BIG WALNUT
5280 GATEHOUSE DRIVE
COLUMBUS, OHIO
MARKET VALUE -
FEE SIMPLE ESTATE
AS OF APRIL 30, 2003
PREPARED FOR:
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(AIMCO)
C/O LINER YANKELEVITZ SUNSHINE & REGENSTREIF LLP
&
LIEFF CABRASER HEIMANN & BERNSTEIN
ON BEHALF OF NUANES, ET. AL.
[AMERICAN APPRAISAL ASSOCIATES(R) LOGO]
[AMERICAN APPRAISAL ASSOCIATES(R) LOGO]
[AMERICAN APPRAISAL ASSOCIATES(R) LETTERHEAD]
JUNE 30, 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: BIG WALNUT
5280 GATEHOUSE DRIVE
COLUMBUS, FRANKLIN COUNTY, OHIO
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 251 units with a
total of 303,703 square feet of rentable area. The improvements were built in
1968. The improvements are situated on 19.497 acres. Overall, the improvements
are in average condition. As of the date of this appraisal, the subject property
is 94% 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
BIG WALNUT, COLUMBUS, OHIO
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 April 30, 2003 is:
($9,800,000)
Respectfully submitted,
AMERICAN APPRAISAL ASSOCIATES, INC.
-s- Brian Johnson
June 30, 2003 Brian Johnson, MAI
#053272 Managing Principal, Real Estate Group
Report By:
Richard Mupo
AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3
BIG WALNUT, COLUMBUS, OHIO
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
BIG WALNUT, COLUMBUS, OHIO
EXECUTIVE SUMMARY
PART ONE - PROPERTY DESCRIPTION
PROPERTY NAME: Big Walnut
LOCATION: 5280 Gatehouse Drive
Columbus, Ohio
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: April 30, 2003
DATE OF REPORT: June 30, 2003
PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS:
SITE:
Size: 19.497 acres, or 849,289 square feet
Assessor Parcel No.: 090-005526-00
Floodplain: Community Panel No. 390180-278G (August 2, 1995)
Flood Zone X, an area outside the floodplain.
Zoning: A2 (Apartment District)
BUILDING:
No. of Units: 251 Units
Total NRA: 303,703 Square Feet
Average Unit Size: 1,210 Square Feet
Apartment Density: 12.9 units per acre
Year Built: 1968
UNIT MIX AND MARKET RENT:
GROSS RENTAL INCOME PROJECTION
Market Rent
Square ------------------ Monthly Annual
Unit Type Feet Per Unit Per SF Income Income
- ------------ ------ -------- ------ --------- ---------
1B/1B-1A10 694 $ 519 $ 0.75 $ 12,456 $ 149,472
1B/1B-1B10 705 $ 469 $ 0.67 $ 11,256 $ 135,072
1B/1B-1C10 975 $ 549 $ 0.56 $ 11,529 $ 138,348
1B/1.5B-1A15 733 $ 519 $ 0.71 $ 12,456 $ 149,472
2B/1.5B-2A15 1,282 $ 649 $ 0.51 $ 27,258 $ 327,096
2B/1.5B-2B15 1,395 $ 649 $ 0.47 $ 19,470 $ 233,640
2B/1.5B-2C15 1,649 $ 679 $ 0.41 $ 50,246 $ 602,952
2B/2B-2A20 1,195 $ 649 $ 0.54 $ 7,788 $ 93,456
Total $ 152,459 $1,829,508
OCCUPANCY: 94%
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5
BIG WALNUT, COLUMBUS, OHIO
ECONOMIC LIFE: 45 YEARS
EFFECTIVE AGE: 20 YEARS
REMAINING ECONOMIC LIFE: 25 YEARS
SUBJECT PHOTOGRAPHS AND LOCATION MAP:
SUBJECT PHOTOGRAPHS
[EXTERIOR - ENTRANCE PICTURE] [EXTERIOR - RESIDENTIAL UNITS PICTURE]
AREA MAP
[AREA MAP]
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6
BIG WALNUT, COLUMBUS, OHIO
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
BIG WALNUT, COLUMBUS, OHIO
PART TWO - ECONOMIC INDICATORS
Amount $/Unit
------ ------
INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION
Potential Rental Income $1,829,508 $ 7,289
Effective Gross Income $1,808,647 $ 7,206
Operating Expenses $ 780,682 $ 3,110 43.2% of EGI
Net Operating Income: $ 965,215 $ 3,845
Capitalization Rate 10.00%
DIRECT CAPITALIZATION VALUE $9,500,000 * $37,849 / UNIT
DISCOUNTED CASH FLOW ANALYSIS:
Holding Period 10 years
2002 Economic Vacancy 7%
Stabilized Vacancy & Collection Loss: 8%
Lease-up / Stabilization Period N/A
Terminal Capitalization Rate 10.50%
Discount Rate 11.75%
Selling Costs 2.00%
Growth Rates:
Income 3.00%
Expenses: 3.00%
DISCOUNTED CASH FLOW VALUE $9,900,000 * $39,442 / UNIT
RECONCILED INCOME CAPITALIZATION VALUE $9,800,000 $39,044 / UNIT
SALES COMPARISON APPROACH
PRICE PER UNIT:
Range of Sales $/Unit (Unadjusted) $29,377 to $35,814
Range of Sales $/Unit (Adjusted) $34,678 to $43,142
VALUE INDICATION - PRICE PER UNIT $9,600,000 * $38,247 / UNIT
EGIM ANALYSIS
Range of EGIMS from Improved Sales 5.39 to 6.37
Selected EGIM for Subject 5.50
Subject's Projected EGI $1,808,647
EGIM ANALYSIS CONCLUSION $9,800,000 * $39,044 / UNIT
NOI PER UNIT ANALYSIS CONCLUSION $9,600,000 * $38,247 / UNIT
RECONCILED SALES COMPARISON VALUE $9,700,000 $38,645 / 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
BIG WALNUT, COLUMBUS, OHIO
PART THREE - SUMMARY OF VALUE CONCLUSIONS
SALES COMPARISON APPROACH:
Price Per Unit $9,600,000
NOI Per Unit $9,600,000
EGIM Multiplier $9,800,000
INDICATED VALUE BY SALES COMPARISON $9,700,000 $38,645 / UNIT
INCOME APPROACH:
Direct Capitalization Method: $9,500,000
Discounted Cash Flow Method: $9,900,000
INDICATED VALUE BY THE INCOME APPROACH $9,800,000 $39,044 / UNIT
RECONCILED OVERALL VALUE CONCLUSION: $9,800,000 $39,044 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9
BIG WALNUT, COLUMBUS, OHIO
INTRODUCTION
IDENTIFICATION OF THE SUBJECT
The subject property is located at 5280 Gatehouse Drive, Columbus, Franklin
County, Ohio. Columbus identifies it as 090-005526-00.
SCOPE OF THE ASSIGNMENT
The property, neighborhood, and comparables were inspected by Richard Mupo on
April 30, 2003. Brian Johnson, MAI has not made a personal inspection of the
subject property. Richard Mupo performed the research, valuation analysis and
wrote the report. Brian Johnson, MAI reviewed the report and concurs with the
value. Brian Johnson, MAI and Richard Mupo 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 April 30, 2003.
The date of the report is June 30, 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
BIG WALNUT, COLUMBUS, OHIO
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 Big Walnut LP. To the
best of our knowledge, no transfers of ownership or offers to purchase the
subject are known to have occurred during the past three years.
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 11
BIG WALNUT, COLUMBUS, OHIO
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 Columbus, Ohio. Overall, the neighborhood is
characterized as a suburban setting with the predominant land uses being
residential and retail. The subject's neighborhood is generally defined by the
following boundaries.
NEIGHBORHOOD BOUNDARIES
East - 1-270
West - Route 317
South - East Livingston Avenue
North - Columbus Country Club & Golf Course
MAJOR EMPLOYERS
Major employers in the subject's area include State of Ohio, Ohio State
University, Federal Gov., Nationwide Insurance, and Bank One. 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
BIG WALNUT, COLUMBUS, OHIO
NEIGHBORHOOD DEMOGRAPHICS
AREA
------------------------------------------
CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA
-------- ------------ ------------ ------------ ----------
POPULATION TRENDS
Current Population 10,349 93,942 208,701 1,572,971
5-Year Population 10,156 93,556 219,352 1,660,843
% Change CY-5Y -1.9% -0.4% 5.1% 5.6%
Annual Change CY-5Y -0.4% -0.1% 1.0% 1.1%
HOUSEHOLDS
Current Households 4,797 41,057 87,494 629,122
5-Year Projected Households 4,822 41,879 93,881 678,975
% Change CY-5Y 0.5% 2.0% 7.3% 7.9%
Annual Change CY-5Y 0.1% 0.4% 1.5% 1.6%
INCOME TRENDS
Median Household Income $ 37,721 $ 35,898 $ 39,758 $ 45,736
Per Capita Income $ 24,563 $ 20,521 $ 22,739 $ 24,105
Average Household Income $ 52,393 $ 46,956 $ 54,232 $ 60,267
Source: Demographics Now
The subject neighborhood's population is expected to show increases below that
of the region. The immediate market offers inferior income levels as compared to
the broader market.
