UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE TO/A
SCHEDULE 13E-3/A
Tender Offer Statement under Section 14(d)(1) or 13(e)(1)
of the Securities Exchange Act of 1934
(Amendment No. 2)
Decade Companies Income Properties A Limited Partnership
(Name of Subject Company (Issuer))
Jeffrey L. Keierleber
(Name of Filing Person (Issuer and Offeror))
Limited Partnership Interests
(Title of Class of Securities)
n/a
(CUSIP Number of Class of Securities)
Jeffrey L. Keierleber
Decade Companies Income Properties
250 Patrick Boulevard
Suite 140
Brookfield, Wisconsin 53045-5864
Copy to:
Walter J. Skipper, Esq.
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(Names and addresses of persons authorized to receive notices and
communications on behalf of the persons filing statement)
Check this box is the filing relates solely to preliminary
communications made before the commencement of a tender
offer.
Check the appropriate boxes below to designate any
transactions to which the statement relates:
X third-party tender offer subject to Rule 14d-1.
issuer tender offer subject to Rule 13e-4.
X going-private transaction subject to Rule 13e-3.
amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment
reporting the results of the tender offer:
SCHEDULE TO/A
This Amendment No. 2 to Schedule TO/13E-3 amends the Schedule
TO/13E-3 originally filed by Jeffrey L. Keierleber. This Amendment
No. 2 to Schedule TO/13E-3 relates to the offer of Decade Companies
Income Properties - A Limited Partnership, a limited partnership
organized in the State of Wisconsin (the "Partnership) and Jeffrey
L. Keierleber (an affiliate of the Partnership and its General
Partner) ("Keierleber) to purchase, in the aggregate, up to 7,700
Limited Partnership Interests (the "Interests"), at a price of
$895.00 per Interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated April 8, 2002 (the "Offer
to Purchase") and in the related Letter of Acceptance (which
together constitute the "Offer"). Amendment No. to the Offer to
Purchase dated May 1, 2002 ("Amendment No. 1") will be sent to all
Limited Partners of the Partnership. Amendment No. 1 is filed with
this Amendment No. 2 to Schedule TO/13E-3 as Exhibit (a)(1)(D).
The Offer is subject to the terms and conditions set forth in
the Offer to Purchase and in the related Letter of Transmittal.
Except as amended hereby, the Schedule TO/13E-3 filed by the
Partnership on April 8, 2001 remains in effect.
The Schedule TO/13E-3 is hereby amended as follows:
Item 4. Terms of the Transaction
The information set forth in the Offer to Purchase under "The
Offer - Introduction - Certain Effects of the Offer," "The Offer -
Fairness of the Transaction; Reports, Opinions, Appraisals and
Certain Negotiations; No Approvals Required; No Appraisal Rights,"
"The Offer Certain Federal Income Tax Consequences," "The
Offer Procedure for Tendering Interests," "The Offer Withdrawal
Rights," "The Offer Certain Conditions of the Offer" is hereby
amended by the information in Amendment No. 1 under "Update on
Payment of Purchase Price," "Withdrawal Rights," "Conditions of the
Offer," "Effects of the Offer" and "Fairness of the Transaction,"
which is incorporated herein by reference.
Item 10. Financial Statements
The Offer to Purchase is hereby amended by the information in
Amendment No. 1 under "Summary of Financial Information," which is
incorporated herein by reference.
Item 11. Additional Information
The information set forth in the Offer to Purchase and Letter
of Acceptance is hereby amended by the additional information in
Amendment No. 1, which is incorporated herein by reference.
Item 12. Exhibits
(a)(1)(D) Amendment No. 1 to the Offer to Purchase dated May
1, 2002
(a)(1)(E) Cover Letter to Limited Partners dated May 1, 2002
(c)(1) Appraisal Report dated April 8, 2002 for Pelican
Sound Apartments
(c)(2) Appraisal Report dated April 8, 2002 for Town
Place Apartments
(c)(3) Fairness Opinion dated April 23, 2002 from The
Valuations Group
Item 13. Information Required by Schedule 13e-3
(b) Purposes, Alternatives, Reasons and Effects. The information
set forth in the Offer to Purchase under "The
Offer Introduction Certain Effects of the Offer" is hereby
amended by the information contained in Amendment No. 1 under
"Effects of the Offer" which is incorporated herein by
reference.
(b Reports, Opinions, Appraisals and Negotiations. The
information set forth in the Offer to Purchase under "The
Offer Introduction Determination of the Purchase Price" and
"The Offer Fairness of the Transaction; Reports, Opinions,
Appraisals and Certain Negotiations; No Approvals Required; No
Appraisal Rights" is hereby supplemented by the information in
Amendment No. 1 under "Appraisal of Property" and "Fairness
Opinion" which is incorporated herein by reference.
(d) Fairness of the Going-Private Transaction. The information
set forth in the Offer to Purchase under "The Offer -
Introduction - Determination of the Purchase Price" and "The
Offer - Fairness of the Transaction; Reports, Opinions,
Appraisals and Certain Negotiations; No Approval Required; No
Appraisal Rights" is hereby supplemented by the information in
Amendment No. 1 under "Update on Unaffiliated March 2002
Tender Offer" and "Fairness of the Transaction" which is
incorporated herein by reference.
