FAIRWAY VIEW II APARTMENTS
2245 COLLEGE DRIVE
BATON ROUGE, LOUISIANA
MARKET VALUE -
FEE SIMPLE ESTATE
AS OF MAY 22, 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 LOGO]
UNITED STATES INTERNATIONAL
Atlanta Milwaukee Brazil Mexico
Boston Minneapolis Canada Morocco
Buffalo New Orleans [AMERICAN APPRAISAL ASSOCIATES LOGO] China Peru
Charlotte New York Croatia Philippines
Chicago Oak Lawn 9441 LBJ Freeway Suite 114 Czech Republic Poland
Cincinnati Philadelphia Dallas, Texas 75243 England Portugal
Dallas Pittsburgh Germany Russia
Denver Princeton Telephone: (972) 994-9100 Greece Spain
Detroit Schaumburg Fax: (972) 994-0516 Hong Kong Taiwan
Houston St. Louis Hungary Thailand
Irvine San Francisco Italy Turkey
Jacksonville Seattle Japan Venezuela
Los Angeles
JULY 17, 2003
Apartment Investment and Management
Company ("AIMCO") c/o
Mr. Steven A. Velkei, Esq.
Liner Yankelevitz Sunshine & Regenstreif LLP
1100 Glendon Avenue, 14th Floor
Los Angeles, California 90024-3503
Nuanes, et al.( "Plaintiffs ") c/o
Ms. Joy Kruse
Lieff Cabraser Heimann & Bernstein
Embarcadero Center West
275 Battery Street, 30th Floor
San Francisco, California 94111
RE: FAIRWAY VIEW II APARTMENTS
2245 COLLEGE DRIVE
BATON ROUGE, EAST BATON ROUGE PARISH COUNTY, LOUISIANA
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 167,022 square feet of rentable area. The improvements were built in
1981. The improvements are situated on 10.55 acres. Overall, the improvements
are in average condition. As of the date of this appraisal, the subject property
is 92% 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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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 22, 2003 is:
($7,700,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
/s/ Frank Fehribach
------------------------------------
July 17, 2003 Frank Fehribach, MAI
#053272 Managing Principal, Real Estate Group
Texas State Certified General Real Estate Appraiser
#TX-1323954-G
Report By:
Kim Cook
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
TABLE OF CONTENTS
Cover
Letter of Transmittal
Table of Contents
APPRAISAL DATA
Executive Summary ............................................................. 4
Introduction .................................................................. 9
Area Analysis ................................................................. 11
Market Analysis ............................................................... 14
Site Analysis ................................................................. 16
Improvement Analysis .......................................................... 16
Highest and Best Use .......................................................... 17
VALUATION
Valuation Procedure ........................................................... 18
Sales Comparison Approach ..................................................... 20
Income Capitalization Approach ................................................ 26
Reconciliation and Conclusion ................................................. 38
ADDENDA
Exhibit A - Photographs of Subject Property
Exhibit B - Summary of Rent Comparables and Photograph of Comparables
Exhibit C - Assumptions and Limiting Conditions
Exhibit D - Certificate of Appraiser
Exhibit E - Qualifications
General Service Conditions
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 4
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: Fairway View II Apartments
LOCATION: 2245 College Drive
Baton Rouge, Louisiana
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 22, 2003
DATE OF REPORT: July 17, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 10.55 acres, or 459,558 square feet
Assessor Parcel No.: 006-1038-0
Floodplain: Community Panel No. 2200580095D (May 17, 1993)
Flood Zone X, an area outside the floodplain.
Zoning: A-4 (General Residential)
BUILDING:
No. of Units: 204 Units
Total NRA: 167,022 Square Feet
Average Unit Size: 819 Square Feet
Apartment Density: 19.3 units per acre
Year Built: 1981
UNIT MIX AND MARKET RENT:
GROSS RENTAL INCOME PROJECTION
Market Rent
Square ---------------- Monthly Annual
Unit Type Feet Per Unit Per SF Income Income
- ---------------- ------- -------- ------ -------- ----------
1Br/1Ba - 1A10 588 $ 540 $ 0.92 $ 25,920 $ 311,040
1Br/1.5Ba - 1B15 620 $ 500 $ 0.81 $ 4,000 $ 48,000
1Br/1Ba -1C10 706 $ 565 $ 0.80 $ 27,120 $ 325,440
2Br/1Ba - 2A10 889 $ 620 $ 0.70 $ 42,160 $ 505,920
2Br/2Ba - 2A20 944 $ 650 $ 0.69 $ 3,900 $ 46,800
3Br/2Ba - 3A20 1,189 $ 680 $ 0.57 $ 4,080 $ 48,960
3Br/2Ba - 3B20 1,335 $ 700 $ 0.52 $ 14,000 $ 168,000
Total $121,180 $1,454,160
OCCUPANCY: 92%
ECONOMIC LIFE: 45 Years
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
EFFECTIVE AGE: 20 Years
REMAINING ECONOMIC LIFE: 25 Years
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
SUBJECT PHOTOGRAPHS
[EXTERIOR AND ENTRANCE TO SUBJECT MAP] [EXTERIOR - TYPICAL VIEW OF BUILDINGS MAP]
AREA MAP
[AREA MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
NEIGHBORHOOD MAP
[NEIGHBORHOOD 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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
PART TWO - ECONOMIC INDICATORS
INCOME CAPITALIZATION APPROACH
Amount $/Unit
------ ------
DIRECT CAPITALIZATION
Potential Rental Income $ 1,454,160 $ 7,128
Effective Gross Income $ 1,378,496 $ 6,757
Operating Expenses $ 529,965 $ 2,598 38.4% of EGI
Net Operating Income: $ 797,532 $ 3,909
Capitalization Rate 10.50%
DIRECT CAPITALIZATION VALUE $ 7,500,000* $ 36,765/UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 8%
Stabilized Vacancy & Collection Loss: 8.5%
Lease-up / Stabilization Period N/A
Terminal Capitalization Rate 11.50%
Discount Rate 12.00%
Selling Costs 2.00%
Growth Rates:
Income 2.50%
Expenses: 2.50%
DISCOUNTED CASH FLOW VALUE $ 7,800,000* $ 38,235/UNIT
RECONCILED INCOME CAPITALIZATION VALUE $ 7,600,000 $ 37,255/UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $28,144 to $35,412
Range of Sales $/Unit (Adjusted) $31,350 to $44,796
VALUE INDICATION - PRICE PER UNIT $7,800,000* $ 38,235/UNIT
EGIM ANALYSIS
Range of EGIMs from Improved Sales 4.80 to 5.76
Selected EGIM for Subject 5.75
Subject's Projected EGI $ 1,378,496
EGIM ANALYSIS CONCLUSION $ 7,900,000* $ 38,725/UNIT
NOI PER UNIT ANALYSIS CONCLUSION $ 7,700,000* $ 37,745/UNIT
RECONCILED SALES COMPARISON VALUE $ 7,800,000 $ 38,235/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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $7,800,000
NOI Per Unit $7,700,000
EGIM Multiplier $7,900,000
INDICATED VALUE BY SALES COMPARISON $7,800,000 $38,235/UNIT
INCOME APPROACH:
Direct Capitalization Method: $7,500,000
Discounted Cash Flow Method: $7,800,000
INDICATED VALUE BY THE INCOME APPROACH $7,600,000 $37,255 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $7,700,000 $37,745 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 2245 College Drive, Baton Rouge, East Baton
Rouge Parish County, Louisiana. Baton Rouge identifies it as 006-1038-0.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by Kim Cook on May
22, 2003. Frank Fehribach, MAI has not made a personal inspection of the subject
property. Kim Cook performed the research, valuation analysis and wrote the
report. Frank Fehribach, MAI reviewed the report and concurs with the value.
Frank Fehribach, MAI and Kim Cook have extensive experience in appraising
similar properties and meet the USPAP competency provision.
The scope of this investigation comprises the inspection of the property and the
collection, verification, and analysis of general and specific data pertinent to
the subject property. We have researched current improved sales and leases of
similar properties, analyzing them as to their comparability, and adjusting them
accordingly. We completed the Sales Comparison and Income Capitalization
Approaches to value. From these approaches to value, a concluded overall value
was made.
DATE OF VALUE AND REPORT
This appraisal was made to express the opinion of value as of May 22, 2003. The
date of the report is July 17, 2003.
PURPOSE AND USE OF APPRAISAL
The purpose of the appraisal is to estimate the market value of the fee simple
interest in the subject property. It is understood that the appraisal is
intended to assist the clients in litigation settlement proceedings. The
appraisal was not based on a requested minimum valuation, a specific valuation,
or the approval of a loan.
