Briggs has completed assignments in over 30 states
throughout the country.
Court Mr. Briggs has testified as an expert witness in
federal bankruptcy court concerning an apartment
complex in Odessa, Texas; given deposition on an
appraisal of an industrial building in Sydney, Ohio;
and assisted in condemnation assignments for the
Texas Highway Department.
Business Mr. Briggs joined AAA in 2000. Prior to joining AAA,
he was a manager in the Dallas office of Arthur
Andersen LLP from 1996 to 1999. Previously, Mr.
Briggs had served as a senior appraiser for Wilson K.
Mason Company and Integrated Evaluation, both Dallas
real estate appraisal companies, and had been
employed by Harvey Cornwell and Associates, also a
Dallas-based real estate valuation firm.
EDUCATION University of North Texas
Bachelor of Business Administration - Real Estate
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
PROFESSIONAL Appraisal Institute, MAI Designated Member
AFFILIATIONS
STATE CERTIFICATIONS State of Arizona, Certified General
Real Estate Appraiser, #31114
State of Arkansas, State Certified General Appraiser,
#CG1588N
State of Indiana, Certified General Appraiser,
#CG40200493
Commonwealth of Kentucky, Certified General Real
Property Appraiser, #002611
State of Michigan, Certified General Appraiser,
#1201068301
State of Minnesota, Certified General Real Property
Appraiser, #AP-20280553
State of Mississippi, State Certified General Real
Estate Appraiser, #GA-625
State of Nebraska, Certified General Real Estate
Appraiser, #CG230072R
State of Oregon, State Certified General Appraiser,
#C000713
Commonwealth of Pennsylvania, Certified General
Appraiser, #GA001870
State of Tennessee, Certified General Real Estate
Appraiser, #00003246
State of Texas, State Certified General Real Estate
Appraiser, #TX-1321403-G
State of Washington, Certified General Real Estate
Appraiser, #1101000
AMERICAN APPRAISAL ASSOCIATES, INC.
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
TATES CREEK VILLAGE, LEXINGTON, KENTUCKY
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.