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this Amendment No. 2 to
Schedule TO/13E-3 is true, complete and correct.
Date: May 1, 2002
By: /s/ Jeffrey L. Keierleber
Jeffrey L. Keierleber
[Item 12. Exhibits (a)(1)(D)]
AMENDMENT NO. 1 TO THE OFFER TO PURCHASE
May 1, 2002
To all Limited Partners of Decade Companies Income Properties - A
Limited Partnership ("DCIP"):
INTRODUCTION:
As we approach the tender offer expiration date, May 7, 2002, and
in addition to the information set forth in the Offer to Purchase
dated April 8, 2002 and the related Letter of Acceptance
(collectively, the "Offer"), all limited partners of Decade
Companies Income Properties (the "Partnership" or "DCIP") are urged
to carefully consider the following information in this letter in
deciding whether to tender their Limited Partnership Interests
("Interests"). This letter amends the Offer and provides
additional information you should consider.
We are sending you this letter to update you on important
information concerning:
Extension of the Expiration Date from May 7, 2002 to May 10,
2002
Appraisals of the two remaining DCIP properties
Receipt of a Fairness Opinion as to the $895 per Interest
Purchase Price
Completion of certain Wisconsin filings
Additional information concerning an unsolicited, lower priced
offer by an unaffiliated party
Additional information concerning payment of the purchase
price, withdrawal rights, conditions of the offer and a summary of
financial information.
The Partnership invites its limited partners to tender their
Interests at $895 per Interest and urges limited partners to review
the information contained in the original Offer to Purchase, the
Letter of Acceptance and in this letter.
EXTENSION OF THE OFFER
The Expiration Date is extended from 12:00 p.m., midnight,
Milwaukee time on May 7, 2002 to 12:00 p.m., midnight, Milwaukee
time on May 10, 2002, unless the Offerors extend the Offer and, in
such event, the "Expiration Date" will be the latest time and date
on which the Offer, as so extended, will expire. If the Expiration
Date is extended, Limited Partners will be notified.
WISCONSIN FILINGS COMPLETED
As noted in the Offer to Purchase, the Offerors were required to
make certain filings with the Department of Financial Institutions
of the State of Wisconsin and have requested an exemption from
certain filing requirements under Wis. Stat. Chapter 552. The
Offerors made the required filings, and a request for certain
exemptions with the Wisconsin Department of Financial Institutions,
Division of Securities. On April 19, 2002, we received the
requested exemption order and confirmation that the Wisconsin
Division of Securities will not object to the terms of the Offer.
The State of Wisconsin has not passed on and does not opine on the
terms or the fairness of the Offer.
APPRAISAL OF PROPERTIES -- PELICAN SOUND AND TOWN PLACE
In order to provide limited partners with information on the value
of its remaining holdings, the Partnership has obtained appraisals
of its two Apartments. The appraisals were performed by an
independent appraiser, Riggins, Atkinson, Combs & Associates, Inc.
("Riggins, Atkinson"). The appraiser was selected on the basis of
its general qualifications and cost. Riggins, Atkinson is a
Florida certified general real estate appraiser. Riggins, Atkinson
previously performed similar services for the Partnership and for
other partnerships sponsored by the General Partner and its
affiliates. However, there is no material relationship between (i)
the appraiser, its affiliates and representatives, and (ii) the
Partnership, Jeffrey Keierleber or their affiliates. No
limitations were imposed on the scope of the investigation of the
appraiser for either appraisal; however, it was agreed that the
cost approach would not be used because of time constraints. The
appraisals are filed as exhibits with the Schedule T0 filings made
by the Partnership and Jeffrey Keierleber with the SEC. The
appraisals will be made available for inspection and copying at the
principal offices of the Partnership during its normal business
hours. Limited Partners may also request a copy of the appraisal
at no cost, in writing, addressed to the Partnership at its
offices.
April 2002 Appraisal of Pelican Sound
Riggins, Atkinson appraised this property at $19,000,000 as of
April 8, 2002. In preparing the appraisal, Riggins, Atkinson
utilized two basic techniques for estimating market value: income
capitalization, and sales comparison, each of which derived a
different value. The results of these two approaches are
Sales Comparison $19,000,000
Income Capitalization $19,300,000
These approaches were then reconciled to a final estimate of
value of $19,000,000.
The income capitalization approach is based upon the premise
that a prudent investor would pay no more for the subject
property than for another investment with similar risk and
return characteristics. The income capitalization approach
converts anticipated benefits to be derived from the ownership
of property into a value estimate. Anticipated future income
and/or reversions are discounted to a present worth figure
through the capitalization process. This approach is based on
the premise that income producing real estate is typically
purchased as an investment, and that from the investor's point
of view earning power is the critical element affecting
property value. An investor who purchases income producing
property is essentially trading present dollars for the right
to receive future dollars. This approach focuses on how
change affects the value of income producing properties. The
income capitalization approach provides a value indication by
converting these anticipated future benefits and the various
accompanying changes into a current value. This conversion
process can be accomplished by either direct or yield
capitalization methods. This amount is capitalized at a rate
that should reflect the risk to the investor and the amount of
income necessary to support debt service or the mortgage
requirement. Riggins, Atkins used three rent comparable
properties for its analysis using the income capitalization
approach.