The following table illustrates the housing statistics in the subject's
immediate area, as well as the MSA region.
HOUSING TRENDS
AREA
------------------------------------------
CATEGORY 1-Mi. RADIUS 3-Mi. RADIUS 5-Mi. RADIUS MSA
-------- ------------ ------------ ------------ ----------
HOUSING TRENDS
% of Households Renting 49.98% 46.69% 41.67% 35.12%
5-Year Projected % Renting 49.90% 46.45% 41.29% 34.33%
% of Households Owning 43.68% 47.32% 52.69% 59.14%
5-Year Projected % Owning 43.79% 47.65% 53.42% 60.33%
Source: Demographics Now
AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13
BIG WALNUT, COLUMBUS, OHIO
SURROUNDING IMPROVEMENTS
The following uses surround the subject property:
North - Country Club & Golf Course
South - Retail Center / Parking Lot
East - Big Walnut Creek / Residential
West - Residential
CONCLUSIONS
The subject is well located within the city of Columbus. 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
BIG WALNUT, COLUMBUS, OHIO
MARKET ANALYSIS
The subject property is located in the city of Columbus in Franklin County. The
overall pace of development in the subject's market is more or less stable. The
pace of multi-family development was strong over the past several years and well
into 2002. As a result, occupancy levels have dropped over the past several
months. The following table illustrates historical occupancy rates for the
subject's market.
HISTORICAL OCCUPANCY
Period Region Submarket
- ------ ------ ---------
Apr-03 91.5% 90.2%
Oct-02 92.2% 90.2%
Apr-02 93.2% 92.2%
Oct-01 94.0% 93.5%
Source - Apartment Realty Advisors Midwest, Inc.
Occupancy trends in the subject's market have been decreasing. Historically
speaking, the subject's submarket has underperformed the overall market.
Occupancy has been on a general decline since early 2001 due to a weak and
stagnant economy, increasing new development and declining absorption rates. New
construction appears to have slowed and the market is likely to stabilize over
the next 12 months. Rental concessions equal to one free month of rent are
typical, and are likely to remain in place until the market recovers. The
subject's submarket has slightly underperformed the overall market over the past
few years due to competition from more desirable submarkets to the north.
Occupancy for Class B properties tends to be higher than that of newer Class A
product.
Market rents in the subject's market have been following a stable trend. The
following table illustrates historical rental rates for the subject's market.
HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change
- ------ ------ -------- --------- --------
Apr-01 $610 - $546 -
Apr-02 $620 1.6% $557 2.0%
Apr-03 $630 1.6% $566 1.6%
Source - Apartment Realty Advisors Midwest, Inc.
The following table illustrates a summary of the subject's competitive set.
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15
BIG WALNUT, COLUMBUS, OHIO
COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject
--- ------------- ----- ----- ---------- --------------------
R-1 Hibernia 348 85% 1986 1/4 Mile south of the subject
R-2 Riding Club 405 96% 1968 1/4 Mile south of the subject
R-3 Club at Eagle's Pointe 759 92% 1971 1/2 Mile south of the subject
R-4 Shaker Square Apartments 194 83% 1970 1/2 Mile north of subject
R-5 N/A 0 0% 0 $0
Subject Big Walnut 251 94% 1968
Rents have shown very modest increases over the past two years. Net effective
rents have actually declined slightly in recent months due to concessions being
offered by most property managers. Rent growth will likely be minimal over the
next twelve months but should rebound to pace inflation as the market recovers.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16
BIG WALNUT, COLUMBUS, OHIO
PROPERTY DESCRIPTION
SITE ANALYSIS
Site Area 19.497 acres, or 849,289 square feet
Shape Irregular
Topography Rolling
Utilities All necessary utilities are available to the site.
Soil Conditions Stable
Easements Affecting Site None other than typical utility easements
Overall Site Appeal Average
Flood Zone:
Community Panel 390180-278G, dated August 2, 1995
Flood Zone Zone X
Zoning A2, 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
- ------------- -------- ---------- ----------- ---------- ---------
090-005526-00 $313,850 $1,973,620 $ 2,287,470 0.05891 $ 134,752
IMPROVEMENT ANALYSIS
Year Built 1968
Number of Units 251
Net Rentable Area 303,703 Square Feet
Construction:
Foundation Reinforced concrete slab
Frame Heavy or light wood
Exterior Walls Brick or masonry
Roof Built-up asphalt with or without gravel over a
wood truss structure
Project Amenities Amenities at the subject include a swimming pool,
volleyball court, tennis court, laundry room,
business office, and secured parking.
Unit Amenities Individual unit amenities include a balcony, cable
TV connection, and washer dryer connection
Appliances available in each unit include a
refrigerator, stove, dishwasher, water heater,
garbage disposal, and oven.
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17
BIG WALNUT, COLUMBUS, OHIO
Washer/dryer hook-ups are located in the 2-BR units only.
Unit Mix:
Unit Area
Unit Type Number of Units (Sq. Ft.)
- --------- --------------- ---------
1B/1B-1A10 24 694
1B/1B-1B10 24 705
1B/1B-1C10 21 975
1B/1.5B-1A15 24 733
2B/1.5B-2A15 42 1,282
2B/1.5B-2B15 30 1,395
2B/1.5B-2C15 74 1,649
2B/2B-2A20 12 1,195
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 $50,000.
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
1968 and consist of a 251-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
BIG WALNUT, COLUMBUS, OHIO
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
BIG WALNUT, COLUMBUS, OHIO
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
BIG WALNUT, COLUMBUS, OHIO
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
BIG WALNUT, COLUMBUS, OHIO
SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
----------- ------- ---------- ----------
Property Name Big Walnut The Club at Eagle's Pointe Bolton Estates
LOCATION:
Address 5280 Gatehouse Drive 6033 Lake Club Court 1150 Norton Road
City, State Columbus, Ohio Columbus, Ohio Columbus, Ohio
County Franklin Franklin Franklin
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 303,703 579,112 153,232
Year Built 1968 1971 1989
Number of Units 251 759 196
Unit Mix: Type Total Type Total Type Total
1B/1B-1A10 24 1Br/1Ba 306 1Br/1Ba 68
1B/1B-1B10 24 1Br/1.5Ba 32 2Br/1Ba 128
1B/1B-1C10 21 2Br/1Ba 306
1B/1.5B-1A15 24 2Br/1.5Ba 15
2B/1.5B-2A15 42 2Br/2Ba 34
2B/1.5B-2B15 30 Studio 66
2B/1.5B-2C15 74
2B/2B-2A20 12
Average Unit Size (SF) 1,210 763 782
Land Area (Acre) 19.4970 44.5810 12.7140
Density (Units/Acre) 12.9 17.0 15.4
Parking Ratio (Spaces/Unit) 1.14 1.48 1.82
Parking Type (Gr., Cov., etc.) Garage, Open Covered Open Open, Covered
CONDITION: Average Average Average
APPEAL: Average Average Average
AMENITIES:
Pool/Spa Yes/No Yes/No Yes/No
Gym Room No No No
Laundry Room Yes Yes No
Secured Parking Yes No No
Sport Courts No No No
Washer/Dryer Connection No No Yes
Tennis Court Yes Yes No
Volleyball Court Yes Yes No
OCCUPANCY: 94% 95% 87%
TRANSACTION DATA:
Sale Date August, 2002 November, 2002
Sale Price ($) $22,297,400 $6,400,000
Grantor W9/PHC Real Estate LP AERC Bolton Inc.