PROPERTY RIGHTS APPRAISED
We have appraised the Fee Simple Estate in the subject property (as applied in
the Sales & Income Approaches), subject to the existing short-term leases. A Fee
Simple Estate is
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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 National Property
Investors 7. 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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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 Baton Rouge, Louisiana. 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 - SR 73/Jefferson Highway
West - South Acadian Thruway
South - Interstate 10
North - Florida Boulevard
MAJOR EMPLOYERS
Major employers in the subject's area include DSM-Copolymer Rubber & Chemical
Co., Placid Refining Company, West Baton Rouge Parish Council, United Parcel
Service, Inc., Trinity Industries, Perin Corporation, International Piping
Systems, Ltd. and West baton Rouge School Board. 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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
NEIGHBORHOOD DEMOGRAPHICS
AREA
-----------------------------------------
CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA
- -------- ------------ ------------ ------------ ---
POPULATION TRENDS
Current Population 7,022 86,665 190,375 615,414
5-Year Population 7,082 87,078 194,814 648,890
% Change CY-5Y 0.9% 0.5% 2.3% 5.4%
Annual Change CY-5Y 0.2% 0.1% 0.5% 1.1%
HOUSEHOLDS
Current Households 3,246 35,889 78,915 229,972
5-Year Projected Households 3,371 37,147 82,615 247,839
% Change CY - 5Y 3.9% 3.5% 4.7% 7.8%
Annual Change CY-5Y 0.8% 0.7% 0.9% 1.6%
INCOME TRENDS
Median Household Income $ 42,522 $ 29,007 $ 29,012 $ 37,058
Per Capita Income $ 35,547 $ 22,927 $ 20,835 $ 19,752
Average Household Income $ 80,604 $ 55,202 $ 50,271 $ 52,857
Source: Demographics Now
The subject neighborhood's population is expected to show increases below that
of the region. The immediate market offers superior income levels as compared to
the broader market.
The following table illustrates the housing statistics in the subject's
immediate area, as well as the MSA region.
HOUSING TRENDS
AREA
------------------------------------------
CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA
- -------- ------------ ------------ ------------ ---
HOUSING TRENDS
% of Households Renting 38.76% 41.50% 42.36% 28.39%
5-Year Projected % Renting 40.11% 41.99% 42.76% 27.69%
% of Households Owning 51.47% 41.62% 42.69% 61.26%
5-Year Projected % Owning 50.61% 41.83% 43.03% 62.64%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Drainage ditch, golf course, residential development
South - Fairway View I Apartments, vacant land, residential and retail uses
East - Horse farm, pastureland
West - Bienville Towers Apartments
CONCLUSIONS
The subject is well located within the city of Baton Rouge. 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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
MARKET ANALYSIS
The subject property is located in the city of Baton Rouge in East Baton Rouge
Parish County. The overall pace of development in the subject's market is more
or less stable. Most of the new construction is outside the subject market. The
most recent addition near the subject is the Gates at Citiplace, built in 1997
and located one mile south of the subject. This property offers 369 units in the
highest quality, garden apartment complex in Baton Rouge. The following table
illustrates historical vacancy rates for the subject's market.
HISTORICAL VACANCY RATE
Period Region Submarket
- ------ ------ ---------
Fall 2002 5.9% 5.3%
Spring 2002 4.5% 2.0%
Fall 2001 5.0% 5.0%
Spring 2001 10.7% 7.5%
Source: LSU Real Estate Research Institute Survey of Apartment Complexes in
Baton Rouge, Fall 2002
Occupancy trends in the subject's market are decreasing. Historically speaking,
the subject's submarket has equated the overall market. During 1995-2001,
approximately 3,995 new units were added to this region, slowing rental rate
increases, increasing vacancies to as high as 8.5% in 1998. As of 1999 and 2000,
most of these units were absorbed. However, an additional 1,738 units were added
during 2002-2003. Most of these units are currently under construction. For
2004, 617 are planned with another 168 pending. These additions to the existing
supply could suppress rent increases for certain sectors of the city during the
next 2-3 years. Studies suggest the subject market can absorb approximately 700
units/yr without a significant increase in vacancies.
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
- ------ ------ -------- --------- --------
Fall 2002 $ 564 - $ 578 -
Spring 2002 $ 563 -0.2% $ 584 1.0%
Fall 2001 $ 557 -1.1% $ 570 -2.4%
Spring 2001 $ 554 -0.5% $ 568 -0.4%
Source: LSU Real Estate Research Institute Survey of Apartment Complexes in
Baton Rouge, Fall 2002
The following table illustrates a summary of the subject's competitive set.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
--- ------------- ----- ----- ---------- --------------------
R-1 Bienville Towers 137 97% 1974 Adjacent to subject
R-2 Parc Fontaine Apartments 88 99% 1965 One mile north of subject
R-3 Cobblestone at Essen 191 93% 1972 Three miles southeast of the subject
R-4 Jefferson Place Apartments 234 91% 1986 Three miles east of the subject
R-5 Warwick Apartments 188 98% 1992-94 Three miles east of the subject
Subject Fairway View II Apartments 204 92% 1981
Vacancy rates were slightly higher in two- and three-bedroom units in the
subject submarket and citywide. New properties coming on-line are targeting
specific markets such as affluent LSU students. However, most of the units under
construction in 2003 are more conventional luxury units. Few of the new
properties will offer standard middle-grade units.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 10.55 acres, or 459,558 square feet
Shape Rectangular
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 2200580095D, dated May 17, 1993
Flood Zone Zone X
Zoning A-4, 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
- ----------------------------------------------------------------------------------
006-1038-0 $30,000 $418,000 $448,000 0.10403 $46,605
IMPROVEMENT ANALYSIS
Year Built 1981
Number of Units 204
Net Rentable Area 167,022 Square Feet
Construction:
Foundation Reinforced concrete slab
Frame Heavy or light wood
Exterior Walls Stucco wall
Roof Built-up asphalt with or without gravel over a wood
truss structure
Project Amenities Amenities at the subject include a swimming
pool, tennis court, gym room, laundry room, business
office, and parking area.
Unit Amenities Individual unit amenities include a garage, balcony,
fireplace, cable TV connection, vaulted ceiling, and
washer dryer connection. Appliances available in each
unit include a refrigerator, stove, dishwasher, water
heater, garbage
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
disposal, and oven.
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
- ---------------------------------------------------------
1Br/1Ba - 1A10 48 588
1Br/1.5Ba - 1B15 8 620
1Br/1Ba -1C10 48 706
2Br/1Ba - 2A10 68 889
2Br/2Ba - 2A20 6 944
3Br/2Ba - 3A20 6 1,189
3Br/2Ba - 3B20 20 1,335
Overall Condition Average
Effective Age 20 years
Economic Life 45 years
Remaining Economic Life 25 years
Deferred Maintenance The deferred maintenance at the subject
property was estimated for a total amount
of $75,000.
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
1981 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 18
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
- ------------------------------- --------------------------- ---------------------------- -----------------------------
Property Name Fairway View II Apartments Kingston Point Apartments Magnolia Trace Apartment
LOCATION:
Address 2245 College Drive 1919 Boulevard De Province 11585 N. Harrell's Ferry Rd
City, State Baton Rouge, Louisiana Baton Rouge, LA Baton Rouge, LA
County East Baton Rouge Parish East Baton Rouge Parish East Baton Rouge Parish
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 167,022 149,853 241,372
Year Built 1981 1974-75 1973
Number of Units 204 156 245
Unit Mix: Type Total Type Total Type Total
1Br/1Ba - 1A10 48 Efficiency 1 1Br/1Ba, Flat 64
1Br/1.5Ba - 1B15 8 1Br/1Ba, Flat 11 2Br/1.5Ba, Flat 59
1Br/1Ba -1C10 48 1Br/1Ba, TH 15 2BR/1.5Ba, TH 52
2Br/1Ba - 2A10 68 2BR/1Ba, Flat 27 3BR/1.5Ba, TH 14
2Br/2Ba - 2A20 6 2BR/1Ba, TH 16 3BR/2.5Ba, TH 56
3Br/2Ba - 3A20 6 2BR/2Ba, Flat 62
3Br/2Ba - 3B20 20 3BR/2Ba, TH 24
Average Unit Size (SF) 819 961 985
Land Area (Acre) 10.5500 7.7420 12.5100
Density (Units/Acre) 19.3 20.1 19.6
Parking Ratio (Spaces/Unit) 1.96 1.99 NA
Parking Type (Gr., Cov., etc) Open Open Open
CONDITION: Average Average Average
APPEAL: Average Average Average
AMENITIES:
Pool/Spa Yes/No Yes/No Yes/No
Gym Room Yes No No
Laundry Room Yes Yes Yes
Secured Parking No Yes No
Sport Courts No No Yes
Washer/Dryer Connection Yes (in 2&3 Br units) Yes Yes
OCCUPANCY: 92% 93% 90%
TRANSACTION DATA:
Sale Date August, 2001 January, 2001
Sale Price ($) $4,446,000 $6,895,212
Grantor Kingston, Inc. Consolidated Capital Equity
Partners, et al
Grantee Pointe Camelot, LLC Fairview, Inc.