The sales comparison approach estimates value based on
comparison to prices paid in actual market transactions for
similar properties. The primary factors used in finding
similar properties were age and quality of the properties, the
date of sale and the location. Riggins, Atkins found eight
comparable sales in its research and cited to four within its
report. The Appraisal report contains additional information
on properties which were determined to be comparable.
Adjustments were then made for differences in terms of the
sale, financing, market conditions, and physical and economic
characteristics. This approach is based on the principle of
substitution, which implies that a prudent investor will not
pay more to buy a property than it would cost to buy a
comparable substitute property in a similar location. Using
this approach, Riggins, Atkinson opined that an estimated
market value would be based on $73.00 a square foot, $16,000
a room and $51,000 a Unit.
Utilizing these techniques, the appraiser concluded
$19,000,000 was the fair value of Pelican Sound. There can be no
assurances that Pelican Sound will sell for an amount equal to, or
greater than, the appraised amount. Each technique or approach to
value has its strengths and weaknesses, depending to a large extent
on the type of property being appraised and the quality of
available data.
The appraiser's underlying analysis, supporting documents and
additional information on each of the two valuation approaches is
set forth in the Appraisal report, which is available for
inspection and copying upon request. For further information on
the sales comparison approach, Limited Partners should review the
section of the Appraisal captioned "Sales Comparison Approach."
For information on the income capitalization approach, including
the estimates and assumptions thereunder, including the discount
rate, Limited Partners should review the section of the Appraisal
captioned "Income Capitalization Approach."
This value is consistent with the Offerors' estimate of the
property as described in the Offer to Purchase.
April 2002 Appraisal of Town Place
Riggins, Atkinson appraised the property at $11,500,000 as of
April 8, 2002. In preparing the appraisal, Riggins, Atkinson
utilized two basic techniques for estimating market value: income
capitalization, and sales comparison, each of which derived a
different value. The results of these two approaches are
Sales Comparison $11,500,000
Income Capitalization $11,300,000
These approaches were then reconciled to a final estimate of
value of $11,500,000. In calculating its final estimate, Riggins,
Atkinson stated that the sales comparison and income capitalization
approaches indicate similar value conclusions and are supported by
market evidence.
The income capitalization approach is based upon the premise
that a prudent investor would pay no more for the subject
property than for another investment with similar risk and
return characteristics. The income capitalization approach
converts anticipated benefits to be derived from the ownership
of property into a value estimate. Anticipated future income
and/or reversions are discounted to a present worth figure
through the capitalization process. This approach is based on
the premise that income producing real estate is typically
purchased as an investment, and that from the investor's point
of view earning power is the critical element affecting
property value. An investor who purchases income producing
real estate is essentially trading present dollars for the
right to receive future dollars. This approach focuses on how
change affects the value of income producing properties. The
income capitalization approach provides a value indication by
converting these anticipated future benefits and the various
accompanying changes into a current value. This conversion
process can be accomplished by either direct or yield
capitalization methods. This amount is capitalized at a rate
that should reflect the risk to the investor and the amount of
income necessary to support debt service or the mortgage
requirement. Riggins, Atkins used three rent comparable
properties for its analysis using the income capitalization
approach.
The sales comparison approach estimates value based on
comparison to prices paid in actual market transactions for
similar properties. The Appraisal report contains additional
information on properties which were determined to be
comparable. Riggins, Atkins found eight comparable sales in
its search and cited to four within the Appraisal report.
Adjustments were then made for differences in terms of the
sale, financing, market conditions, and physical and economic
characteristics. This approach is based on the principle of
substitution, which implies that a prudent investor will not
pay more to buy a property than it would cost to buy a
comparable substitute property in a similar location. Using
this approach, Riggins, Atkins opined that an estimated market
value would be based on $57.00 a square foot, $13,500 a room
and $48,000 a Unit.
Utilizing these techniques, the appraiser concluded
$11,500,000 was the fair value of Town Place. There can be no
assurances that Town Place will sell for an amount equal to, or
greater than, the appraised amount. Each technique or approach to
value has its strengths and weaknesses, depending to a large extent
on the type of property being appraised and the quality of
available data.
The appraiser's underlying analysis, supporting documents and
additional information on each of the two valuation approaches is
set forth in the Appraisal report, which is available for
inspection and copying upon request. For further information on
the market or sales comparison, Limited Partners should review the
section of the Appraisal captioned "Sales Comparison Approach."
For information on the income capitalization approach, including
the estimates and assumptions thereunder, including the discount
rate, Limited Partners should review the section of the Appraisal
captioned "Income Capitalization Approach."
FAIRNESS OPINION TO THE OFFERORS
The Offerors have obtained a fairness opinion from The
Valuations Group which is attached as Exhibit A.
In April 2002, the Partnership asked The Valuations Group to
deliver an opinion in connection with the fairness of the Purchase
Price. The Partnership selected The Valuations Group for its
familiarity and experience with valuing limited partnership
interests, its independence from the Offerors and the price and
scheduling terms on which it agreed to perform its services. The
Valuations Group regularly values real estate limited partnerships.