Grantee Alliance BP LP Bolton Estates Apartments LLC
Sale Documentation Doc # 200208290213585 Doc # 200211250301771
Verification Buyer Seller
Telephone Number (410)962-0595 (800) 440-2372
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $4,339,680 $5,718 $7.49 $1,154,640 $5,891 $7.54
Vacancy/Credit Loss $ 216,984 $ 286 $0.37 $ 150,103 $ 766 $0.98
Effective Gross Income $4,122,696 $5,432 $7.12 $1,004,537 $5,125 $6.56
Operating Expenses $1,752,597 $2,309 $3.03 $ 428,537 $2,186 $2.80
Net Operating Income $2,370,099 $3,123 $4.09 $ 576,000 $2,939 $3.76
NOTES: None NOI and OAR based on actual
income and expenses provided
by the seller.
PRICE PER UNIT $29,377 $32,653
PRICE PER SQUARE FOOT $ 38.50 $ 41.77
EXPENSE RATIO 42.5% 42.7%
EGIM 5.41 6.37
OVERALL CAP RATE 10.63% 9.00%
Cap Rate based on Pro Forma or Actual Income? PRO FORMA ACTUAL
COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4
----------- ---------- ----------
Property Name Northgate Apartments Spring Creek
LOCATION:
Address 6175 Northgate Road 5811 Spring Run Drive
City, State Columbus, Ohio Columbus, Ohio
County Franklin Franklin
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 375,960 208,491
Year Built 1970 1982
Number of Units 316 288
Unit Mix: Type Total Type Total
1Br/1Ba 48 1Br/1Ba 224
1Br/1.5Ba 48 2Br/2Ba 64
2Br/1.5Ba 164
2Br/2Ba 32
3Br/2.5Ba 24
Average Unit Size (SF) 1,190 724
Land Area (Acre) 19.4300 18.5900
Density (Units/Acre) 16.3 15.5
Parking Ratio (Spaces/Unit) 1.98 1.04
Parking Type (Gr., Cov., etc.) Open Open
CONDITION: Average Average
APPEAL: Average Average
AMENITIES:
Pool/Spa Yes/Yes Yes/No
Gym Room No No
Laundry Room Yes No
Secured Parking Yes No
Sport Courts No No
Washer/Dryer Connection No Yes
Tennis Court Yes Yes
Volleyball Court No No
OCCUPANCY: 95% 95%
TRANSACTION DATA:
Sale Date September, 2001 September, 2001
Sale Price ($) $11,011,986 $10,314,300
Grantor New Plan of Northgate New Plan Excel Realty Trust
Grantee C-K Northgate LLC C-K Spring Creek LLC
Sale Documentation Doc # 200110020227497 Doc # 200110110235193
Verification Seller Seller
Telephone Number (212) 869-3000 (212) 869-3000
ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF
Potential Gross Income $2,150,184 $6,804 $5.72 $1,868,160 $6,487 $8.96
Vacancy/Credit Loss $ 107,509 $ 340 $0.29 $ 93,408 $ 324 $0.45
Effective Gross Income $2,042,675 $6,464 $5.43 $1,774,752 $6,162 $8.51
Operating Expenses $ 864,142 $2,735 $2.30 $ 708,690 $2,461 $3.40
Net Operating Income $1,178,533 $3,730 $3.13 $1,066,062 $3,702 $5.11
NOTES: The property also has a The property also has a
clubhouse. clubhouse.
PRICE PER UNIT $34,848 $35,814
PRICE PER SQUARE FOOT $ 29.29 $ 49.47
EXPENSE RATIO 42.3% 39.9%
EGIM 5.39 5.81
OVERALL CAP RATE 10.70% 10.34%
Cap Rate based on Pro Forma or Actual Income? PRO FORMA PRO FORMA
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22
BIG WALNUT, COLUMBUS, OHIO
IMPROVED SALES MAP
[IMPROVED SALES MAP]
IMPROVED SALES ANALYSIS
The improved sales indicate a sales price range from $29,377 to $35,814 per
unit. Adjustments have been made to the sales to reflect differences in
location, age/condition and quality/appeal. Generally speaking, larger
properties typically have a lower price per unit when compared to smaller
properties, all else being equal. Similarly, those projects with a higher
average unit size will generally have a higher price per unit. After appropriate
adjustments are made, the improved sales demonstrate an adjusted range for the
subject from $34,678 to $43,142 per unit with a mean or average adjusted price
of $38,737 per unit. The median adjusted price is $38,565 per unit. Based on the
following analysis, we have concluded to a value of $39,000 per unit, which
results in an "as is" value of $9,600,000 (rounded after necessary adjustment,
if any).
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23
BIG WALNUT, COLUMBUS, OHIO
SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE
DESCRIPTION SUBJECT I - 1 I - 2
----------- ------- ---------- ----------
Property Name Big Walnut The Club at Eagle's Pointe Bolton Estates
Address 5280 Gatehouse Drive 6033 Lake Club Court 1150 Norton Road
City Columbus, Ohio Columbus, Ohio Columbus, Ohio
Sale Date August, 2002 November, 2002
Sale Price ($) $22,297,400 $6,400,000
Net Rentable Area (SF) 303,703 579,112 153,232
Number of Units 251 759 196
Price Per Unit $29,377 $32,653
Year Built 1968 1971 1989
Land Area (Acre) 19.4970 44.5810 12.7140
VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 08-2002 2% 11-2002 1%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $29,965 $33,061
Location Comparable 0% Comparable 0%
Number of Units 251 759 15% 196 0%
Quality / Appeal Good Comparable 0% Comparable 0%
Age / Condition 1968 1971 / Average 0% 1989 / Average -5%
Occupancy at Sale 94% 95% 0% 87% 10%
Amenities Average Comparable 0% Comparable 0%
Average Unit Size (SF) 1,210 763 10% 782 10%
Parking Ratio 1.14 Comparable 0% Superior -5%
Unit Mix Good Comparable 0% Inferior 10%
PHYSICAL ADJUSTMENT 25% 20%
FINAL ADJUSTED VALUE ($/UNIT) $37,456 $39,673
COMPARABLE COMPARABLE
DESCRIPTION I - 3 I - 4
----------- ---------- ----------
Property Name Northgate Apartments Spring Creek
Address 6175 Northgate Road 5811 Spring Run Drive
City Columbus, Ohio Columbus, Ohio
Sale Date September, 2001 September, 2001
Sale Price ($) $11,011,986 $10,314,300
Net Rentable Area (SF) 375,960 208,491
Number of Units 316 288
Price Per Unit $34,848 $35,814
Year Built 1970 1982
Land Area (Acre) 19.4300 18.5900
VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ.
Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0%
Financing Cash To Seller 0% Cash To Seller 0%
Conditions of Sale Arm's Length 0% Arm's Length 0%
Date of Sale (Time) 09-2001 5% 09-2001 5%
VALUE AFTER TRANS. ADJUST. ($/UNIT) $36,503 $37,515
Location Comparable 0% Comparable 0%
Number of Units 316 0% 288 0%
Quality / Appeal Comparable 0% Comparable 0%
Age / Condition 1970 / Average 0% 1982 / Average -5%
Occupancy at Sale 95% 0% 95% 0%
Amenities Comparable 0% Comparable 0%
Average Unit Size (SF) 1,190 0% 724 10%
Parking Ratio Superior -5% Comparable 0%
Unit Mix Comparable 0% Inferior 10%
PHYSICAL ADJUSTMENT -5% 15%
FINAL ADJUSTED VALUE ($/UNIT) $34,678 $43,142
SUMMARY
VALUE RANGE (PER UNIT) $34,678 TO $43,142
MEAN (PER UNIT) $38,737
MEDIAN (PER UNIT) $38,565
VALUE CONCLUSION (PER UNIT) $39,000
VALUE OF IMPROVEMENT & MAIN SITE $9,789,000
DEFERRED MAINTENANCE -$ 50,000
PV OF CONCESSIONS -$ 116,000
VALUE INDICATED BY SALES COMPARISON APPROACH $9,623,000
ROUNDED $9,600,000
NET OPERATING INCOME (NOI) ANALYSIS
We have also conducted a net operating income (NOI) comparison analysis. The NOI
effectively takes into account the various physical, location, and operating
aspects of the sale. When the subject's NOI is compared to the sale NOI, a
percent adjustment can be arrived at. The following table illustrates this
analysis.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 24
BIG WALNUT, COLUMBUS, OHIO
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-1 759 $22,297,400 10.63% $2,370,099 $965,215 1.231 $36,177
$ 29,377 $ 3,123 $ 3,845
I-2 196 $ 6,400,000 9.00% $ 576,000 $965,215 1.309 $42,728
$ 32,653 $ 2,939 $ 3,845
I-3 316 $11,011,986 10.70% $1,178,533 $965,215 1.031 $35,931
$ 34,848 $ 3,730 $ 3,845
I-4 288 $10,314,300 10.34% $1,066,062 $965,215 1.039 $37,206
$ 35,814 $ 3,702 $ 3,845
PRICE/UNIT
Low High Average Median
$35,931 $42,728 $38,010 $36,692
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT
Estimated Price Per Unit $ 39,000
Number of Units 251
Value $9,789,000
Deferred Maintenance -$ 50,000
PV of Concessions -$ 116,000
-----------
Value Based on NOI Analysis $9,623,000
Rounded $9,600,000
The adjusted sales indicate a range of value between $35,931 and $42,728 per
unit, with an average of $38,010 per unit. Based on the subject's competitive
position within the improved sales, a value of $39,000 per unit is estimated.