Sale Documentation Document 942-11254 Document 799-11193
Verification Selling Broker, Art Confidential
Telephone Number Lancaster
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $947,840 $6,076 $6.33 $1,562,460 $6,377 $6.47
Vacancy/Credit Loss $ 66,439 $ 426 $0.44 $ 124,997 $ 510 $0.52
Effective Gross Income $881,401 $5,650 $5.88 $1,437,463 $5,867 $5.96
Operating Expenses $453,246 $2,905 $3.02 $ 674,485 $2,753 $2.79
Net Operating Income $428,155 $2,745 $2.86 $ 762,978 $3,114 $3.16
NOTES: Property amenities also Complex is a low-rise, two-
include a lake and walking story property.
bridges Sale price adjusted upward
$25,000 for deferred maint
PRICE PER UNIT $28,500 $28,144
PRICE PER SQUARE FOOT $ 29.67 $ 28.57
EXPENSE RATIO 51.4% 46.9%
EGIM 5.04 4.80
OVERALL CAP RATE 9.63% 11.07%
Cap Rate based on Pro
Forma or Actual Income? ACTUAL
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 3 I - 4
- ------------------------------- --------------------------- ----------------------------- ----------------------------
Property Name Fairway View II Apartments Sable Chase Apartments Sharlo Apartments (now known
as Azalea Point
LOCATION:
Address 2245 College Drive 1860 Boulevard De Province 2000 Brightside Lane
City, State Baton Rouge, Louisiana Baton Rouge, LA Baton Rouge, LA
County East Baton Rouge Parish East Baton Rouge Parish East Baton Rouge Parish
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 167,022 184,920 173,696
Year Built 1981 1978 1975
Number of Units 204 208 200
Unit Mix: Type Total Type Total Type Total
1Br/1Ba - 1A10 48 1Br/1Ba 52 1Br/1Ba 48
1Br/1.5Ba - 1B15 8 1Br/1Ba 52 2Br/2Ba 112
1Br/1Ba -1C10 48 2 Br/1Ba 56 3Br/2Ba 40
2Br/1Ba - 2A10 68 2 Br/1.5 Ba 28
2Br/2Ba - 2A20 6 3Br/2Ba 16
3Br/2Ba - 3A20 6 4Br/2Ba 4
3Br/2Ba - 3B20 20
Average Unit Size (SF) 819 889 868
Land Area (Acre) 10.5500 9.5210 9.4500
Density (Units/Acre) 19.3 21.8 21.2
Parking Ratio (Spaces/Unit) 1.96 NA 2.00
Parking Type (Gr., Cov., etc) Open Open Open
CONDITION: Average Good Good
APPEAL: Average Average Average
AMENITIES:
Pool/Spa Yes/No Yes/Yes Yes/No
Gym Room Yes Yes No
Laundry Room Yes Yes Yes
Secured Parking No No No
Sport Courts No Yes Yes
Washer/Dryer Connection Yes (in 2&3 Br units) Yes Yes
OCCUPANCY: 92% 91% 93%
TRANSACTION DATA:
Sale Date December, 2000 October, 2000
Sale Price ($) $6,508,000 $7,082,446
Grantor Sablechase @ Sherwood Beal Bank, SSB
Partnership
Grantee Sable Chase Operating Fairview, Inc.
Associates
Sale Documentation Document 888-11180 Document 603-11164
Verification David Treppendahl, Confidential
Telephone Number Selling Broker
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $1,241,000 $5,966 $6.71 $1,482,600 $7,413 $8.54
Vacancy/Credit Loss $ 111,690 $ 537 $0.60 $ 103,782 $ 519 $0.60
Effective Gross Income $1,129,310 $5,429 $6.11 $1,378,818 $6,894 $7.94
Operating Expenses $ 528,112 $2,539 $2.86 $ 606,342 $3,032 $3.49
Net Operating Income $ 601,198 $2,890 $3.25 $ 772,476 $3,862 $4.45
NOTES: Opposite Comp 1; SP None
includes $175,000 for def
maintenance & $92,000
for fav FNMA financing
PRICE PER UNIT $31,288 $35,412
PRICE PER SQUARE FOOT $ 35.19 $ 40.77
EXPENSE RATIO 46.8% 44.0%
EGIM 5.76 5.14
OVERALL CAP RATE 9.24% 10.91%
Cap Rate based on Pro
Forma or Actual Income? PRO FORMA
COMPARABLE
DESCRIPTION SUBJECT I - 5
- ------------------------------- --------------------------- ------------------------------
Property Name Fairway View II Apartments Goodwood Place Apartment
LOCATION:
Address 2245 College Drive 356 Apartment Court
City, State Baton Rouge, Louisiana Baton Rouge, LA
County East Baton Rouge Parish East Baton Rouge Parish
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 167,022 187,456
Year Built 1981 Late 1960's, updated
Number of Units 204 184
Unit Mix: Type Total Type Total
1Br/1Ba - 1A10 48 Efficiency 2
1Br/1.5Ba - 1B15 8 1Br/1Ba 48
1Br/1Ba -1C10 48 2Br/1.5Ba, TH 102
2Br/1Ba - 2A10 68 2Br/2Ba, Flat 32
2Br/2Ba - 2A20 6
3Br/2Ba - 3A20 6
3Br/2Ba - 3B20 20
Average Unit Size (SF) 819 1,019
Land Area (Acre) 10.5500 7.5900
Density (Units/Acre) 19.3 24.2
Parking Ratio (Spaces/Unit) 1.96 NA
Parking Type (Gr., Cov., etc) Open Open
CONDITION: Average Average
APPEAL: Average Average
AMENITIES:
Pool/Spa Yes/No Yes/No
Gym Room Yes No
Laundry Room Yes Yes
Secured Parking No Yes
Sport Courts No No
Washer/Dryer Connection Yes (in 2&3 Br units) Yes
OCCUPANCY: 92% 98%
TRANSACTION DATA:
Sale Date January, 2000
Sale Price ($) $5,548,936
Grantor Goodwood Investors, LLC
Grantee Sheltering Palms Baton Rouge,
LLC
Sale Documentation Document 761-11089
Verification Grantee
Telephone Number
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF
Potential Gross Income $1,081,200 $5,876 $5.77
Vacancy/Credit Loss $ 75,684 $ 411 $0.40
Effective Gross Income $1,005,516 $5,465 $5.36
Operating Expenses $ 431,848 $2,347 $2.30
Net Operating Income $ 573,668 $3,118 $3.06
NOTES: None
PRICE PER UNIT $30,157
PRICE PER SQUARE FOOT $ 29.60
EXPENSE RATIO 42.9%
EGIM 5.52
OVERALL CAP RATE 10.34%
Cap Rate based on Pro PRO FORMA
Forma or Actual Income?
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
IMPROVED SALES MAP
[IMPROVED SALES MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $28,144 to $35,412 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 $31,350 to $44,796 per unit with a mean or average adjusted price
of $38,142 per unit. The median adjusted price is $38,698 per unit. Based on the
following analysis, we have concluded to a value of $38,500 per unit, which
results in an "as is" value of $7,800,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2 I - 3
- ----------------------------- ---------------------- ----------------------- ------------------------ ------------------------
Property Name Fairway View II Kingston Point Magnolia Trace Apartment Sable Chase Apartments
Apartments Apartments
Address 2245 College Drive 1919 Boulevard De 11585 N. Harrell's Ferry 1860 Boulevard De
Province Rd Province
City Baton Rouge, Louisiana Baton Rouge, LA Baton Rouge, LA Baton Rouge, LA
Sale Date August, 2001 January, 2001 December, 2000
Sale Price ($) $4,446,000 $6,895,212 $6,508,000
Net Rentable Area (SF) 167,022 149,853 241,372 184,920
Number of Units 204 156 245 208
Price Per Unit $28,500 $28,144 $31,288
Year Built 1981 1974-75 1973 1978
Land Area (Acre) 10.5500 7.7420 12.5100 9.5210
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 08-2001 10% 01-2001 10% 12-2000 15%
VALUE AFTER TRANS. ADJUST.
($/UNIT) $31,350 $30,958 $35,982
Location Comparable 0% Comparable 0% Comparable 0%
Number of Units 204 156 -5% 245 5% 208 0%
Quality / Appeal Good Comparable 0% Inferior 10% Comparable 0%
Age / Condition 1981 1974-75 / Average 10% 1973 / Average 10% 1978 / Good 5%
Occupancy at Sale 92% 93% 0% 90% 0% 91% 0%
Amenities Good Comparable 0% Inferior 5% Comparable 0%
Average Unit Size (SF) 819 961 -5% 985 -5% 889 -5%
PHYSICAL ADJUSTMENT 0% 25% 0%
FINAL ADJUSTED VALUE ($/UNIT) $31,350 $38,698 $35,982
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 4 I - 5
- ----------------------------- ---------------------- ------------------------ ----------------------------
Property Name Fairway View II Sharlo Apartments (now Goodwood Place Apartment
Apartments known as Azalea Point
Address 2245 College Drive 2000 Brightside 356 Apartment Court
Lane
City Baton Rouge, Louisiana Baton Rouge, LA Baton Rouge, LA
Sale Date October, 2000 January, 2000
Sale Price ($) $7,082,446 $5,548,936
Net Rentable Area (SF) 167,022 173,696 187,456
Number of Units 204 200 184
Price Per Unit $35,412 $30,157
Year Built 1981 1975 Late 1960's, updated
Land Area (Acre) 10.5500 9.4500 7.5900
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 10-2000 15% 01-2000 15%
VALUE AFTER TRANS. ADJUST.