Mr. Phelan, an officer who directed The Valuation Groups efforts,
has over 15 years experience with real estate limited partnerships
and provides more than 400 valuations annually. The Valuations
Group provided a similar opinion for the Partnership's October 1996
tender offer. There has been no material relationship between (i)
The Valuations Group, and (ii) the Offerors or their affiliates at
any time during the past two years. The Offerors placed no limits
on the scope of analysis and investigation and no deadline was set
by which it had to complete its analysis, but it did request The
Valuations Group review matters at its first and earliest
convenience. In April 2002 the Partnership was orally informed,
and on April 23, 2002, it confirmed in writing, that on such date
The Valuations Group concluded that $895 per Interest was fair to
Limited Partners from a financial point of view. The Offerors
originally determined the Purchase Price of $895 per Interest. The
Valuations Group's opinion is not required to be updated after the
date of this Offer to take account of any material developments, if
any, which may thereafter occur or may come to its attention. A
copy of the written opinion dated as of April 23, 2002 is attached
hereto as Exhibit A. The written opinion will also be made
available for inspection and copying at the principal offices of
the Partnership during its normal business hours. Limited Partners
are urged to read this opinion in its entirety.
In rendering its opinion, The Valuations Group relied, in
part, without independent verification, on the accuracy and
completeness of all appraisal, financial and other information
provided to it by the Offerors. The Valuations Group did not make
or obtain appraisals of the Partnership's assets, but relied upon
the appraisals dated April 8, 2002 of the Partnership's Apartments
(Pelican Sound and Town Place) and did not solicit third parties
who might be interested in acquiring all or a part of the
Partnership or the Apartments. The Valuations Group reviewed the
appraisals and believes the key assumptions, methodology and
resulting conclusions in each appraisal to be both reasonable and
adequately documented.
In reaching its conclusions about the fairness of the Offer,
The Valuations Group utilized a variety of valuation techniques and
performed a number of analyses of relevant information. In forming
its opinion, The Valuations Group has reviewed the Partnership's
recent Securities and Exchange Commission filings and data
published in real estate industry publications. Prior to being
engaged to provide this opinion in connection with the fairness of
the Purchase Price, in November 2001 The Valuations Group prepared
an independent opinion of value of the Interests for a client
unrelated to the Offerors. In that opinion, The Valuations Group
concluded that $623 per Interest was the fair market value for an
Interest; however, The Valuations Group's current valuation based
on the same methodology applied using information available as of
April 23, 2002 is $848 per Interest. The difference arises
principally from an increase in the value of the underlying real
estate assets, as indicated by the sale of the Meadows II
Apartments on January 31, 2002, from the April 2002 independent
appraisals of Pelican Sound and Town Place, as well as the impact
of Partnership unit repurchases which have been accretive to value.
The principal methods, techniques and their outcome supporting the
opinion are summarized in the following paragraphs.
As part of the review, The Valuations Group sought information
about recent sales of the Interests. The Valuations Group, based
upon information from the Offerors and its own research, found that
1,046.5 Interests in the Partnership changed hands in 107
transactions. These transactions, most of which involved purchases
by the Partnership and Jeffrey L. Keierleber, occurred at prices
ranging from a low of $550 per Interest to a high of $600 per
Interest. The offer price exceeds the range of all recent
transactions presently known to The Valuations Group.
As part of its analysis in support of its opinion, The
Valuations Group derived an estimate of the Partnership's net asset
value per Interest. This estimate, which The Valuations Group
believes to be reasonable based on its analysis of Partnership
information, represents the dollar amount in cash which could be
available for distribution to the Partnership's Limited Partners,
stated on a per Interest basis, if the Partnership's two remaining
properties were sold at their appraised value and its outstanding
liabilities were satisfied as of December 31, 2001. Net asset
value per Interest is equal to appraised value plus net proceeds
from the subsequent Meadows II sale, less selling costs and
repayment of debt, plus net other assets (e.g., cash, receivables,
less payables, etc.). This amount does not consider all of the
costs of liquidating the Partnership, completing all of the filings
required by the Securities and Exchange Commission or other
agencies, or the costs of conducting this Offer. Based upon its
analysis, The Valuations Group derived a net asset value of $1,305
per Interest. The Purchase Price of $895 per Interest, which does
consider the estimated costs of liquidating the Partnership (and
other related costs) and the costs of this Offer, is approximately
a 32% discount to this derived net asset value.