This indicates an "as is" market value of $9,600,000 (rounded after necessary
adjustment, if any) for the NOI Per Unit Analysis.
EFFECTIVE GROSS INCOME MULTIPLIER (EGIM) ANALYSIS
The effective gross income multiplier (EGIM) is derived by dividing the sales
price by the total effective gross income. The following table illustrates the
EGIMs for the comparable improved sales.
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 25
BIG WALNUT, COLUMBUS, OHIO
EFFECTIVE GROSS INCOME MULTIPLIER COMPARISON
COMPARABLE NO. OF SALE PRICE EFFECTIVE OPERATING SUBJECT
NO. UNITS PRICE/UNIT GROSS INCOME EXPENSE OER PROJECTED OER EGIM
- ---------- ------ ---------- ------------ ---------- --- ------------- -----
I-1 759 $22,297,400 $4,122,696 $1,752,597 42.51% 5.41
$ 29,377
I-2 196 $ 6,400,000 $1,004,537 $ 428,537 42.66% 6.37
$ 32,653
43.16%
I-3 316 $11,011,986 $2,042,675 $ 864,142 42.30% 5.39
$ 34,848
I-4 288 $10,314,300 $1,774,752 $ 708,690 39.93% 5.81
$ 35,814
EGIM
Low High Average Median
5.39 6.37 5.75 5.61
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES
Estimate EGIM 5.50
Subject EGI $1,808,647
Value $9,947,560
Deferred Maintenance -$ 50,000
PV of Concessions -$ 116,000
-----------
Value Based on EGIM Analysis $9,781,560
Rounded $9,800,000
Value Per Unit $ 39,044
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 43.16% before reserves. The comparable sales
indicate a range of expense ratios from 39.93% to 42.66%, while their EGIMs
range from 5.39 to 6.37. Overall, we conclude to an EGIM of 5.50, which results
in an "as is" value estimate in the EGIM Analysis of $9,800,000.
SALES COMPARISON CONCLUSION
The three valuation methods in the Sales Comparison Approach are shown below.
The overall value via the Sales Comparison Approach is estimated at $9,700,000.
Price Per Unit $9,600,000
NOI Per Unit $9,600,000
EGIM Analysis $9,800,000
Sales Comparison Conclusion $9,700,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26
BIG WALNUT, COLUMBUS, OHIO
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
BIG WALNUT, COLUMBUS, OHIO
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
--------- --------- -------- ------ ----------
1B/1B-1A10 694 $ 503 $ 0.73 91.7%
1B/1B-1B10 705 $ 474 $ 0.67 91.7%
1B/1B-1C10 975 $ 520 $ 0.53 85.7%
1B/1.5B-1A15 733 $ 504 $ 0.69 87.5%
2B/1.5B-2A15 1282 $ 618 $ 0.48 100.0%
2B/1.5B-2B15 1395 $ 625 $ 0.45 96.7%
2B/1.5B-2C15 1649 $ 668 $ 0.41 95.9%
2B/2B-2A20 1195 $ 630 $ 0.53 91.7%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28
BIG WALNUT, COLUMBUS, OHIO
RENT ANALYSIS
COMPARABLE RENTS
-----------------------------------------------------
R-1 R-2 R-3 R-4 R-5
-------- ----------- ------- ---------- ---
Club at Shaker
Eagle's Square
Hibernia Riding Club Pointe Apartments N/A
-----------------------------------------------------
COMPARISON TO SUBJECT
SUBJECT SUBJECT -----------------------------------------------------
SUBJECT UNIT ACTUAL ASKING Slightly Slightly
DESCRIPTION TYPE RENT RENT Superior Superior Similar Similar 0
----------- ------------ ------- ------- -------- -------- ------- ------- ---
Monthly Rent 1B/1B-1A10 $ 503 $ 529 $ 455 $ 410
Unit Area (SF) 694 694 689 626
Monthly Rent Per Sq. Ft. $0.73 $0.76 $0.66 $0.65
Monthly Rent 1B/1B-1B10 $ 474 $ 469 $ 571
Unit Area (SF) 705 705 910
Monthly Rent Per Sq. Ft. $0.67 $0.67 $0.63
Monthly Rent 1B/1B-1C10 $ 520 $ 559 $ 587 $525
Unit Area (SF) 975 975 918 864
Monthly Rent Per Sq. Ft. $0.53 $0.57 $0.64 $0.61
Monthly Rent 1B/1.5B-1A15 $ 504 $ 529 $ 563 $510
Unit Area (SF) 733 733 901 775
Monthly Rent Per Sq. Ft. $0.69 $0.72 $0.62 $0.66
Monthly Rent 2B/1.5B-2A15 $ 618 $649 $ 613 $ 545 $543 $ 635
Unit Area (SF) 1,282 1,282 1,052 925 878 1,072
Monthly Rent Per Sq. Ft. $0.48 $0.51 $0.58 $0.59 $0.62 $0.59
Monthly Rent 2B/1.5B-2B15 $ 625 $ 649 $ 703
Unit Area (SF) 1,395 1,395 1,180
Monthly Rent Per Sq. Ft. $0.45 $0.47 $0.60
Monthly Rent 2B/1.5B-2C15 $ 668 $ 679
Unit Area (SF) 1,649 1,649
Monthly Rent Per Sq. Ft. $0.41 $0.41
Monthly Rent 2B/2B-2A20 $ 630 $ 659 $650
Unit Area (SF) 1,195 1,195 1,104
Monthly Rent Per Sq. Ft. $0.53 $0.55 $0.59
DESCRIPTION MIN MAX MEDIAN AVERAGE
----------- --- --- ------ -------
Monthly Rent $ 410 $ 455 $ 433 $ 433
Unit Area (SF) 626 689 658 658
Monthly Rent Per Sq. Ft. $0.65 $0.66 $0.66 $0.66
Monthly Rent $ 571 $ 571 $ 571 $ 571
Unit Area (SF) 910 910 910 910
Monthly Rent Per Sq. Ft. $0.63 $0.63 $0.63 $0.63
Monthly Rent $ 525 $ 587 $ 556 $ 556
Unit Area (SF) 864 918 891 891
Monthly Rent Per Sq. Ft. $0.61 $0.64 $0.62 $0.62
Monthly Rent $ 510 $ 563 $ 536 $ 536
Unit Area (SF) 775 901 838 838
Monthly Rent Per Sq. Ft. $0.62 $0.66 $0.64 $0.64
Monthly Rent $ 543 $ 635 $ 579 $ 584
Unit Area (SF) 878 1,072 989 982
Monthly Rent Per Sq. Ft. $0.58 $0.62 $0.59 $0.60
Monthly Rent $ 703 $ 703 $ 703 $ 703
Unit Area (SF) 1,180 1,180 1,180 1,180
Monthly Rent Per Sq. Ft. $0.60 $0.60 $0.60 $0.60
Monthly Rent
Unit Area (SF)
Monthly Rent Per Sq. Ft.