($/UNIT) $40,724 $34,681
Location Comparable 0% Comparable 0%
Number of Units 204 200 0% 184 0%
Quality / Appeal Good Comparable 0% Inferior 10%
Age / Condition 1981 1975 / Good 10% Late 1960's, updated / A 15%
Occupancy at Sale 92% 93% 0% 98% -5%
Amenities Good Comparable 0% Inferior 5%
Average Unit Size (SF) 819 868 0% 1,019 -10%
PHYSICAL ADJUSTMENT 10% 15%
FINAL ADJUSTED VALUE ($/UNIT) $44,796 $39,883
SUMMARY
VALUE RANGE (PER UNIT) $ 31,350 TO $ 44,796
MEAN (PER UNIT) $ 38,142
MEDIAN (PER UNIT) $ 38,698
VALUE CONCLUSION (PER UNIT) $ 38,500
VALUE OF IMPROVEMENT & MAIN SITE $ 7,854,000
DEFERRED MAINTENANCE -$ 75,000
VALUE INDICATED BY SALES COMPARISON APPROACH $ 7,779,000
ROUNDED $ 7,800,000
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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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-1 156 $4,446,000 9.63% $428,155 $ 797,532 1.424 $ 40,596
$ 28,500 $ 2,745 $ 3,909
I-2 245 $6,895,212 11.07% $762,978 $ 797,532 1.255 $ 35,331
$ 28,144 $ 3,114 $ 3,909
I-3 208 $6,508,000 9.24% $601,198 $ 797,532 1.353 $ 42,320
$ 31,288 $ 2,890 $ 3,909
I-4 200 $7,082,446 10.91% $772,476 $ 797,532 1.012 $ 35,844
$ 35,412 $ 3,862 $ 3,909
I-5 184 $5,548,936 10.34% $573,668 $ 797,532 1.254 $ 37,815
$ 30,157 $ 3,118 $ 3,909
PRICE/UNIT
Low High Average Median
$35,331 $42,320 $38,381 $37,815
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
Estimated Price Per Unit $ 38,000
----------
Number of Units 204
Value $7,752,000
Deferred Maintenance -$ 75,000
----------
Value Based on NOI Analysis $7,677,000
Rounded $7,700,000
The adjusted sales indicate a range of value between $35,331 and $42,320 per
unit, with an average of $38,381 per unit. Based on the subject's competitive
position within the improved sales, a value of $38,000 per unit is estimated.
This indicates an "as is" market value of $7,700,000 (rounded after necessary
adjustment, if any) for the NOI Per Unit Analysis.
EFFECTIVE GROSS INCOME MULTIPLIER (EGIM) ANALYSIS
The effective gross income multiplier (EGIM) is derived by dividing the sales
price by the total effective gross income. The following table illustrates the
EGIMs for the comparable improved sales.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 25
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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-1 156 $4,446,000 $ 881,401 $ 453,246 51.42% 5.04
$ 28,500
I-2 245 $6,895,212 $ 1,437,463 $ 674,485 46.92% 4.80
$ 28,144
I-3 208 $6,508,000 $ 1,129,310 $ 528,112 46.76% 5.76
$ 31,288 38.45%
I-4 200 $7,082,446 $ 1,378,818 $ 606,342 43.98% 5.14
$ 35,412
I-5 184 $5,548,936 $ 1,005,516 $ 431,848 42.95% 5.52
$ 30,157
EGIM
Low High Average Median
4.80 5.76 5.25 5.14
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
Estimate EGIM 5.75
-----------
Subject EGI $1,378,496
Value $7,926,354
Deferred Maintenance -$ 75,000
-----------
Value Based on EGIM Analysis $7,851,354
Rounded $7,900,000
Value Per Unit $ 38,725
There is an inverse relationship, which generally holds among EGIMs and
operating expenses. Properties, which have higher expense ratios, typically sell
for relatively less and therefore produce a lower EGIM. As will be illustrated
in the Income Capitalization Approach of this report, the subject's operating
expense ratio (OER) is estimated at 38.45% before reserves. The comparable sales
indicate a range of expense ratios from 42.95% to 51.42%, while their EGIMs
range from 4.80 to 5.76. Overall, we conclude to an EGIM of 5.75, which results
in an "as is" value estimate in the EGIM Analysis of $7,900,000.
SALES COMPARISON CONCLUSION
The three valuation methods in the Sales Comparison Approach are shown below.
The overall value via the Sales Comparison Approach is estimated at $7,800,000.
Price Per Unit $7,800,000
NOI Per Unit $7,700,000
EGIM Analysis $7,900,000
Sales Comparison Conclusion $7,800,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
method is normally more appropriate for properties with relatively stable
operating histories and expectations.
A pro forma analysis for the first year of the investment is made to estimate a
reasonable potential net operating income for the Subject Property. Such an
analysis entails an estimate of the gross income the property should command in
the marketplace. From this total gross income must be deducted an allowance for
vacancy/collection loss and operating expenses as dictated by general market
conditions and the overall character of the subject's tenancy and leased income
to arrive at a projected estimate of net operating income. Conversion of the net
operating income to an indication of value is accomplished by the process of
capitalization, as derived primarily from market data.
MARKET RENT ANALYSIS
In order to determine a market rental rate for the subject, a survey of
competing apartment communities was performed. This survey was displayed
previously in the market analysis section of the report. Detailed information
pertaining to each of the comparable rental communities, along with photographs,
is presented in the Addenda of this report.
The following charts display the subject's current asking and actual rent rates
as well as a comparison with the previous referenced comparable rental
properties.
SUMMARY OF ACTUAL AVERAGE RENTS
Average
Unit Area --------------------
Unit Type (Sq. Ft.) Per Unit Per SF %Occupied
- ---------------- --------- -------- ------ ---------
1Br/1Ba - 1A10 588 $ 481 $ 0.82 95.8%
1Br/1.5Ba - 1B15 620 $ 507 $ 0.82 100.0%
1Br/1Ba - 1C10 706 $ 531 $ 0.75 95.8%
2Br/1Ba - 2A10 889 $ 625 $ 0.70 86.8%
2Br/2Ba - 2A20 944 $ 791 $ 0.84 100.0%
3Br/2Ba - 3A20 1189 $ 786 $ 0.66 100.0%
3Br/2Ba - 3B20 1335 $ 819 $ 0.61 85.0%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
RENT ANALYSIS
COMPARABLE RENTS
----------------------------------------------------------
R-1 R-2 R-3 R-4 R-5
----------------------------------------------------------
Parc Jefferson
Bienville Fontaine Cobblestone Place Warwick
Towers Apartments at Essen Apartments Apartments
----------------------------------------------------------
COMPARISON TO SUBJECT
----------------------------------------------------------
SUBJECT SUBJECT
SUBJECT UNIT ACTUAL ASKING Slightly Slightly Slightly
DESCRIPTION TYPE RENT RENT Inferior Inferior Superior Superior Superior
- ------------------------------------------------------------------------------------------------------------------------
Monthly Rent 1BR/1BA - 1A10 $ 481 $ 501 $ 525 $ 665
Unit Area (SF) 588 588 620 648
Monthly Rent Per Sq. Ft. $ 0.82 $ 0.85 $ 0.85 $ 1.03
Monthly Rent 1BR/1.5BA - 1B15 $ 507 $ 541 $ 550
Unit Area (SF) 620 620 740
Monthly Rent Per Sq. Ft. $ 0.82 $ 0.87 $ 0.74
Monthly Rent 1BR/1BA -1C10 $ 531 $ 571 $ 575 $ 640
Unit Area (SF) 706 706 740 750
Monthly Rent Per Sq. Ft. $ 0.75 $ 0.81 $ 0.78 $ 0.85
Monthly Rent 2BR/1BA - 2A10 $ 625 $ 671 $ 634 $ 615 $ 890 $ 740
Unit Area (SF) 889 889 923 970 995 990
Monthly Rent Per Sq. Ft. $ 0.70 $ 0.75 $ 0.69 $ 0.63 $ 0.89 $ 0.75
Monthly Rent 2BR/2BA - 2A20 $ 791 $ 871 $ 655 $ 625 $ 774 $ 740
Unit Area (SF) 944 944 1,156 970 1,070 1,029
Monthly Rent Per Sq. Ft. $ 0.84 $ 0.92 $ 0.57 $ 0.64 $ 0.72 $ 0.72
Monthly Rent 3BR/2BA - 3A20 $ 786 $ 861 $ 705 $ 871 $ 772
Unit Area (SF) 1,189 1,189 1,084 1,250 1,047
Monthly Rent Per Sq. Ft. $ 0.66 $ 0.72 $ 0.65 $ 0.70 $ 0.74
Monthly Rent 3BR/2BA - 3B20 $ 819 $ 889 $ 855 $ 715 $ 975 $ 1,086 $ 960
Unit Area (SF) 1,335 1,335 1,120 1,270 1,265 1,559 1,242
Monthly Rent Per Sq. Ft. $ 0.61 $ 0.67 $ 0.76 $ 0.56 $ 0.77 $ 0.70 $ 0.77
SUBJECT UNIT
DESCRIPTION TYPE MIN MAX MEDIAN AVERAGE