The Valuations Group also considered that fractional, non-
controlling interests in limited partnerships typically trade at
discounts to the partnership's net asset value. These discounts
are often substantial and reflect investor preferences for a
partnership's unique investment characteristics. The Valuations
Group has applied discounts and premiums to net asset value based
upon internally derived weightings which represent The Valuations
Group's subjective judgment as to the relative influence of a
number of key factors on the value of a non-controlling, minority
interest in the Partnership. These relative influences are
reflected as additions to or subtractions from net asset value and
are expressed as premiums or discounts applied thereto. In
deriving the applicable discount for a non-controlling, minority
interest in the Partnership, The Valuations Group looked at the
following factors: secondary market, liquidity and investment
control, cash flow and distributions, asset type and quality,
management capabilities and fee structure, market capitalization,
portfolio diversification, liquidation time horizon, recent
historical performance, analytical complexity, and financial
leverage. Factors which figured most prominently in deriving the
discount appropriate to estimate the price for a non-controlling
interest in the Partnership were: (i) the low volume of secondary
market trading activity involving unrelated purchasers; (ii) weak
cash flow and distributions; and, (iii) uncertainty as to
management's liquidation plans and future asset composition. The
Valuations Group, applying the fractional interest discount
approach derived a value of $848 per Interest which represents
approximately a 35% discount from net asset value (a 27.5% discount
for lack of marketability and control, a 2.5% discount for weak
cash flow and distribution characteristics, and a 5.0% discount for
uncertainty regarding the Partnership's liquidation plans and
future asset composition). This level of discount is consistent
with the results of the 2001 Discount Study published by
Partnership Profiles, Inc. which indicated that equity partnerships
reporting moderate to high debt levels and making distributions
traded at an average discount of 26% during the two month period
ending May 31st, 2001. The Valuations Group believes the discount
spread is warranted due to substantial uncertainty regarding the
Partnership's future liquidation plans as well as the Partnership's
cash flow yield characteristics compared to the partnerships
included in the study.
These analyses, taken as a whole, led The Valuations Group to
conclude that the offer price of $895 per Interest is fair to
Limited Partners from a financial point of view. The preparation
of the fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or summary description. Selecting
portions of the analyses in the summary set forth above, without
considering the analyses as a whole, could create an incomplete
view of the processes underlying The Valuations Group's opinion.
No partnership or transaction used in the above analysis as a
comparison is identical to the Partnership or the contemplated
Offer. In arriving at its fairness determination, The Valuations
Group considered the results of all such analyses and did not
assign any particular weight to the results of any particular
analysis. The analyses were prepared for the purpose of enabling
The Valuations Group to provide its opinion as to fairness and do
not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold.
As compensation for financial advisory services rendered in
connection with the Offer, the Partnership has agreed to pay The
Valuations Group a fee of $10,000, whether or not the Offer is
consummated.
ADDITIONAL TAX INFORMATION ABOUT YOUR INVESTMENTS
At the request of Limited Partners, the Offerors will prepare
a letter updating partners on the expected tax consequences of
accepting the Offer, which they expect to mail in the next few
days.
UPDATE ON UNAFFILIATED MARCH 2002 TENDER OFFER
On March 11, 2002, Everest Properties II and its affiliates
("Everest") made an unsolicited offer to buy up to 200 Interests at
$550 per Interest, less any cash distribution after January 31,
2002 and transfer fees. This offer is not related to the Offer to
Purchase being conducted by the Partnership and Jeffrey Keierleber.
Everest is not affiliated in any way with the Offerors. That offer
purported to close on April 19, 2002. Everest has requested the
Partnership to transfer to it certain Interests, mostly those of
limited partners who already sold the Interests to others over the
past few years.
UPDATE ON PAYMENT OF PURCHASE PRICE
The Offerors intend to promptly pay for all Interests tendered
in the Offer upon the Expiration Date. If the Offerors receive
7,700 Interests or less in the Offer, Limited Partners should
expect to receive payment within one or two days of the expiration
date. However, if the Offerors receive more than 7,700 Interests
and must prorate the number of Interests accepted in the Offer,
then it may take the Offerors additional time after the Expiration
Date to calculate the prorated Interests to be accepted. In such
event, Limited Partners should expect to receive payment within
five days of the Expiration Date. For information regarding the
method of proration see the section entitled "The Offer Procedure
for Tendering Units Proration" in the Offer to Purchase.
WITHDRAWAL RIGHTS
The Offer to Purchase contains a section entitled "Withdrawal
Rights." That section indicates that any tenders of Interest may
be withdrawn (i) at any time prior to the Expiration Date, (ii) at
any time within seven days of your tender, or (iii) any time after
June 7, 2002. In addition, pursuant to SEC regulations, your
tender may be withdrawn if your Interests have not been accepted
for exchange by the fortieth business day after the commencement of
the Offer.
CONDITIONS OF THE OFFER
The Offer to Purchase contains a section entitled "Certain
Conditions of the Offers." That section discusses certain
conditions under which the Offerors may not be required to accept
tendered Interests, or terminate or amend the Offer. Among other
conditions, the Offer to Purchase listed as condition (e), as a
condition of the Offer, that there shall not have occurred any
event or events that result in or may in the reasonable judgment of
the Offerors result in, an actual or threatened change in the
business, condition (financial or other), income, operations, stock
ownership or prospects of the Partnership. We are deleting that
condition.
In the Offer to Purchase, we state that the conditions of the
Offer "may be waived by the Offerors, in whole or in part, at
anytime and from time to time in its reasonable discretion."
However, other than any necessary regulatory approvals, all of the
conditions listed in the Offer to Purchase will be waived or
satisfied prior to the Expiration Date of the Offer.
EFFECTS OF THE OFFER
If the Offerors receive tenders of all 7,700 Interests pursuant to
the Offer, the effects of the Offer on the General Partner's and
Mr. Keierleber's interest in the net book value and net earnings of
the Partnership are as follows:
The interest of the General Partner in the net book value and net
earnings of the Partnership will not change as a result of the
Offer.