Monthly Rent $ 650 $ 650 $ 650 $ 650
Unit Area (SF) 1,104 1,104 1,104 1,104
Monthly Rent Per Sq. Ft. $0.59 $0.59 $0.59 $0.59
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
--------- --------------- --------- -------- ------ ------- ------
1B/1B-1A10 24 694 $519 $0.75 $ 12,456 $ 149,472
1B/1B-1B10 24 705 $469 $0.67 $ 11,256 $ 135,072
1B/1B-1C10 21 975 $549 $0.56 $ 11,529 $ 138,348
1B/1.5B-1A15 24 733 $519 $0.71 $ 12,456 $ 149,472
2B/1.5B-2A15 42 1,282 $649 $0.51 $ 27,258 $ 327,096
2B/1.5B-2B15 30 1,395 $649 $0.47 $ 19,470 $ 233,640
2B/1.5B-2C15 74 1,649 $679 $0.41 $ 50,246 $ 602,952
2B/2B-2A20 12 1,195 $649 $0.54 $ 7,788 $ 93,456
Total $152,459 $1,829,508
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 29
BIG WALNUT, COLUMBUS, OHIO
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
BIG WALNUT, COLUMBUS, OHIO
SUMMARY OF HISTORICAL INCOME & EXPENSES
FISCAL YEAR 2000 FISCAL YEAR 2001 FISCAL YEAR 2002
ACTUAL ACTUAL ACTUAL
----------------------- ----------------------- -----------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT
----------- ------------ -------- ------------ -------- ------------ --------
Revenues
Rental Income $ 1,765,540 $ 7,034 $ 1,506,608 $ 6,002 $ 1,751,166 $ 6,977
Vacancy $ 173,284 $ 690 $ 247,226 $ 985 $ 82,191 $ 327
Credit Loss/Concessions $ 52,252 $ 208 $ 87,768 $ 350 $ 45,990 $ 183
------------ -------- ------------ -------- ------------ --------
Subtotal $ 225,536 $ 899 $ 334,994 $ 1,335 $ 128,181 $ 511
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 81,810 $ 326 $ 90,924 $ 362 $ 156,164 $ 622
------------ -------- ------------ -------- ------------ --------
Subtotal Other Income $ 81,810 $ 326 $ 90,924 $ 362 $ 156,164 $ 622
------------ -------- ------------ -------- ------------ --------
Effective Gross Income $ 1,621,814 $ 6,461 $ 1,262,538 $ 5,030 $ 1,779,149 $ 7,088
Operating Expenses
Taxes $ 156,041 $ 622 $ 93,421 $ 372 $ 149,415 $ 595
Insurance $ 31,387 $ 125 $ 41,781 $ 166 $ 50,821 $ 202
Utilities $ 91,303 $ 364 $ 79,077 $ 315 $ 87,639 $ 349
Repair & Maintenance $ 52,895 $ 211 $ 33,417 $ 133 $ 24,872 $ 99
Cleaning $ 77,888 $ 310 $ 48,082 $ 192 $ 61,880 $ 247
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 43,239 $ 172 $ 42,216 $ 168 $ 20,405 $ 81
General Administrative $ 31,998 $ 127 $ 28,067 $ 112 $ 26,264 $ 105
Management $ 84,169 $ 335 $ 66,459 $ 265 $ 90,866 $ 362
Miscellaneous $ 222,211 $ 885 $ 193,569 $ 771 $ 249,812 $ 995
------------ -------- ------------ -------- ------------ --------
Total Operating Expenses $ 791,131 $ 3,152 $ 626,089 $ 2,494 $ 761,974 $ 3,036
Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
------------ -------- ------------ -------- ------------ --------
Net Income $ 830,683 $ 3,309 $ 636,449 $ 2,536 $ 1,017,175 $ 4,052
FISCAL YEAR 2003 ANNUALIZED 2003
MANAGEMENT BUDGET PROJECTION AAA PROJECTION
----------------------- ----------------------- -----------------------------------
DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT %
----------- ------------ -------- ------------ -------- ------------ -------- ------
Revenues
Rental Income $ 1,791,420 $ 7,137 $ 1,783,888 $ 7,107 $ 1,829,508 $ 7,289 100.0%
Vacancy $ 74,000 $ 295 $ 148,620 $ 592 $ 91,475 $ 364 5.0%
Credit Loss/Concessions $ 41,650 $ 166 $ 233,496 $ 930 $ 54,885 $ 219 3.0%
------------ -------- ------------ -------- ------------ -------- -----
Subtotal $ 115,650 $ 461 $ 382,116 $ 1,522 $ 146,361 $ 583 8.0%
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Other Misc. Revenue $ 131,863 $ 525 $ 458,860 $ 1,828 $ 125,500 $ 500 6.9%
------------ -------- ------------ -------- ------------ -------- -----
Subtotal Other Income $ 131,863 $ 525 $ 458,860 $ 1,828 $ 125,500 $ 500 6.9%
------------ -------- ------------ -------- ------------ -------- -----
Effective Gross Income $ 1,807,633 $ 7,202 $ 1,860,632 $ 7,413 $ 1,808,647 $ 7,206 100.0%
Operating Expenses
Taxes $ 153,096 $ 610 $ 140,456 $ 560 $ 153,110 $ 610 8.5%
Insurance $ 55,680 $ 222 $ 54,816 $ 218 $ 55,220 $ 220 3.1%
Utilities $ 84,788 $ 338 $ 129,308 $ 515 $ 87,850 $ 350 4.9%
Repair & Maintenance $ 30,238 $ 120 $ 60,136 $ 240 $ 37,650 $ 150 2.1%
Cleaning $ 57,990 $ 231 $ 80,444 $ 320 $ 61,495 $ 245 3.4%
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0%
Marketing & Leasing $ 29,328 $ 117 $ 22,400 $ 89 $ 31,375 $ 125 1.7%
General Administrative $ 24,828 $ 99 $ 46,824 $ 187 $ 25,100 $ 100 1.4%
Management $ 90,882 $ 362 $ 79,840 $ 318 $ 90,432 $ 360 5.0%
Miscellaneous $ 241,157 $ 961 $ 225,116 $ 897 $ 238,450 $ 950 13.2%
------------ -------- ------------ -------- ------------ -------- -----
Total Operating Expenses $ 767,987 $ 3,060 $ 839,340 $ 3,344 $ 780,682 $ 3,110 43.2%
Reserves $ 0 $ 0 $ 0 $ 0 $ 62,750 $ 250 8.0%
------------ -------- ------------ -------- ------------ -------- -----
Net Income $ 1,039,646 $ 4,142 $ 1,021,292 $ 4,069 $ 965,215 $ 3,845 53.4%
REVENUES AND EXPENSES
The subject's revenue and expense projections are displayed on the previous
chart. Rental income is based on the market analysis previously discussed. Other
income consists of forfeited deposits, laundry income, late rent payments, month
to month fees, pet fees, vending machine revenue, etc.
We forecasted the property's annual operating expenses after reviewing its
historical performance at the subject property. We analyzed each item of expense
and attempted to forecast amounts a typical informed investor would consider
reasonable.
VACANCY AND COLLECTION LOSS
An investor is primarily interested in the annual revenue an income property is
likely to produce over a specified period of time, rather than the income it
could produce if it were always 100% occupied and all tenants were paying their
rent in full and on time. An investor normally expects some income loss as
tenants vacate, fail to pay rent, or pay their rent late.
We have projected a stabilized vacancy and collection loss rate of 8% based on
the subject's historical performance, as well as the anticipated future market
conditions.
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31
BIG WALNUT, COLUMBUS, OHIO
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 $50,000 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
BIG WALNUT, COLUMBUS, OHIO
SUMMARY OF OVERALL
CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR
- --------- --------- ------ ---------- ---
I-1 Aug-02 95% $29,377 10.63%
I-2 Nov-02 87% $32,653 9.00%
I-3 Sep-01 95% $34,848 10.70%
I-4 Sep-01 95% $35,814 10.34%
I-5 Jan-00 0% N/A
High 10.70%
Low 9.00%
Average 10.17%
Based on this information, we have concluded the subject's overall
capitalization rate should be 10.00%. The terminal capitalization rate is
applied to the net operating income estimated for the year following the end of
the holding period. Based on the concluded overall capitalization rate, the age
of the property and the surveyed information, we have concluded the subject's
terminal capitalization rate to be 10.50%. 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 11.75%.