- -----------------------------------------------------------------------------------
Monthly Rent 1BR/1BA - 1A10 $ 525 $ 665 $ 595 $ 595
Unit Area (SF) 620 648 634 634
Monthly Rent Per Sq. Ft. $ 0.85 $ 1.03 $ 0.94 $ 0.94
Monthly Rent 1BR/1.5BA - 1B15 $ 550 $ 550 $ 550 $ 550
Unit Area (SF) 740 740 740 740
Monthly Rent Per Sq. Ft. $ 0.74 $ 0.74 $ 0.74 $ 0.74
Monthly Rent 1BR/1BA -1C10 $ 575 $ 640 $ 608 $ 608
Unit Area (SF) 740 750 745 745
Monthly Rent Per Sq. Ft. $ 0.78 $ 0.85 $ 0.82 $ 0.82
Monthly Rent 2BR/1BA - 2A10 $ 615 $ 890 $ 687 $ 720
Unit Area (SF) 923 995 980 970
Monthly Rent Per Sq. Ft. $ 0.63 $ 0.89 $ 0.72 $ 0.74
Monthly Rent 2BR/2BA - 2A20 $ 625 $ 774 $ 698 $ 698
Unit Area (SF) 970 1,156 1,049 1,056
Monthly Rent Per Sq. Ft. $ 0.57 $ 0.72 $ 0.68 $ 0.66
Monthly Rent 3BR/2BA - 3A20 $ 705 $ 871 $ 772 $ 783
Unit Area (SF) 1,047 1,250 1,084 1,127
Monthly Rent Per Sq. Ft. $ 0.65 $ 0.74 $ 0.70 $ 0.69
Monthly Rent 3BR/2BA - 3B20 $ 715 $ 1,086 $ 960 $ 918
Unit Area (SF) 1,120 1,559 1,265 1,291
Monthly Rent Per Sq. Ft. $ 0.56 $ 0.77 $ 0.76 $ 0.71
CONCLUDED MARKET RENTAL RATES AND TERMS
Based on this analysis above, the subject's concluded market rental rates and
gross rental income is calculated as follows:
GROSS RENTAL INCOME PROJECTION
Market Rent
Unit Area ---------------- Monthly Annual
Unit Type Number of Units (Sq. Ft.) Per Unit Per SF Income Income
- --------------------------------------------------------------------------------------
1Br/1Ba - 1A10 48 588 $ 540 $ 0.92 $ 25,920 $ 311,040
1Br/1.5Ba - 1B15 8 620 $ 500 $ 0.81 $ 4,000 $ 48,000
1Br/1Ba -1C10 48 706 $ 565 $ 0.80 $ 27,120 $ 325,440
2Br/1Ba - 2A10 68 889 $ 620 $ 0.70 $ 42,160 $ 505,920
2Br/2Ba - 2A20 6 944 $ 650 $ 0.69 $ 3,900 $ 46,800
3Br/2Ba - 3A20 6 1,189 $ 680 $ 0.57 $ 4,080 $ 48,960
3Br/2Ba - 3B20 20 1,335 $ 700 $ 0.52 $ 14,000 $ 168,000
--------- -----------
Total $ 121,180 $ 1,454,160
========= ===========
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 29
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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 30
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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 $1,454,014 $ 7,128 $1,476,535 $ 7,238 $1,455,951 $ 7,137 $1,473,368 $ 7,222
Vacancy $ 95,280 $ 467 $ 115,670 $ 567 $ 96,940 $ 475 $ 159,548 $ 782
Credit Loss/Concessions $ 48,299 $ 237 $ 41,849 $ 205 $ 16,213 $ 79 $ 17,712 $ 87
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Subtotal $ 143,579 $ 704 $ 157,519 $ 772 $ 113,153 $ 555 $ 177,260 $ 869
Laundry Income $ 2,726 $ 13 $ 3,738 $ 18 $ 5,855 $ 29 $ 19,984 $ 98
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 36,484 $ 179 $ 40,363 $ 198 $ 70,489 $ 346 $ 35,348 $ 173
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Subtotal Other Income $ 39,210 $ 192 $ 44,101 $ 216 $ 76,344 $ 374 $ 55,332 $ 271
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Effective Gross Income $1,349,645 $ 6,616 $1,363,117 $ 6,682 $1,419,142 $ 6,957 $1,351,440 $ 6,625
Operating Expenses
Taxes $ 55,031 $ 270 $ 36,528 $ 179 $ 60,309 $ 296 $ 48,000 $ 235
Insurance $ 22,956 $ 113 $ 40,373 $ 198 $ 32,029 $ 157 $ 33,468 $ 164
Utilities $ 69,939 $ 343 $ 79,320 $ 389 $ 77,011 $ 378 $ 81,904 $ 401
Repair & Maintenance $ 32,444 $ 159 $ 19,897 $ 98 $ 21,789 $ 107 $ 14,836 $ 73
Cleaning $ 7,498 $ 37 $ 5,625 $ 28 $ 5,096 $ 25 $ 0 $ 0
Landscaping $ 25,041 $ 123 $ 22,962 $ 113 $ 22,781 $ 112 $ 42,816 $ 210
Security $ 16,405 $ 80 $ 16,199 $ 79 $ 17,831 $ 87 $ 0 $ 0
Marketing & Leasing $ 21,391 $ 105 $ 10,429 $ 51 $ 15,823 $ 78 $ 13,912 $ 68
General Administrative $ 112,236 $ 550 $ 119,934 $ 588 $ 157,678 $ 773 $ 140,236 $ 687
Management $ 68,592 $ 336 $ 57,636 $ 283 $ 70,909 $ 348 $ 74,088 $ 363
Miscellaneous $ 48,116 $ 236 $ 40,808 $ 200 $ 51,254 $ 251 $ 45,160 $ 221
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Operating Expenses $ 479,649 $ 2,351 $ 449,711 $ 2,204 $ 532,510 $ 2,610 $ 494,420 $ 2,424
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 869,996 $ 4,265 $ 913,406 $ 4,477 $ 886,632 $ 4,346 $ 857,020 $ 4,201
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
ANNUALIZED 2003
-----------------------
PROJECTION AAA PROJECTION
----------------------- ----------------------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT %
----------- ---------- ---------- ---------- ---------- ------
Revenues
Rental Income $1,470,752 $ 7,210 $1,454,160 $ 7,128 100.0%
Vacancy $ 124,492 $ 610 $ 101,791 $ 499 7.0%
Credit Loss/Concessions $ 15,156 $ 74 $ 21,812 $ 107 1.5%
---------- ---------- ---------- ---------- -----
Subtotal $ 139,648 $ 685 $ 123,604 $ 606 8.5%
Laundry Income $ 5,224 $ 26 $ 7,140 $ 35 0.5%
Garage Revenue $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 50,164 $ 246 $ 40,800 $ 200 2.8%
---------- ---------- ---------- ---------- -----
Subtotal Other Income $ 55,388 $ 272 $ 47,940 $ 235 3.3%
---------- ---------- ---------- ---------- -----
Effective Gross Income $1,386,492 $ 6,797 $1,378,496 $ 6,757 100.0%
Operating Expenses
Taxes $ 48,692 $ 239 $ 56,100 $ 275 4.1%
Insurance $ 33,888 $ 166 $ 34,680 $ 170 2.5%
Utilities $ 79,860 $ 391 $ 81,600 $ 400 5.9%
Repair & Maintenance $ 32,684 $ 160 $ 25,500 $ 125 1.8%
Cleaning $ 10,572 $ 52 $ 8,160 $ 40 0.6%
Landscaping $ 32,356 $ 159 $ 28,560 $ 140 2.1%
Security $ 20,356 $ 100 $ 18,360 $ 90 1.3%
Marketing & Leasing $ 12,088 $ 59 $ 14,280 $ 70 1.0%
General Administrative $ 166,592 $ 817 $ 142,800 $ 700 10.4%
Management $ 73,184 $ 359 $ 68,925 $ 338 5.0%
Miscellaneous $ 97,828 $ 480 $ 51,000 $ 250 3.7%
---------- ---------- ---------- ---------- -----
Total Operating Expenses $ 608,100 $ 2,981 $ 529,965 $ 2,598 38.4%
Reserves $ 0 $ 0 $ 51,000 $ 250 9.6%
---------- ---------- ---------- ---------- -----
Net Income $ 778,392 $ 3,816 $ 797,532 $ 3,909 57.9%
---------- ---------- ---------- ---------- -----
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 8.5% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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 some major
items remaining in need of repair or replacement that would require an expense
beyond our reserves for replacement. Therefore an additional $75,000 has been
deducted.
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 32
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
SUMMARY OF OVERALL
CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
- --------- --------- ------ ---------- -----
I-1 Aug-01 93% $ 28,500 9.63%
I-2 Jan-01 90% $ 28,144 11.07%
I-3 Dec-00 91% $ 31,288 9.24%
I-4 Oct-00 93% $ 35,412 10.91%
I-5 Jan-00 98% $ 30,157 10.34%
High 11.07%
Low 9.24%
Average 10.24%
Based on this information, we have concluded the subject's overall
capitalization rate should be 10.50%. The terminal capitalization rate is
applied to the net operating income estimated for the year following the end of
the holding period. Based on the concluded overall capitalization rate, the age
of the property and the surveyed information, we have concluded the subject's
terminal capitalization rate to be 11.50%. Finally, the subject's discount rate
or yield rate is estimated based on the previous investor survey and an
examination of returns available on alternative investments in the market. Based
on this analysis, the subject's discount rate is estimated to be 12.00%.
HOLDING PERIOD
The survey of investors indicates that most investors are completing either
10-year cash flows or extending the analysis to the end of the lease if it is
more than 10-years. A 10-year period has been used in the analysis of the
subject with the eleventh year stabilized NOI used to determine the reversion.