The interest of Mr. Keierleber in the net book value of the
Partnership will increase from $(270) per Interest to $190 per
Interest as a result of the Partnership's purchase and retirement
of 3,000 Interests. See "Appendix A, Pro Forma Book Value of
Interests" in the Offer to Purchase. As a result of his purchase
of 4,400 Interests, interest of the Mr. Keierleber in the net book
value of the Partnership will increase from $617,068 (31.3% of the
book value of outstanding Interests) to $1,520,576 (77.1% of the
book value of outstanding Interests).
The interest of Mr. Keierleber in the net earnings of the
Partnership will increase 7.1% (from 24.2% to 31.3%) as a result of
the Partnership's purchase of 3,000 Interests and will increase an
additional 45.8% (from 31.3% to 77.1%) as a result of his purchase
of 4,400 Interests. His share of the pro forma earnings for the
year ended December 31, 2001 would have decreased from $1.23 per
Interest to $(16.37) per Interest as a result of the Partnership's
purchase of 3,000 Interests. See "Appendix A, Pro Forma Condensed
Statements of Operations, Earnings per Interest, and Ratio of Fixed
Charges for the Year Ended December 31, 2001" in the Offer to
Purchase. As a result of his purchase of 4,400 Interests, the
interest of Mr. Keierleber in the pro forma earnings (loss) for the
year ended December 31, 2001 would have increased from $(53,239)
(31.3% of the net loss per outstanding Interests) to $(131,191)
(77.1% of the net loss per outstanding Interests).
FAIRNESS OF THE TRANSACTION
In addition to those factors listed in the Offer to Purchase under
"Fairness of the Transaction; Reports, Opinions, Appraisals and
Certain Negotiations; No Approvals Required; No Appraisal Rights,"
the Offerors also considered the net book value and liquidation
value of the Interests. In determining the fairness of the
transaction to Limited Partners, the Offerors did not consider the
going concern value of the Partnership. Although the Offerors have
received an opinion as to the fairness of the Offer, the Offerors
did not rely on that opinion in making their determination of the
Purchase Price or the fairness of the Offer. There were no firm
offers by unaffiliated third parties of which the Offerors are
aware for the merger or consolidation of Partnership, the sale or
transfer of all of the Partnership's assets or the purchase of
Interests which would enable the holder to control the Partnership
upon which the Offerors could evaluate the fairness of the
transaction.
SUMMARY OF FINANCIAL INFORMATION
The Offer to Purchase incorporates by reference the
Partnership's audited financial statements contained in its Form
10-KSB for the year ended December 31, 2001. The following tables
summarize certain of the Partnership's consolidated financial data.
BALANCE SHEET
Fiscal Year ended December 31,
2001 2000
ASSETS
Cash and cash equivalents $3,183,319 $4,251,384
Prepaid expenses and other assets 262,112 183,386
Escrow deposits 21,331 20,598
Deferred financing costs 411,643 524,951
Net investment properties 21,600,866 22,089,665
TOTAL ASSETS $25,479,271 $27,069,984
LIABILITIES
Tenant security deposits $130,628 $133,385
Accounts payable 14,212 49,931
Accrued real estate taxes 258,115 265,684
Accrued interest payable 17,490 20,310
Unearned rent 56,001 65,744
Distributions payable 167,467 171,051
Payables to affiliates 945,252 3,935,184
Mortgage notes payable 27,598,920 25,482,407
TOTAL LIABILITIES 29,188,085 30,123,696
PARTNERS' DEFICIT
General Partner (95,661) (95,827)
Limited Partners (For 2001, Interests authorized - 18,000;
Interests outstanding - 13,397.27; For 2000, Interests authorized -
18,000; Interests outstanding - 13,400.27)
(3,613,153)
(2,957,885)
TOTAL LIABILITIES AND PARTNERS' DEFICIT $25,479,271 $27,069,984
The balance sheets at December 31, 2001 and 2000 have been derived
from the audited financial statements at those dates but do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
For further information, refer to the Partnership's financial
statements and footnotes thereto included in the Partnership's
annual report on Form 10-KSB for the year ended December 31, 2001.
STATEMENT OF OPERATIONS
For Fiscal Year Ended December 31,
2001 2000
OPERATING REVENUE ASSOCIATED WITH INVESTMENT PROPERTIES
Rentals $6,709,204 $6,486,367
Other 284,180 279,053
Total Operating Revenue Associated with Investment Properties
6,993,384 6,765,420
OPERATING EXPENSES ASSOCIATED WITH INVESTMENT PROPERTIES
Operating 2,738,400 2,684,971
Administration 295,710 289,674
Depreciation 1,046,892 1,025,601
Interest, including amortization of financing costs
2,045,518 2,097,206
Real estate taxes 754,319 757,114
Total Operating Expenses Associated with Investment
Properties 6,880,839 6,854,566
Income (Loss) from Operations of Investment Properties
112,545 (89,146)
OTHER PARTNERSHIP INCOME (EXPENSE)
Interest income 126,393 256,176
Interest on payables to affiliates (28,588) (28,588)
Administrative expenses (193,730) (187,195)
Net Other Partnership Income (Expenses) (95,925) 40,393
NET INCOME (LOSS) 16,620 (48,753)
Net income (loss) attributable to General Partner (1%)
$166 $(488)
Net income (loss) attributable to Limited Partners (99%)
$16,454 $(48,265)
$16,620 $(48,753)
Weighted average Limited Partnership Interests outstanding
13,398.40 13,400.27
Net income (loss) per weighted average Limited Partnership Interest
$1.23
$(3.60)
The statements of operations for the fiscal years ended
December 31, 2001 and 2000 have been derived from the audited
financial statements at those dates but do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the financial statements and
footnotes thereto included in the Partnership's annual report on
Form 10-KSB for the year ended December 31, 2001.
