Exhibit (b)(1)
[PRICE WATERHOUSE LETTERHEAD]
September 30, 1994
Lerner Corporation
11501 Huff Court
North Bethesda, Maryland 28095-1094
Gentlemen:
Re: Appraisal of the Springhill Lake Apartments located at
9164 Edmonston Road in Prince George's County, Maryland
In accordance with your engagement letter dated September 7, 1994, we have
appraised the property captioned above. We have estimated the market value of
the subject property assuming a market level management fee. In addition, we
have also estimated the market value of the property, subject to the existing
financing and in-place management agreement. The purpose of this report is to
present our findings and conclusions and we understand that it will be used as
part of a Consent Solicitation Statement to the unitholders of Springhill Lake
Investors Limited Partnership and will be filed with the Securities and Exchange
Commission as an exhibit to the Consent Solicitation Statement. The legal
interest appraised is the leased fee interest. The date of the value estimates
is September 12, 1994, under market conditions as observed during the period of
our research during September 1994. The property was inspected on September 12,
1994.
The subject property consists of a 2,899-unit garden apartment complex totalling
2,533,413 square feet of gross living area, plus a clubhouse, shopping center,
daycare center and related site improvements. These improvements are located on
a 154,049 acre site that fronts the west side of Edmonston Road just south of
Capital Beltway (Interstate 495) in Prince George's County, Maryland.
A complete description of the property, together with the sources of information
and the bases of our estimates, are stated in the accompanying sections of this
report. Your attention is called to the Certification, Standard Conditions, and
Special Conditions to follow.
Subject to all conditions and explanations contained in this report, and based
upon our analyses of the subject property and the market, together with our
experience and knowledge of the market gained in appraising similar properties,
our opinion of the market value of the subject property, assuming a market level
management fee, as of September 12, 1994 (As Is) is as follows:
EIGHTY EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS
$88,500,000
Subject to the Certification, Standard Conditions, and Special Conditions
Based on the analysis of the existing financing, the market value of the subject
property as of September 12, 1994 (As Is), subject to the existing financing and
in-place management agreement, is as follows:
EIGHTY FOUR MILLION SIX HUNDRED THOUSAND DOLLARS
$84,600,000
Subject to the Certification, Standard Conditions, and Special Conditions
There are currently some reported environmental problems at the subject
property. Your attention is called to both the Special Conditions section (page
vii) of the report as well as the Site Conditions (page 11) for more detail on
the environmental conditions of the subject property.
Neither the underground storage tank (UST) remediation nor the dry cleaners soil
and concrete remediation are considered in the value estimates presented in this
appraisal. These should be further researched by competent authorities to
assess their impact on the value of the property.
The accompanying prospective financial analyses are based on estimates and
assumptions developed in connection with the appraisal. However, some
assumptions inevitably will not materialize, and unanticipated events and
circumstances may occur; therefore, actual results achieved during the period
covered by our prospective financial analysis will vary from our estimates and
the variations may be material.
This report, the final estimates of value and the prospective financial analyses
are intended solely for your information and assistance for the purpose stated
above, and should not be relied upon for any other purpose. Other than as
indicated above, neither our report nor any of its contents nor any reference to
the appraisers or our firm, may be included or quoted in any document, offering
circular or registration statement, prospectus, sales brochure, other appraisal,
loan or other agreement without Price Waterhouse LLP's (Price Waterhouse) prior
written approval of the form and context in which it will appear.
Respectfully submitted,
/s/ PRICE WATERHOUSE LLP
PREFACE ix
EXECUTIVE SUMMARY
Property Identification Springhill Lake Apartments
Property Location 9164 Edmonston Road, Prince George's County,
Maryland
Legal Interest Appraised Leased fee estate
Date of Inspection September 12, 1994
Site Description 154,049 acres
Building Description 2,899-unit garden apartment complex totalling
2,533,413 square feet of gross living area;
clubhouse; shopping center; daycare center and
various site improvements including two swimming
pools and two sets of tennis courts.
Occupancy as of
August 31, 1994 91.28%
Indications of Value:
As of September 12, 1994 (As Is)
Income Capitalization Approach
Direct Capitalization Technique $90,300,000
Overall Rate Ro: 10.25%
Discounted Cash Flow Analysis: $88,000,000
Income Growth Rate: 0% first two years, 3.5% thereafter
Expense Growth Rate: 3.5%
Discount Rate (DRR): 13.0%
Terminal Rate (Rt) 11.5%
Analysis Period: 11 years, assuming a 10 year holdingperiod
Sales Comparison Approach $87,000,000
Final Estimate of Value as of
September 12, 1994 (As Is) $88,500,000*
Indicated Value per Unit $30,528
Indicated Value Per Leasable
Square Foot $34.93
Implied Going-In Capitalization
Rate (NOI) - Year 1 DCF 10.54%
Implied Effective Gross Revenue
Multiple (Year 1 DCF) 3.80
Final Estimate of Value Subject
to Existing Financing and In-place
Management Contract as of
September 12, 1994 (As Is) $84,600,000 ($29.182/unit)*
Implied Going-In Capitalization
Rate (NOI-Year 1 DCF) 10.47%
* Neither the underground storage tank remediation nor the dry cleaners soil and concrete remediation are considered in the
value estimates presented in this appraisal. These should be further researched by competent authorities to assess their impact on
the value of the property.