SELLING COSTS
Sales of similar size properties are typically accomplished with the aid of a
broker and will also incur legal and other transaction related cost. Based on
our survey of brokers and a review of institutional investor projections, an
allowance of 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 12.00% indicates a value of $7,800,000. 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 33
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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 34
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
DISCOUNTED CASH FLOW ANALYSIS
FAIRWAY VIEW II APARTMENTS
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009
FISCAL YEAR 1 2 3 4 5 6
----------- ---------- ---------- ---------- ---------- ---------- ----------
REVENUE
Base Rent $1,454,160 $1,483,243 $1,512,908 $1,543,166 $1,574,030 $1,613,380
Vacancy $ 101,791 $ 103,827 $ 105,904 $ 108,022 $ 110,182 $ 112,937
Credit Loss $ 21,812 $ 22,249 $ 22,694 $ 23,147 $ 23,610 $ 24,201
Concessions $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ---------- ----------
Subtotal $ 123,604 $ 126,076 $ 128,597 $ 131,169 $ 133,793 $ 137,137
Laundry Income $ 7,140 $ 7,283 $ 7,428 $ 7,577 $ 7,729 $ 7,922
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 40,800 $ 41,616 $ 42,448 $ 43,297 $ 44,163 $ 45,267
---------- ---------- ---------- ---------- ---------- ----------
Subtotal Other Income $ 47,940 $ 48,899 $ 49,877 $ 50,874 $ 51,892 $ 53,189
---------- ---------- ---------- ---------- ---------- ----------
EFFECTIVE GROSS INCOME $1,378,496 $1,406,066 $1,434,188 $1,462,871 $1,492,129 $1,529,432
OPERATING EXPENSES:
Taxes $ 56,100 $ 57,222 $ 58,366 $ 59,534 $ 60,724 $ 62,243
Insurance $ 34,680 $ 35,374 $ 36,081 $ 36,803 $ 37,539 $ 38,477
Utilities $ 81,600 $ 83,232 $ 84,897 $ 86,595 $ 88,326 $ 90,535
Repair & Maintenance $ 25,500 $ 26,010 $ 26,530 $ 27,061 $ 27,602 $ 28,292
Cleaning $ 8,160 $ 8,323 $ 8,490 $ 8,659 $ 8,833 $ 9,053
Landscaping $ 28,560 $ 29,131 $ 29,714 $ 30,308 $ 30,914 $ 31,687
Security $ 18,360 $ 18,727 $ 19,102 $ 19,484 $ 19,873 $ 20,370
Marketing & Leasing $ 14,280 $ 14,566 $ 14,857 $ 15,154 $ 15,457 $ 15,844
General Administrative $ 142,800 $ 145,656 $ 148,569 $ 151,541 $ 154,571 $ 158,436
Management $ 68,925 $ 70,303 $ 71,709 $ 73,144 $ 74,606 $ 76,472
Miscellaneous $ 51,000 $ 52,020 $ 53,060 $ 54,122 $ 55,204 $ 56,584
---------- ---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $ 529,965 $ 540,564 $ 551,375 $ 562,403 $ 573,651 $ 587,992
Reserves $ 51,000 $ 52,020 $ 53,060 $ 54,122 $ 55,204 $ 56,584
---------- ---------- ---------- ---------- ---------- ----------
NET OPERATING INCOME $ 797,532 $ 813,482 $ 829,752 $ 846,347 $ 863,274 $ 884,856
========== ========== ========== ========== ========== ==========
Operating Expense Ratio (% of EGI) 38.4% 38.4% 38.4% 38.4% 38.4% 38.4%
Operating Expense Per Unit $ 2,598 $ 2,650 $ 2,703 $ 2,757 $ 2,812 $ 2,882
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 7 8 9 10 11
----------- ---------- ---------- ---------- ---------- ----------
REVENUE
Base Rent $1,653,715 $1,695,058 $1,737,434 $1,780,870 $1,825,392
Vacancy $ 115,760 $ 118,654 $ 121,620 $ 124,661 $ 127,777
Credit Loss $ 24,806 $ 25,426 $ 26,062 $ 26,713 $ 27,381
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ----------
Subtotal $ 140,566 $ 144,080 $ 147,682 $ 151,374 $ 155,158
Laundry Income $ 8,120 $ 8,323 $ 8,531 $ 8,744 $ 8,963
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 46,399 $ 47,559 $ 48,748 $ 49,967 $ 51,216
---------- ---------- ---------- ---------- ----------
Subtotal Other Income $ 54,519 $ 55,882 $ 57,279 $ 58,711 $ 60,179
---------- ---------- ---------- ---------- ----------
EFFECTIVE GROSS INCOME $1,567,668 $1,606,860 $1,647,031 $1,688,207 $1,730,412
OPERATING EXPENSES:
Taxes $ 63,799 $ 65,394 $ 67,028 $ 68,704 $ 70,422
Insurance $ 39,439 $ 40,425 $ 41,436 $ 42,472 $ 43,533
Utilities $ 92,798 $ 95,118 $ 97,496 $ 99,933 $ 102,432
Repair & Maintenance $ 28,999 $ 29,724 $ 30,467 $ 31,229 $ 32,010
Cleaning $ 9,280 $ 9,512 $ 9,750 $ 9,993 $ 10,243
Landscaping $ 32,479 $ 33,291 $ 34,124 $ 34,977 $ 35,851
Security $ 20,880 $ 21,402 $ 21,937 $ 22,485 $ 23,047
Marketing & Leasing $ 16,240 $ 16,646 $ 17,062 $ 17,488 $ 17,926
General Administrative $ 162,396 $ 166,456 $ 170,618 $ 174,883 $ 179,255
Management $ 78,383 $ 80,343 $ 82,352 $ 84,410 $ 86,521
Miscellaneous $ 57,999 $ 59,449 $ 60,935 $ 62,458 $ 64,020
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $ 602,692 $ 617,759 $ 633,203 $ 649,033 $ 665,259
Reserves $ 57,999 $ 59,449 $ 60,935 $ 62,458 $ 64,020
---------- ---------- ---------- ---------- ----------
NET OPERATING INCOME $ 906,977 $ 929,651 $ 952,893 $ 976,715 $1,001,133
========== ========== ========== ========== ==========
Operating Expense Ratio (% of EGI) 38.4% 38.4% 38.4% 38.4% 38.4%
Operating Expense Per Unit $ 2,954 $ 3,028 $ 3,104 $ 3,182 $ 3,261
Estimated Stabilized NOI $ 797,532 Sales Expense Rate 2.00%
Months to Stabilized 1 Discount Rate 12.00%
Stabilized Occupancy 93.0% Terminal Cap Rate 11.50%
"DCF" VALUE ANALYSIS
Gross Residual Sale Price $8,705,504 Deferred Maintenance -$ 75,000
Less: Sales Expense $ 174,110 Add: Excess Land $ 0
----------
Net Residual Sale Price $8,531,394 Other Adjustments $ 0
----------
PV of Reversion $2,746,881 Value Indicated By "DCF" $7,830,717
Add: NPV of NOI $5,158,836 Rounded $7,800,000
----------
PV Total $7,905,717
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE
----------------------------------------------------------------------
TOTAL VALUE 11.50% 11.75% 12.00% 12.25% 12.50%
----------- ---------- ---------- ---------- ---------- ----------
11.00% $8,281,744 $8,154,815 $8,030,575 $7,908,956 $7,789,894
11.25% $8,215,007 $8,089,557 $7,966,759 $7,846,547 $7,728,858
TERMINAL CAP RATE 11.50% $8,151,172 $8,027,136 $7,905,717 $7,786,851 $7,670,475
11.75% $8,090,053 $7,967,371 $7,847,273 $7,729,695 $7,614,577
12.00% $8,031,481 $7,910,096 $7,791,264 $7,674,921 $7,561,008
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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 36
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
FAIRWAY VIEW II APARTMENTS
TOTAL PER SQ. FT. PER UNIT %OF EGI
----------- ----------- --------- -------
REVENUE
Base Rent $1,454,160 $ 8.71 $ 7,128
Less: Vacancy & Collection Loss 8.50% $ 123,604 $ 0.74 $ 606
Plus: Other Income
Laundry Income $ 7,140 $ 0.04 $ 35 0.52%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 40,800 $ 0.24 $ 200 2.96%
---------- ----------- --------- -------
Subtotal Other Income $ 47,940 $ 0.29 $ 235 3.48%
EFFECTIVE GROSS INCOME $1,378,496 $ 8.25 $ 6,757
OPERATING EXPENSES:
Taxes $ 56,100 $ 0.34 $ 275 4.07%
Insurance $ 34,680 $ 0.21 $ 170 2.52%
Utilities $ 81,600 $ 0.49 $ 400 5.92%
Repair & Maintenance $ 25,500 $ 0.15 $ 125 1.85%
Cleaning $ 8,160 $ 0.05 $ 40 0.59%
Landscaping $ 28,560 $ 0.17 $ 140 2.07%
Security $ 18,360 $ 0.11 $ 90 1.33%
Marketing & Leasing $ 14,280 $ 0.09 $ 70 1.04%
General Administrative $ 142,800 $ 0.85 $ 700 10.36%
Management 5.00% $ 68,925 $ 0.41 $ 338 5.00%
Miscellaneous $ 51,000 $ 0.31 $ 250 3.70%
TOTAL OPERATING EXPENSES $ 529,965 $ 3.17 $ 2,598 38.45%
Reserves $ 51,000 $ 0.31 $ 250 3.70%
---------- ----------- --------- -------
NET OPERATING INCOME $ 797,532 $ 4.78 $ 3,909 57.86%
========== =========== ========= =======
"GOING IN" CAPITALIZATION RATE 10.50%
VALUE INDICATION $7,595,539 $ 45.48 $ 37,233
DEFERRED MAINTENANCE ($ 75,000)
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $7,520,539
ROUNDED $7,500,000 $ 44.90 $ 36,765
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 37
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- -------- ---------- ---------- ------- ------
9.75% $8,104,811 $8,100,000 $39,706 $48.50
10.00% $7,900,316 $7,900,000 $38,725 $47.30
10.25% $7,705,796 $7,700,000 $37,745 $46.10
10.50% $7,520,539 $7,500,000 $36,765 $44.90
10.75% $7,343,898 $7,300,000 $35,784 $43.71
11.00% $7,175,287 $7,200,000 $35,294 $43.11
11.25% $7,014,170 $7,000,000 $34,314 $41.91
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $7,500,000.