STATEMENTS OF PARTNERS' DEFICIT
Years Ended December 31, 2001 and 2000
Limited Partnership Interests General Partners' Deficit
Limited Partners' Deficit
Total
BALANCES
December 31, 1999
13,400.27
$(91,792)
$(2,239,604)
$(2,331,396)
Net loss for the year (488) (48,265) (48,753)
Distributions to Partners
(3,547)
(670,016)
(673,563)
BALANCES
December 31, 2000
13,400.27
(95,827)
(2,957,885)
(3,053,712)
Net income for the year
166
16,454
16,620
Distributions to Partners
(669,922)
(669,922)
Redemption of Interests
(3.00)
(1,800)
(1,800)
BALANCES,
December 31, 2001
13,397.27
(95,661)
(3,613,153)
(3,708,814)
The statements of Partners' deficit for the years ended
December 31, 2001 and 2000 have been derived from the audited
financial statements at those dates but do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the financial statements and
footnotes thereto included in the Partnership's annual report on
Form 10-KSB for the year ended December 31, 2001.
The book value per Interest as of December 31, 2001 was $(269.69)
per Interest. For additional information, see the footnotes to the
financial statements which are incorporated by reference from the
Partnership's Form 10-KSB for the year ended December 31, 2001.
Financial information on the quarter ended March 31, 2002 is not
available.
[Items 12 (a)(1)(E)]
[Letterhead of Decade Companies]
May 1, 2002
RE: Decade Companies Income Properties
Offer to Purchase Limited Partnership Interests
Amendment No. 1
Dear Investor:
Enclosed with this letter is Amendment No. 1 to the Offer to
purchase your Interests for cash consideration of $895 per
Interest. The Amendment includes information concerning the recent
appraisals of Pelican Sound and Town Place, a copy of a Fairness
Opinion as to the $895 per Interest Purchase Price, and other
important additional information for you to consider.
In order to give Limited Partners additional time to decide whether
or not to tender Interests, the Expiration Date is extended from
Tuesday, May 7, 2002 to Friday, May 10, 2002.
The Offerors intend to promptly pay for all Interests tendered in
the Offer upon the extended Expiration Date. The Offerors expect
to mail payment no later than May 14, 2002, and possibly earlier,
unless the Offer is again extended.
At the request of Limited Partners, the Offerors will prepare a
letter updating partners on the expected tax consequences of
accepting the Offer, which they expect to mail in the next few
days.
If you need another copy of the Offer to Purchase or the Letter of
Acceptance, please call me at (262) 792-9200.
Very truly yours,
/s/Michael Sweet
Michael Sweet
Partnership Manager
MS/mt
Enclosure
[Item 12. Exhibits (c)(1)]
[LETTERHEAD OF RIGGINS, ATKINSON, COMBS, & ASSOCIATES, INC.]
APPRAISAL REPORT
Pelican Sound Apartments
A 379-Unit Apartment Complex
10200 Gandy Boulevard
St. Petersburg, Florida 33702
EFFECTIVE DATE OF APPRAISAL:
April 8, 2002
INSPECTION DATE:
April 8, 2002
PURPOSE OF APPRAISAL:
The purpose of the appraisal is to estimate the market value of the
subject property in "as is" condition. Market value is defined in
the appraisal certification.
INTENDED USE OF THE APPRAISAL:
The intended use of the appraisal is to provide the client with a
fair market value estimate for potential sale of the subject
property.
PROPERTY RIGHTS:
Fee Simple - Liens or encumbrances, if not described, are unknown
and the property has been analyzed as if free and clear.
SCOPE OF THE APPRAISAL:
This is a Limited Summary Appraisal Report which is intended to
comply with the reporting requirements set forth under Standard
Rule 2-2(b) of the Uniform Standards of Professional Appraisal
Practice. As such, it presents only summary discussions of the
data, reasoning, and analyses that were used in the appraisal
process to develop the appraiser's opinion of value. The depth of
discussion contained in this report is specific to the needs of the
client and for the intended use as stated. The appraiser is not
responsible for unauthorized use of this report.
Once a physical inspection was completed, the economic conditions
of the region and neighborhood were investigated and analyzed in
relation to the relevant factors which effect the market value of
the subject. The sales comparison and income capitalization
approaches were used to evaluate the relevant factors and estimate
the market value of the subject. Per prior agreement with the
client, the cost approach was not used. The appraisal process,
therefore, involved departure from Standard Rule 1-4(b). The
intended user of this report is warned that the reliability of the
value conclusion provided may be impacted to the degree there is
departure from specific guidelines of USPAP. Data sources used to
collect comparable market information include Comps, MicroBase,
Iris, Metroscan, MLS, public records, and internal appraisal files.
