EXHIBIT (b)(2)
[LIPMAN FRIZZELL & MITCHELL LETTERHEAD]
September 8, 1994
Lerner Corporation
11501 Huff Court
North Bethesda, Maryland 28095-1094
RE: Springhill Lake Apartments
Prince George's County, Maryland
Dear Sirs:
In accordance with your request for an appraisal of the above captioned
property for the purpose of estimating its market value "as is" in fee simple as
well as its value subject to existing financing and management contract we
herewith submit our report.
The subject property was personally inspected on July 18, 1994 and found
to consist of 154 acres of land in several parcels supporting a 2,899 unit
rental apartment project generally in the form of three-and four-story garden
apartments with some rental townhouses. The project also includes a number of
common facilities including swimming pools, small shopping center, day care
facility, community rooms, and common spaces. The property was erected in
stages between 1962 and 1969 and was found to be in good condition as of the
date of inspection. On the date of inspection the property was approximately
93% occupied and generally in line with overall market occupancy rates.
Our valuation has as its main emphasis the operating history of the
subject property supplemented by income and expense information from comparable
projects and rental information from area competing projects. In estimating
market value of the subject your appraisers fully developed the sales comparison
and income approaches to value, with greatest emphasis placed on the income
approach. The valuation included investigation of both local and national
markets for apartment purchase and financing in order to gather pertinent
information regarding rates of return and investor appetites.
As a result of our investigation and by virtue of experiences it is our
opinion that market value of the subject property "as is", after reflecting
deferred maintenance was EIGHTY FIVE MILLION FOUR HUNDRED THIRTY THOUSAND
($85,430,000) DOLLARS in fee simple.
We also estimated that the existing mortgage had a negative impact on
value of $3,790,000 and the existing management contract had diminished the
value by an additional $3,230,000 resulting in a net market value of the subject
property, subject to the existing mortgage and management contract of SEVENTY
EIGHT MILLION FOUR HUNDRED TEN THOUSAND ($78,410,000) DOLLARS. A summary of
these conclusions is as follows:
MARKET VALUE Before Deferred Maintenance........... $89,720,000
LESS: Deferred Maintenance........................ 4,288,750
-----------
FINAL ESTIMATE OF MARKET VALUE..................... $85,430,000
(rounded)
LESS: Value of Existing Mortgage $3,790,000
Value of Existing Management Contract 3,230,000 7,020,000
--------- ---------
MARKET VALUE SUBJECT TO EXISTING MORTGAGE &
MANAGEMENT CONTRACT....... $78,410,000
I trust the attached appraisal report will be informative and I am
available for any additional questions or comments regarding the subject
property.
Respectfully submitted,
LIPMAN FRIZZELL & MITCHELL LLC
/s/ David H. Brooks
David H. Brooks, MAI
Certified General Real Estate Appraiser
State of Maryland License No.: 04-136
/s/ Curtis W. Morris
Curtis W. Morris, Associate
SUMMARY OF SALIENT FACTS AND CONCLUSIONS
Property: Springhill Lake Apartments
Location: Breezewood Drive, Cherrywood Lane and Edmonston Road,
Greenbelt, Prince George's County, Maryland
Ownership: Springhill Lake Limited Partnership
Land Area: 154 +/- acres
Zoning: R-18 and CA
Highest and Best Use: As if Vacant: Residential Development
As Improved: As currently improved
Improvements: 2,899 unit garden apartment complex with ancillary
commercial space
Date of Appraisal: July 18, 1994
Value Indicators: Cost Approach................ Not Used
Sales Comparison Approach.... $88,420,000
Income Approach.............. $89,720,000
FINAL ESTIMATE OF MARKET VALUE(1) .................... $89,720,000
LESS: Deferred Maintenance .......................... 4,288,750
-----------
FINAL ESTIMATE OF MARKET VALUE ....................... $85,430,000
(rounded)
LESS: Value of Existing Mortgage $3,790,000
Value of Existing Management Contract 3,230,000 7,020,000
---------- ---------
MARKET VALUE SUBJECT TO EXISTING MORTGAGE &
MANAGEMENT CONTRACT............... $78,410,000
This valuation is predicated on the subject property being
environmentally free of any hazardous materials and that there are no negative
easements or encroachments of the subject property.
This valuation is predicated on the accuracy of financial statements
that were supplied to us.
_____________
(1) Before deferred maintenance deduction