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 $7,800,000
Direct Capitalization Method $7,500,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$7,600,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 38
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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 $ 7,800,000
Income Approach $ 7,600,000
Reconciled Value $ 7,700,000
The Income Capitalization Method is considered a reliable indicator of value.
Income and expenses were estimated and projected based on historical operating
statements and market oriented expenses. This method is primarily used by
investors in their underwriting analysis. Furthermore, there was good support
for an overall rate in the Direct Capitalization Method.
The Sales Comparison Approach to value supported the value conclusion by the
Income Approach and was given secondary consideration. Investment-grade,
income-producing properties such as the subject are not typically traded based
on cost. Therefore, the Cost Approach has not been considered in our valuation.
FINAL VALUE - FEE SIMPLE ESTATE
Based on the investigation and premise outlined, it is our opinion that as of
May 22, 2003 the market value of the fee simple estate in the property is:
$7,700,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
EXTERIOR AND ENTRANCE TO SUBJECT EXTERIOR - TYPICAL VIEW OF BUILDINGS
[PICTURE] [PICTURE]
REAR VIEW OF APARTMENT COMPLEX POOL
[PICTURE] [PICTURE]
VIEW OF DRAINAGE DITCH AT REAR OF THE SITE TYPICAL LAUNDRY ROOM
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
FAIRWAY VIEW II APARTMENTS, BATON ROUGE,
LOUISIANA
SUBJECT PHOTOGRAPHS
[PICTURE] [PICTURE]
FITNESS CENTER EXTERIOR INTERIOR VIEW OF FITNESS CENTER
[PICTURE] [PICTURE]
INTERIOR - APARTMENT UNIT INTERIOR - APARTMENT UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FAIRWAY VIEW I I APARTMENTS, BATON ROUGE, LOUISIANA
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
KINGSTON POINT APARTMENTS MAGNOLIA TRACE APARTMENT SABLE CHASE APARTMENTS
1919 Boulevard De 11585 N. Harrell's Ferry Rd 1860 Boulevard De
Province Baton Rouge, LA Baton Rouge, LA Province Baton Rouge, LA
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE I-4 COMPARABLE I-5
SHARLO APARTMENTS (NOW KNOWN AS AZALEA POINT GOODWOOD PLACE APARTMENT
2000 Brightside Lane 356 Apartment Court
Baton Rouge, LA Baton Rouge, LA
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
- ------------------------------- ---------------------------------------- ----------------------------------
Property Name Fairway View II Apartments Bienville Towers
Management Company AIMCO Patrician Management
LOCATION:
Address 2245 College Drive 2100 College Drive
City, State Baton Rouge, Louisiana Baton Rouge, LA
County East Baton Rouge Parish East Baton Rouge Parish
Proximity to Subject Adjacent to subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 167,022 126,251
Year Built 1981 1974
Effective Age 20 25
Building Structure Type Vinyl siding, flat roofs Brick veneer, mansard-style roofs
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 204 137
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba - 1A10 588 48 $481 3 1Br/1Ba 740 44 $575
2 1Br/1.5Ba - 1B15 620 8 $507 2 1Br/1Ba, TH 740 1 $550
3 1Br/1Ba-1C10 706 48 $531 4 2Br/1Ba 900 18 $625
4 2Br/1Ba - 2A10 889 68 $625 4 2Br/1Ba 940 25 $640
5 2Br/2Ba - 2A20 944 6 $791 5 2Br/1.5Ba 1,156 1 $655
6 3Br/2Ba - 3A20 1,189 6 $786 6 2Br/2Ba 1,075 19 $690
7 3Br/2Ba - 3B20 1,335 20 $819 6 2Br/2Ba 1,090 27 $715
7 3Br/2Ba 1,120 2 $855
Average Unit Size (SF) 819 922
Unit Breakdown: Efficiency 0% 2-Bedroom 39% Efficiency 0% 2-Bedroom 66%
1-Bedroom 61% 3-Bedroom 0% 1-Bedroom 33% 3-Bedroom 1%
CONDITION: Good Average
APPEAL: Average Average
AMENITIES:
Unit Amenities X Attach. Garage X Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony X W/D Connect. Balcony X W/D Connect.
X 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 X BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room Gym Room
OCCUPANCY: 92% 97%
LEASING DATA:
Available Leasing Terms 6 to 12 Months 7 to 13 months
Concessions 1/2 to 1.5 Months Free on select units Waive $25 App fee; decorative accent wall
Pet Deposit $300 $300
Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas
Water Trash Water Trash
Confirmation May 22, 2003; Deborah Zumo (Property Manager) May 27, 2003, Missy (Leasing Agent)
Telephone Number (225)926-9717 (225)928-9137
NOTES: Chosen for its proximity to the subject
COMPARISON TO SUBJECT: Slightly Inferior
COMPARABLE
DESCRIPTION SUBJECT R - 2
- ------------------------------- ---------------------------------------- -----------------------------------------------
Property Name Fairway View II Apartments Parc Fontaine Apartments
Management Company AIMCO Patrician Management
LOCATION:
Address 2245 College Drive 1100 South Foster Drive
City, State Baton Rouge, Louisiana Baton Rouge, LA
County East Baton Rouge Parish East Baton Rouge Parish
Proximity to Subject One mile north of subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 167,022 81,060
Year Built 1981 1965
Effective Age 20 25
Building Structure Type Vinyl siding, flat roofs Vinyl siding, pitched composition shingle roofs
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 204 88
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba - 1A10 588 48 $481 1 1Br/1Ba 620 26 $525
2 1Br/1.5Ba - 1B15 620 8 $507 4 2Br/1Ba 970 30 $615
3 1Br/1Ba-1C10 706 48 $531 5 2Br/1.5Ba 970 16 $625
4 2Br/1Ba - 2A10 889 68 $625 7 3Br/2Ba 1,270 16 $715
5 2Br/2Ba - 2A20 944 6 $791
6 3Br/2Ba - 3A20 1,189 6 $786
7 3Br/2Ba - 3B20 1,335 20 $819
Average Unit Size (SF) 819 921
Unit Breakdown: Efficiency 0% 2-Bedroom 39% Efficiency 0% 2-Bedroom 52%
1-Bedroom 61% 3-Bedroom 0% 1-Bedroom 30% 3-Bedroom 18%
CONDITION: Good Average
APPEAL: Average Average
AMENITIES:
Unit Amenities X Attach. Garage X Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony X W/D Connect. Balcony X W/D Connect.