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 11.75% indicates a value of $9,900,000. In this instance, the reversion
figure contributes approximately 38% of the total value. Investors surveyed for
this assignment indicated they
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 33
BIG WALNUT, COLUMBUS, OHIO
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
BIG WALNUT, COLUMBUS, OHIO
DISCOUNTED CASH FLOW ANALYSIS
BIG WALNUT
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009
FISCAL YEAR 1 2 3 4 5 6
----------- ------------ ------------ ------------ ------------ ------------ ------------
REVENUE
Base Rent $ 1,829,508 $ 1,829,508 $ 1,884,393 $ 1,940,925 $ 1,999,153 $ 2,059,127
Vacancy $ 91,475 $ 91,475 $ 94,220 $ 97,046 $ 99,958 $ 102,956
Credit Loss $ 54,885 $ 54,885 $ 56,532 $ 58,228 $ 59,975 $ 61,774
Concessions $ 112,789 $ 18,295 $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------ ------------ ------------
Subtotal $ 259,150 $ 164,656 $ 150,751 $ 155,274 $ 159,932 $ 164,730
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 125,500 $ 125,500 $ 129,265 $ 133,143 $ 137,137 $ 141,251
------------ ------------ ------------ ------------ ------------ ------------
Subtotal Other Income $ 125,500 $ 125,500 $ 129,265 $ 133,143 $ 137,137 $ 141,251
------------ ------------ ------------ ------------ ------------ ------------
EFFECTIVE GROSS INCOME $ 1,695,858 $ 1,790,352 $ 1,862,907 $ 1,918,794 $ 1,976,358 $ 2,035,649
OPERATING EXPENSES:
Taxes $ 153,110 $ 157,703 $ 162,434 $ 167,307 $ 172,327 $ 177,496
Insurance $ 55,220 $ 56,877 $ 58,583 $ 60,340 $ 62,151 $ 64,015
Utilities $ 87,850 $ 90,486 $ 93,200 $ 95,996 $ 98,876 $ 101,842
Repair & Maintenance $ 37,650 $ 38,780 $ 39,943 $ 41,141 $ 42,375 $ 43,647
Cleaning $ 61,495 $ 63,340 $ 65,240 $ 67,197 $ 69,213 $ 71,290
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 31,375 $ 32,316 $ 33,286 $ 34,284 $ 35,313 $ 36,372
General Administrative $ 25,100 $ 25,853 $ 26,629 $ 27,427 $ 28,250 $ 29,098
Management $ 84,793 $ 89,518 $ 93,145 $ 95,940 $ 98,818 $ 101,782
Miscellaneous $ 238,450 $ 245,604 $ 252,972 $ 260,561 $ 268,378 $ 276,429
------------ ------------ ------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES $ 775,043 $ 800,475 $ 825,432 $ 850,195 $ 875,700 $ 901,971
Reserves $ 62,750 $ 64,633 $ 66,571 $ 68,569 $ 70,626 $ 72,744
------------ ------------ ------------ ------------ ------------ ------------
NET OPERATING INCOME $ 858,065 $ 925,245 $ 970,904 $ 1,000,031 $ 1,030,032 $ 1,060,933
Operating Expense Ratio (% of EGI) 45.7% 44.7% 44.3% 44.3% 44.3% 44.3%
Operating Expense Per Unit $ 3,088 $ 3,189 $ 3,289 $ 3,387 $ 3,489 $ 3,594
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014
FISCAL YEAR 7 8 9 10 11
----------- ------------ ------------ ------------ ------------ ------------
REVENUE
Base Rent $ 2,120,901 $ 2,184,528 $ 2,250,064 $ 2,317,566 $ 2,387,093
Vacancy $ 106,045 $ 109,226 $ 112,503 $ 115,878 $ 119,355
Credit Loss $ 63,627 $ 65,536 $ 67,502 $ 69,527 $ 71,613
Concessions $ 0 $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------ ------------
Subtotal $ 169,672 $ 174,762 $ 180,005 $ 185,405 $ 190,967
Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0
Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0
Other Misc. Revenue $ 145,489 $ 149,854 $ 154,349 $ 158,980 $ 163,749
------------ ------------ ------------ ------------ ------------
Subtotal Other Income $ 145,489 $ 149,854 $ 154,349 $ 158,980 $ 163,749
------------ ------------ ------------ ------------ ------------
EFFECTIVE GROSS INCOME $ 2,096,718 $ 2,159,620 $ 2,224,408 $ 2,291,140 $ 2,359,875
OPERATING EXPENSES:
Taxes $ 182,821 $ 188,306 $ 193,955 $ 199,774 $ 205,767
Insurance $ 65,936 $ 67,914 $ 69,951 $ 72,050 $ 74,211
Utilities $ 104,897 $ 108,044 $ 111,286 $ 114,624 $ 118,063
Repair & Maintenance $ 44,956 $ 46,305 $ 47,694 $ 49,125 $ 50,598
Cleaning $ 73,428 $ 75,631 $ 77,900 $ 80,237 $ 82,644
Landscaping $ 0 $ 0 $ 0 $ 0 $ 0
Security $ 0 $ 0 $ 0 $ 0 $ 0
Marketing & Leasing $ 37,463 $ 38,587 $ 39,745 $ 40,937 $ 42,165
General Administrative $ 29,971 $ 30,870 $ 31,796 $ 32,750 $ 33,732
Management $ 104,836 $ 107,981 $ 111,220 $ 114,557 $ 117,994
Miscellaneous $ 284,722 $ 293,263 $ 302,061 $ 311,123 $ 320,457
------------ ------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES $ 929,030 $ 956,901 $ 985,608 $ 1,015,177 $ 1,045,632
Reserves $ 74,927 $ 77,175 $ 79,490 $ 81,875 $ 84,331
------------ ------------ ------------ ------------ ------------
NET OPERATING INCOME $ 1,092,761 $ 1,125,544 $ 1,159,310 $ 1,194,089 $ 1,229,912
Operating Expense Ratio (% of EGI) 44.3% 44.3% 44.3% 44.3% 44.3%
Operating Expense Per Unit $ 3,701 $ 3,812 $ 3,927 $ 4,045 $ 4,166
"DCF" Value Analysis
Gross Residual Sale Deferred Maintenance -$ 50,000
Price $11,713,446
Estimated Stabilized NOI $965,215 Sales Expense Rate 2.00% Less: Sales Expense $ 234,269 Add: Excess Land $ 0
-----------
Months to Stabilized 1 Discount Rate 11.75% Net Residual Sale Price $11,479,177 Other Adjustments $ 0
-----------
Stabilized Occupancy 95.0% Terminal Cap Rate 10.50% PV of Reversion $ 3,779,509 Value Indicated By
Add: NPV of NOI $ 6,128,465 "DCF" $9,857,974
-----------
PV Total $ 9,907,974 Rounded $9,900,000
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE
------------------------------------------------------------------------------
TOTAL VALUE 11.25% 11.50% 11.75% 12.00% 12.25%
- -------------------------- ----------- ----------- ----------- ---------- ----------
10.00% $10,425,208 $10,259,295 $10,096,950 $9,938,085 $9,782,612
10.25% $10,323,977 $10,160,310 $10,000,158 $9,843,431 $9,690,046
TERMINAL CAP RATE 10.50% $10,227,565 $10,066,039 $ 9,907,974 $9,753,285 $9,601,888
10.75% $10,135,639 $ 9,976,153 $ 9,820,079 $9,667,332 $9,517,830
11.00% $10,047,890 $ 9,890,352 $ 9,736,179 $9,585,286 $9,437,593
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35
BIG WALNUT, COLUMBUS, OHIO
INCOME LOSS DURING LEASE-UP
The subject is currently near or at a stabilized condition. Therefore, there is
no income loss during lease-up at the subject property.
CONCESSIONS
Due to softness in the market, concessions have been utilized at the subject
property and within the market. Based on our discussions with the subject's
property manager and those at competing properties, these concessions are
expected to continue in the near term until the market returns to a stabilized
level. Concessions have been included as a line item deduction within the
discounted cash flow analysis. The present value of these concessions equates to
$116,000 (rounded). This amount has been deducted from the Direct Capitalization
analysis, as well as the Sales Comparison Approach value.
DIRECT CAPITALIZATION METHOD
After having projected the income and expenses for the property, the next step
in the valuation process is to capitalize the net income into an estimate of
value. The selected overall capitalization rate ("OAR") covers both return on
and return of capital. It is the overall rate of return an investor expects.
After considering the market transactions and the investor surveys, we
previously conclude that an overall rate of 10.00% percent is applicable to the
subject. The results of our direct capitalization analysis are as follows:
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36
BIG WALNUT, COLUMBUS, OHIO
BIG WALNUT
TOTAL PER SQ. FT. PER UNIT %OF EGI
- -----------------------------------------------------------------------------------------------------------------------------------
REVENUE
Base Rent $1,829,508 $ 6.02 $ 7,289
Less: Vacancy & Collection Loss 8.00% $ 146,361 $ 0.48 $ 583
Plus: Other Income
Laundry Income $ 0 $ 0.00 $ 0 0.00%
Garage Revenue $ 0 $ 0.00 $ 0 0.00%
Other Misc. Revenue $ 125,500 $ 0.41 $ 500 6.94%
--------------------------------------------------------------------------
Subtotal Other Income $ 125,500 $ 0.41 $ 500 6.94%
EFFECTIVE GROSS INCOME $1,808,647 $ 5.96 $ 7,206
OPERATING EXPENSES:
Taxes $ 153,110 $ 0.50 $ 610 8.47%
Insurance $ 55,220 $ 0.18 $ 220 3.05%
Utilities $ 87,850 $ 0.29 $ 350 4.86%
Repair & Maintenance $ 37,650 $ 0.12 $ 150 2.08%
Cleaning $ 61,495 $ 0.20 $ 245 3.40%
Landscaping $ 0 $ 0.00 $ 0 0.00%
Security $ 0 $ 0.00 $ 0 0.00%
Marketing & Leasing $ 31,375 $ 0.10 $ 125 1.73%
General Administrative $ 25,100 $ 0.08 $ 100 1.39%
Management 5.00% $ 90,432 $ 0.30 $ 360 5.00%
Miscellaneous $ 238,450 $ 0.79 $ 950 13.18%
TOTAL OPERATING EXPENSES $ 780,682 $ 2.57 $ 3,110 43.16%
Reserves $ 62,750 $ 0.21 $ 250 3.47%
--------------------------------------------------------------------------
NET OPERATING INCOME $ 965,215 $ 3.18 $ 3,845 53.37%
"GOING IN" CAPITALIZATION RATE 10.00%
VALUE INDICATION $9,652,150 $31.78 $38,455
DEFERRED MAINTENANCE ($ 50,000)
PV OF CONCESSIONS ($ 116,000)
"AS IS" VALUE INDICATION
(DIRECT CAPITALIZATION APPROACH) $9,486,150
ROUNDED $9,500,000 $31.28 $37,849
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 37
BIG WALNUT, COLUMBUS, OHIO
DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF
- ---------------------------------------------------------------------------------------------------------------------
9.25% $10,268,757 $10,300,000 $41,036 $33.91
9.50% $ 9,994,158 $10,000,000 $39,841 $32.93
9.75% $ 9,733,641 $ 9,700,000 $38,645 $31.94
10.00% $ 9,486,150 $ 9,500,000 $37,849 $31.28
10.25% $ 9,250,732 $ 9,300,000 $37,052 $30.62
10.50% $ 9,026,524 $ 9,000,000 $35,857 $29.63
10.75% $ 8,812,744 $ 8,800,000 $35,060 $28.98
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD
Applying the capitalization rate to our estimated NOI results in an estimated
value of $9,500,000.
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 $9,900,000
Direct Capitalization Method $9,500,000
Giving consideration to the indicated values provided by both techniques, we
have concluded the estimated value by the income capitalization approach to be
$9,800,000.
AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 38
BIG WALNUT, COLUMBUS, OHIO
RECONCILIATION AND CONCLUSION
This appraisal was made to express an opinion as of the Market Value of the fee
simple estate in the property.
AS IS MARKET VALUE OF THE FEE SIMPLE ESTATE
Cost Approach Not Utilized
Sales Comparison Approach $9,700,000
Income Approach $9,800,000
Reconciled Value $9,800,000
The Direct Capitalization Method is considered a reliable indicator of value.
Income and expenses were estimated and projected based on historical operating
statements and market oriented expenses. This method is primarily used by
investors in their underwriting analysis. Furthermore, there was good support
for an overall rate in the Direct Capitalization Method.
The Sales Comparison Approach to value supported the value conclusion by the
Income Approach and was given secondary consideration. Investment-grade,
income-producing properties such as the subject are not typically traded based
on cost. Therefore, the Cost Approach has not been considered in our valuation.
FINAL VALUE - FEE SIMPLE ESTATE
Based on the investigation and premise outlined, it is our opinion that as of
April 30, 2003 the market value of the fee simple estate in the property is:
$9,800,000
AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA
BIG WALNUT, COLUMBUS, OHIO
ADDENDA
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
BIG WALNUT, COLUMBUS, OHIO
EXHIBIT A
SUBJECT PHOTOGRAPHS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A
BIG WALNUT, COLUMBUS, OHIO
SUBJECT PHOTOGRAPHS
[EXTERIOR - ENTRANCE PICTURE] [EXTERIOR - RESIDENTIAL UNITS PICTURE]
[EXTERIOR - POOL PICTURE] [EXTERIOR - TENNIS COURTS PICTURE]
[INTERIOR - UNIT PICTURE] [INTERIOR - TYPICAL KITCHEN PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
BIG WALNUT, COLUMBUS, OHIO
EXHIBIT B
SUMMARY OF RENT COMPARABLES
AND PHOTOGRAPH OF COMPARABLES
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
BIG WALNUT, COLUMBUS, OHIO
PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES
COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3
THE CLUB AT EAGLE'S POINTE BOLTON ESTATES NORTHGATE APARTMENTS
6033 Lake Club Court 1150 Norton Road 6175 Northgate Road
Columbus, Ohio Columbus, Ohio Columbus, Ohio
N/A [PICTURE] [PICTURE]
COMPARABLE I-4
SPRING CREEK
5811 Spring Run Drive
Columbus, Ohio
[PICTURE] N/A
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
BIG WALNUT, COLUMBUS, OHIO
SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE
DESCRIPTION SUBJECT R - 1
- -----------------------------------------------------------------------------------------------------------------------------
Property Name Big Walnut Hibernia
Management Company Aimco Oakwood Management
LOCATION:
Address 5280 Gatehouse Drive 5680 Hibernia Drive
City, State Columbus, Ohio Columbus, Ohio
County Franklin Franklin
Proximity to Subject 1/4 Mile south of the subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 303,703 353,220
Year Built 1968 1986
Effective Age 20 10
Building Structure Type Brick & wood siding walls; asphalt Wood siding; asphalt shingled
shingle roof roofs
Parking Type (Gr., Cov., etc.) Open, Covered Open, Covered
Number of Units 251 348
Unit Mix: Type Unit Qty Mo Rent Type Unit Qty Mo
1 1B/1B-1A10 694 24 $503 2 1Br/1Ba - Type 1 910 87 $571
2 1B/1B-1B10 705 24 $474 3 1Br/1Ba - Type 2 918 87 $587
3 1B/1B-1C10 975 21 $520 5 2Br/1.5Ba - Type 1 1,052 87 $613
4 1B/1.5B-1A15 733 24 $504 6 2Br/1.5Ba - Type 2 1,180 87 $703
5 2B/1.5B-2A15 1,282 42 $618
6 2B/1.5B-2B15 1,395 30 $625
7 2B/1.5B-2C15 1,649 74 $668
8 2B/2B-2A20 1,195 12 $630
Average Unit Size (SF) 1,210 1,015
Unit Breakdown: Efficiency 0% 2-Bedroom 63% Efficiency 0% 2-Bedroom 0%
1-Bedroom 37% 3-Bedroom 0% 1-Bedroom 0% 3-Bedroom 0%
CONDITION: Average Good
APPEAL: Average Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling
X Balcony X W/D Connect. X Balcony X W/D Connect.
Fireplace Other X Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
X Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball Meeting Hall Sand Volley Ball X Meeting Hall
X Tennis Court X Secured Parking Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball Laundry Room
Jogging Track X Business Office X Jogging Track X Business Office
Gym Room Gym Room
OCCUPANCY: 94% 85%
LEASING DATA:
Available Leasing Terms 6 to 15 Months 3 to 12 Months
Concessions 1 Month Free 1 Month Free
Pet Deposit $200 $200
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water Trash X Water Trash
Confirmation April 30, 2003; Carinne Blackwell April 30, 2003; Carinne Blackwell (PM) and
Telephone Number (614) 863-3306 (614) 866-6282
NOTES: This is a younger complex located on the south
side of Route 40.