X 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 X BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room Gym Room
OCCUPANCY: 92% 99%
LEASING DATA:
Available Leasing Terms 6 to 12 Months 7 to 13 months
Concessions 1/2 to 1.5 Months Free on select units None
Pet Deposit $300 $300
Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas
Water Trash Water Trash
Confirmation May 22, 2003; Deborah Zumo (Property Manager) May 27, 2003; Emily (Leasing Agent)
Telephone Number (225)926-9717 (225)924-2738
NOTES: Renovated in 2000-2001
Chosen for its proximity to the subject
COMPARISON TO SUBJECT: Slightly Inferior
COMPARABLE
DESCRIPTION SUBJECT R - 3
- ------------------------------- ---------------------------------------- --------------------------------------
Property Name Fairway View II Apartments Cobblestone at Essen
Management Company AIMCO Wampold Management
LOCATION:
Address 2245 College Drive 5431 Essen Lane
City, State Baton Rouge, Louisiana Baton Rouge, LA
County East Baton Rouge Parish East Baton Rouge Parish
Proximity to Subject Three miles southeast of the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 167,022 194,480
Year Built 1981 1972
Effective Age 20 25
Building Structure Type Vinyl siding, flat roofs Brick, pitched composition shingle roof
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 204 191
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba - 1A10 588 48 $481 1 1Br/1Ba 648 24 $665
2 1Br/1.5Ba - 1B15 620 8 $507 4 2Br/1Ba 995 28 $890
3 1Br/1Ba-1C10 706 48 $531 5 2Br/1.5Ba, TH 1,152 71 $745
4 2Br/1Ba - 2A10 889 68 $625 5 2Br/1.5Ba 966 56 $810
5 2Br/2Ba - 2A20 944 6 $791 7 3Br/2Ba 1,265 12 $975
6 3Br/2Ba - 3A20 1,189 6 $786
7 3Br/2Ba - 3B20 1,335 20 $819
Average Unit Size (SF) 819 1,018
Unit Breakdown: Efficiency 0% 2-Bedroom 39% Efficiency 0% 2-Bedroom 81%
1-Bedroom 61% 3-Bedroom 0% 1-Bedroom 13% 3-Bedroom 6%
CONDITION: Good Good
APPEAL: Average Good
AMENITIES:
Unit Amenities X Attach. Garage X Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court X BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room X Gym Room
OCCUPANCY: 92% 93%
LEASING DATA:
Available Leasing Terms 6 to 12 Months 6, 9, or 12 months
Concessions 1/2 to 1.5 Months Free on select units None
Pet Deposit $300 $300
Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas
Water Trash Water Trash
Confirmation May 22, 2003; Deborah Zumo (Property Manager)May 27, 2003; Ashley (Leasing Agent)
Telephone Number (225)926-9717 (225)766-1851
NOTES: None
COMPARISON TO SUBJECT:
Slightly Superior
COMPARABLE
DESCRIPTION SUBJECT R - 4
- ------------------------------- ---------------------------------------- ---------------------------------------
Property Name Fairway View II Apartments Jefferson Place Apartments
Management Company AIMCO AIMCO
LOCATION:
Address 2245 College Drive 7975 N. Jefferson Place Circle
City, State Baton Rouge, Louisiana Baton Rouge, LA
County East Baton Rouge Parish East Baton Rouge Parish
Proximity to Subject Three miles east of the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 167,022 325,300
Year Built 1981 1986
Effective Age 20 15
Building Structure Type Vinyl siding, flat roofs Brick veneer, composition shingle roofs
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 204 234
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba - 1A10 588 48 $481 6 2Br/2Ba 1,250 128 $ 871
2 1Br/1.5Ba - 1B15 620 8 $507 7 3Br/2Ba 1,500 76 $1,041
3 1Br/1Ba-1C10 706 48 $531 7 3Br/2Ba 1,710 30 $1,199
4 2Br/1Ba - 2A10 889 68 $625
5 2Br/2Ba - 2A20 944 6 $791
6 3Br/2Ba - 3A20 1,189 6 $786
7 3Br/2Ba - 3B20 1,335 20 $819
Average Unit Size (SF) 819 1,390
Unit Breakdown: Efficiency 0% 2-Bedroom 39% Efficiency 0% 2-Bedroom 55%
1-Bedroom 61% 3-Bedroom 0% 1-Bedroom 0% 3-Bedroom 45%
CONDITION: Good Good
APPEAL: Average Good
AMENITIES:
Unit Amenities X Attach. Garage X Vaulted Ceiling Attach. Garage X Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace X Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash X Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment X Basketball Court X BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall X Sand Volley Ball X Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room Gym Room
OCCUPANCY: 92% 91%
LEASING DATA:
Available Leasing Terms 6 to 12 Months 6 to 12 Months
Concessions 1/2 to 1.5 Months Free on select units 1 - 1 1/2 Months Free
Pet Deposit $300 $300
Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas
Water Trash Water Trash
Confirmation May 22, 2003; Deborah Zumo (Property Manager) May 27, 2003; Kristen (Leasing Agent)
Telephone Number (225)926-9717 (225)924-5921
NOTES: None
COMPARISON TO SUBJECT: Superior
COMPARABLE
DESCRIPTION SUBJECT R - 5
- ------------------------------- ---------------------------------------- ----------------------------------------
Property Name Fairway View II Apartments Warwick Apartments
Management Company AIMCO Patrician Management
LOCATION:
Address 2245 College Drive 8001 Jefferson Highway
City, State Baton Rouge, Louisiana Baton Rouge, LA
County East Baton Rouge Parish East Baton Rouge Parish
Proximity to Subject Three miles east of the subject
PHYSICAL CHARATERISTICS:
Net Rentable Area (SF) 167,022 172,244
Year Built 1981 1992-94
Effective Age 20 8
Building Structure Type Vinyl siding, flat roofs Brick veneer, composition shingle roofs
Parking Type (Gr., Cov., etc.) Open Open
Number of Units 204 188
Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo.
1 1Br/1Ba - 1A10 588 48 $481 3 1Br/1Ba 750 80 $640
2 1Br/1.5Ba - 1B15 620 8 $507 4 2Br/1.5Ba, TH 990 24 $740
3 1Br/1Ba-1C10 706 48 $531 5 2Br/1Ba 1,029 12 $740
4 2Br/1Ba - 2A10 889 68 $625 6 2Br/2Ba 1,036 8 $790
5 2Br/2Ba - 2A20 944 6 $791 6 2Br/2Ba 1,046 20 $800
6 3Br/2Ba - 3A20 1,189 6 $786 6 2Br/1.5Ba, TH 1,049 40 $755
7 3Br/2Ba - 3B20 1,335 20 $819 7 3Br/2Ba 1,242 4 $960
Average Unit Size (SF) 819 916
Unit Breakdown: Efficiency 0% 2-Bedroom 39% Efficiency 0% 2-Bedroom 55%
1-Bedroom 61% 3-Bedroom 0% 1-Bedroom 43% 3-Bedroom 2%
CONDITION: Good Good
APPEAL: Average Good
AMENITIES:
Unit Amenities X Attach. Garage X Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
X Fireplace X Fireplace
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court X BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
X Gym Room X Gym Room
OCCUPANCY: 92% 98%
LEASING DATA:
Available Leasing Terms 6 to 12 Months 7 to 13 months
Concessions 1/2 to 1.5 Months Free on select units 1 - 1 1/2 Months Free
Pet Deposit $300 $300 - $500
Utilities Paid by Tenant: X Electric Natural Gas Electric X Natural Gas
Water Trash Water Trash
Confirmation May 22, 2003; Deborah Zumo (Property Manager) May 27, 2003; (Leasing Agent)
Telephone Number (225)926-9717 (225)924-1421
NOTES: None
COMPARISON TO SUBJECT: Superior
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
BIENVILLE TOWERS PARC FONTAINE APARTMENTS COBBLESTONE AT ESSEN
2100 College Drive 1100 South Foster Drive 5431 Essen Lane
Baton Rouge, LA Baton Rouge, LA Baton Rouge, LA
[PICTURE] [PICTURE] [PICTURE]
COMPARABLE R-4 COMPARABLE R-5
JEFFERSON PLACE APARTMENTS WARWICK APARTMENTS
7975 N. Jefferson Place Circle 8001 Jefferson Highway
Baton Rouge, LA Baton Rouge, LA
[PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
EXHIBIT D
CERTIFICATE OF APPRAISER
(1 PAGE)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D
CERTIFICATE OF APPRAISER
I certify that, to the best of my knowledge and belief:
The statements of fact contained in this report are true and correct.
The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and represent the unbiased
professional analyses, opinions, and conclusions of American Appraisal
Associates, Inc.
American Appraisal Associates, Inc. and I personally, have no present or
prospective interest in the property that is the subject of this report
and have no personal interest or bias with respect to the parties
involved.
Compensation for American Appraisal Associates, Inc. is not contingent on
an action or event resulting from the analyses, opinions, or conclusions
in, or the use of, this report.
The analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the requirements of the Uniform
Standards of Professional Appraisal Practice and the Code of Professional
Ethics and the Standards of Professional Practice of the Appraisal
Institute.
The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
I personally did not inspect the subject property. Kim Cook provided
significant real property appraisal assistance in the preparation of this
report.
I am currently in compliance with the Appraisal Institute's continuing
education requirements.
/s/ Frank Fehribach
-----------------------------------------
Frank Fehribach, MAI
Managing Principal, Real Estate Group
Texas State Certified General Real Estate
Appraiser #TX-1323954-G
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
FRANK A. FEHRIBACH, MAI
MANAGING PRINCIPAL, REAL ESTATE GROUP
POSITION Frank A. Fehribach is a Managing Principal for the Dallas Real
Estate Group of American Appraisal Associates, Inc. ("AAA").
EXPERIENCE
Valuation Mr. Fehribach has experience in valuations for resort hotels;
Class A office buildings; Class A multifamily complexes;
industrial buildings and distribution warehousing; multitract
mixed-use vacant land; regional malls; residential subdivision
development; and special-purpose properties such as athletic
clubs, golf courses, manufacturing facilities, nursing homes,
and medical buildings. Consulting assignments include
development and feasibility studies, economic model creation
and maintenance, and market studies.
Mr. Fehribach also has been involved in overseeing appraisal
and consulting assignments in Mexico and South America.
Business Mr. Fehribach joined AAA as an engagement director in 1998. He
was promoted to his current position in 1999. Prior to that,
he was a manager at Arthur Andersen LLP. Mr. Fehribach has
been in the business of real estate appraisal for over ten
years.
EDUCATION University of Texas - Arlington
Master of Science - Real Estate
University of Dallas
Master of Business Administration - Industrial Management
Bachelor of Arts - Economics
STATE State of Arizona
CERTIFICATIONS Certified General Real Estate Appraiser, #30828
State of Arkansas
State Certified General Appraiser, #CG1387N
State of Colorado
Certified General Appraiser, #CG40000445
State of Georgia
Certified General Real Property Appraiser, #218487
State of Michigan
Certified General Appraiser, #1201008081
State of Texas
Real Estate Salesman License, #407158 (Inactive)
State of Texas
State Certified General Real Estate Appraiser, #TX-1323954-G
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
PROFESSIONAL Appraisal Institute, MAI Designated Member
AFFILIATIONS Candidate Member of the CCIM Institute pursuing Certified
Commercial Investment Member (CCIM) designation
PUBLICATIONS "An Analysis of the Determinants of Industrial Property
Valuation," Co-authored with Dr. Ronald C. Rutherford and Dr.
Mark Eakin, The Journal of Real Estate Research, Vol. 8, No.
3, Summer 1993, p. 365.
AMERICAN APPRAISAL ASSOCIATES, INC.
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
FAIRWAY VIEW II APARTMENTS, BATON ROUGE, LOUISIANA
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.