COMPARISON TO SUBJECT: Slightly Superior
COMPARABLE COMPARABLE
DESCRIPTION R - 2 R - 3
- -----------------------------------------------------------------------------------------------------------------------------
Property Name Riding Club Club at Eagle's Pointe
Management Company Plaza Properties Alliance Residential
LOCATION:
Address 5198 Riding Club Lane 6033 Lake Club Street
City, State Columbus, Ohio Columbus, Ohio
County Franklin Franklin
Proximity to Subject 1/4 Mile south of the subject 1/2 Mile south of the subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 414,528 579,112
Year Built 1968 1971
Effective Age 20 20
Building Structure Type Masonry veneer walls; composition Wood siding; asphalt
shingle roof shingled roofs
Parking Type (Gr., Cov., etc.) Open, Covered Open, Covered
Number of Units 405 759
Unit Mix: Type Unit Qty Mo Type Unit Qty Mo
1 1Br/1Ba 689 64 $455 1 1Br/1Ba - Type 1 626 276 $410
4 1Br/1.5Ba 733 64 $525 3 1Br/1Ba - Type 2 864 30 $525
2Br/1Ba 965 76 $525 4 1Br/1.5Ba 775 32 $510
5 2Br/1.5Ba - Type 1 925 48 $545 5 2Br/1Ba 856 273 $535
4 2Br/1.5Ba - Type 1 1,045 75 $595 5 2Br/1Ba 1,000 33 $575
3Br/2Ba 1,405 38 $745 5 2Br/1.5Ba 1,000 15 $610
3Br/2.5Ba 1,260 40 $695 8 2Br/2Ba 1,104 34 $650
Studio 504 66 $400
Average Unit Size (SF) 965 759
Unit Breakdown: Efficiency 0% 2-Bedroom Efficiency 9% 2-Bedroom 46%
1-Bedroom 3-Bedroom 1-Bedroom 45% 3-Bedroom 0%
CONDITION: Average Average
APPEAL: Good Average
AMENITIES:
Unit Amenities Attach. Garage Vaulted Attach. Vaulted
Ceiling Garage Ceiling
X Balcony W/D Connect. X Balcony W/D Connect.
Fireplace Other Fireplace Other
X Cable TV Ready X Cable TV Ready
Project Amenities X Swimming Pool X Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room X Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall Sand Volley Ball Meeting Hall
X Tennis Court Secured Parking X Tennis Court Secured Parking
Racquet Ball X Laundry Room Racquet Ball X Laundry Room
Jogging Track X Business Office Jogging Track X Business Office
Gym Room Gym Room
OCCUPANCY: 96% 92%
LEASING DATA:
Available Leasing Terms 6 to 15 Months 6 to 15 Months
Concessions 1 Month Free 1 Month Free
Pet Deposit $200 - $300 $200
Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas
X Water Trash X Water Trash
Confirmation April 30, 2003; Carinne Blackwell April 30, 2003; Carinne
(PM) and Plaza Blackwell (PM) and
Telephone Number (614) 237-3726 (614) 863-3306
NOTES: Residents have free access to the pool None
and tennis courts, and pay a discounted
fee to use an adjacent state-of-the-art
fitness center.
COMPARISON TO SUBJECT: Slightly Superior Similar
COMPARABLE COMPARABLE
DESCRIPTION R - 4 R - 5
- -----------------------------------------------------------------------------------------------------------------------------
Property Name Shaker Square Apartments N/A
Management Company Buckingham Properties
LOCATION:
Address 280 Barkley Place W
City, State Columbus, Ohio
County Franklin
Proximity to Subject 1/2 Mile north of subject
PHYSICAL CHARACTERISTICS:
Net Rentable Area (SF) 207,928
Year Built 1970
Effective Age 20
Building Structure Type Masonry siding walls; asphalt shingle roof
Parking Type (Gr., Cov., etc.) Open, Covered
Number of Units 194
Unit Mix: Type Unit Qty Mo Type Unit Qty Mo
5 2Br/1.5Ba 1,064 138 $625
5 2Br/1.5Ba 1,091 56 $660
Average Unit Size (SF) 1,072
Unit Breakdown: Efficiency 0% 2-Bedroom 100% Efficiency 2-Bedroom
1-Bedroom 0% 3-Bedroom 0% 1-Bedroom 3-Bedroom
CONDITION: Slightly Superior Slightly Superior
APPEAL: Good Good
AMENITIES:
Unit Amenities Attach. Garage Vaulted Attach. Garage Vaulted Ceiling
Ceiling
X Balcony X W/D Connect. Balcony W/D Connect.
Fireplace Other Fireplace Other
X Cable TV Ready Cable TV Ready
Project Amenities X Swimming Pool Swimming Pool
Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash
Basketball Court BBQ Equipment Basketball Court BBQ Equipment
Volleyball Court Theater Room Volleyball Court Theater Room
Sand Volley Ball X Meeting Hall Sand Volley Ball Meeting Hall
Tennis Court Secured Parking Tennis Court Secured Parking
Racquet Ball Laundry Room Racquet Ball Laundry Room
Jogging Track X Business Office Jogging Track Business Office
X Gym Room Gym Room
OCCUPANCY: 83%
LEASING DATA:
Available Leasing Terms 6 to 15 Months
Concessions 1 Month Free
Pet Deposit $200
Utilities Paid by Tenant: X Electric X Natural Gas Electric Natural Gas
X Water Trash Water Trash
Confirmation April 30, 2003; Carinne Blackwell
(PM) and Shaker
Telephone Number (614) 863-3306
NOTES: None
COMPARISON TO SUBJECT: Similar
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B
BIG WALNUT, COLUMBUS, OHIO
PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES
COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3
HIBERNIA RIDING CLUB CLUB AT EAGLE'S POINTE
5680 Hibernia Drive 5198 Riding Club Lane 6033 Lake Club Street
Columbus, Ohio Columbus, Ohio Columbus, Ohio
[PICTURE] [PICTURE] N/A
COMPARABLE R-4 COMPARABLE R-5
SHAKER SQUARE APARTMENTS N/A
280 Barkley Place W
Columbus, Ohio
[PICTURE] N/A
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
BIG WALNUT, COLUMBUS, OHIO
EXHIBIT C
ASSUMPTIONS AND LIMITING CONDITIONS
(3 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C
BIG WALNUT, COLUMBUS, OHIO
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
BIG WALNUT, COLUMBUS, OHIO
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
BIG WALNUT, COLUMBUS, OHIO
such testimony, and then such testimony shall be at American Appraisal
Associates, Inc.'s, prevailing per diem for the individuals involved.
Possession of this report or any copy thereof does not carry with it the right
of publication. No portion of this report (especially any conclusion to use, the
identity of the appraiser or the firm with which the appraiser is connected, or
any reference to the American Society of Appraisers or the designations awarded
by this organization) shall be disseminated to the public through prospectus,
advertising, public relations, news, or any other means of communication without
the written consent and approval of American Appraisal Associates, Inc.
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D
BIG WALNUT, COLUMBUS, OHIO
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. Richard Mupo
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/ Brian Johnson, MAI
---------------------------
Brian Johnson, MAI
Managing Principal, Real Estate Group
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
BIG WALNUT, COLUMBUS, OHIO
EXHIBIT E
QUALIFICATIONS OF APPRAISER
(2 PAGES)
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
BIG WALNUT, COLUMBUS, OHIO
F. BRIAN JOHNSON, MAI
MANAGING PRINCIPAL, REAL ESTATE ADVISORY GROUP
POSITION F. Brian Johnson is the Managing Principal of the New
York Real Estate Advisory Group of American Appraisal
Associates, Inc. ("AAA").
EXPERIENCE
Valuation Mr. Johnson has completed appraisals for securitization
and pension funds/insurance industries. Analyses he has
performed involve various types of investment-grade real
estate throughout the continental United States including
apartments, cooperatives, hotels, industrial and research
and development parks, office buildings, regional
shopping centers, and undeveloped acreage.
Additional experience includes the valuation of existing
and proposed investment-grade real estate, market and
feasibility studies and offering memorandums for debt
placement, equity investments and acquisitions, and
disposition analysis.
Court Mr. Johnson is qualified as an expert witness for the New
Jersey Supreme Court.
Business Mr. Johnson joined AAA in 1998 and was promoted to his
current position in 1999. Prior to joining AAA, Mr.
Johnson was a Senior Vice President at Koeppel Tener Real
Estate Services and a Vice President at L. W. Ellwood &
Co.
EDUCATION Fairleigh Dickinson
Bachelor of Science - Finance
STATE CERTIFICATIONS State of New Jersey, General Appraiser, #42RG00158300
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E
COLONY OF SPRINGDALE, SPRINGDALE, OHIO
PROFESSIONAL Appraisal Institute, MAI Designated Member
AFFILIATIONS
VALUATION AND Several courses are completed on an annual basis as
SPECIAL COURSES part of the continuing education requirements of
the Appraisal Institute. In addition, Mr. Johnson
attends real estate and financial industry-related
conferences and seminars.
PUBLICATIONS "Operational Items to Consider When Appraising a
Regional Mall," Appraisal Journal, 1991
AMERICAN APPRAISAL ASSOCIATES, INC.
BIG WALNUT, COLUMBUS, OHIO
GENERAL SERVICE CONDITIONS
AMERICAN APPRAISAL ASSOCIATES, INC.
BIG WALNUT, COLUMBUS, OHIO
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.