All of the comparables used in the report were physically inspected
and confirmed with a knowledgeable source.
The sales comparison approach values the subject property by
comparing it to similar sales in the market area. The primary
factors which were considered in the search for improved
comparables were age and quality of the properties, the date of
sale and the location.
The income capitalization approach estimates the value of the
subject by dividing net operating income by a capitalization rate.
Net operating income is derived by estimating the gross potential
income of the subject and then deducting for vacancy, collection
loss and operating expenses. The primary factors which were
considered in the search for rent comparables were the age and
quality of the properties and the location.
LEGAL DESCRIPTION:
Parcel of land located in Sections 18 and 19, Township 30 South,
Range 17 East, being more particularly described at the addendum of
the report.
The legal description is assumed to be correct. No warranty is
made as to the accuracy of the legal description.
TAX INFORMATION:
Parcel Number: 19-30-17-68290-001-0010
Owner of Record: Decade Companies Income Properties, Ltd.
2001 Tax Valuation: $12,970,500
Millage Rate: 24.7343
2001 Gross Tax: $320,816.24
Delinquent Taxes: None Known
SALES HISTORY OF THE SUBJECT PROPERTY:
To our knowledge, there have been no other arm's-length ownership
transfers of the subject property within the last five years. To
our knowledge, the subject property is not actively on the market
for sale and has not been on the market within the last year.
NEIGHBORHOOD DESCRIPTION:
The subject site is located on the south side of Gandy Boulevard,
east of 4th Street North in the city of St. Petersburg. The
boundaries of the neighborhood can be generally described as
Interstate 275 to the north and west, 62nd Avenue North to the
south, and Tampa Bay, a large body of water, to the east. The
neighborhood boundaries encompass a large residential area which is
primarily within the city limits of St. Petersburg.
The improvements in the subject neighborhood contain a mixture of
commercial and residential uses. The main traffic arteries are
typically lined with commercial improvements, including offices,
service stations, convenience stores, restaurants, service shops,
auto sales/repair facilities, banks, and other commercial uses. The
northwest portion of the neighborhood is developed with office,
manufacturing and industrial type properties and the balance of the
surrounding areas is primarily developed with residential
properties.
As with most older cities, St. Petersburg was developed using a
grid system. As is typical with these older cities, the business
district usually has a central location and the supporting
residential development is at the surrounding areas. The central
business district for the city of St. Petersburg is concentrated in
the area where Central Avenue and Tampa Bay come together. Over
the years commercial development has slowly expanded into the
residential areas. In St. Petersburg, all Avenue's travel in an
east-west direction and all Street's travel in a north-south
direction. The subject neighborhood is located approximately four
miles northwest of the central business district.
The major north-south arteries in the neighborhood are Interstate
275, 4th Street North, and 9th Street North. The major east-west
arteries in the neighborhood are Roosevelt Boulevard, Gandy
Boulevard and 62nd Avenue North. The roads are continuously
maintained and provide reasonably good traffic flow to and through
the neighborhood. The Howard Franklin Bridge (Interstate 275) and
the Gandy Bridge (Gandy Boulevard) are two of four major roadways
linking Pinellas and Hillsborough counties.
Employment opportunities for the subject neighborhood are good.
Industrial and manufacturing employment opportunities are located
to the northwest of the subject neighborhood in the Gateway area
and corporate employment opportunities are located to the south in
the St. Petersburg central business district. Metropolitan
downtown Tampa, is located within a 20 minute driving distance to
the northeast, across Tampa Bay. Both the Gandy Bridge and the
Howard Frankland Bridge provide direct access from the subject
neighborhood the downtown Tampa. The St. Petersburg Clearwater
International Airport is located about 2 miles northwest of the
neighborhood and Tampa International is located within a fifteen
minute driving distance to the northeast.
A number of public parks, schools, and shopping centers are
located conveniently throughout the neighborhood. Elementary
schools servicing the area include Lynch, North Shore, Rio Vista,
and Shore Acres. Middle schools include Meadowlawn and Riviera.
The high school servicing the neighborhood is Northeast, which is
located just south of the subject neighborhood at the northwest
corner of 54th Avenue North and 16th Street North. Parks and
recreational activities servicing the area include the Mangrove Bay
Municipal Golf Course, Sawgrass Lake Park, and the Willis S. John
Fossil Center. Derby Lane, a seasonal greyhound racing track, is
located on Gandy Boulevard, east of 4th Street North. The Pinellas
County Gulf beaches are located within a 20 to 30 minute driving
distance to the west or southwest. Neighborhood shopping centers
servicing the neighborhood include Gateway Crossing, Paragon
Crossing and Rutland Plaza. Gateway Mall, a regional center, is
located at the northeast corner of 9th Street North and 77th Avenue
North and is anchored by Uptons, Publix, Eckerd's and Target.
Single family dwellings account for about 40% of the residential
development. The remaining residential development consists of
multiple family dwellings, townhouses, condominium units, and
mobile homes. The area is approximately 90% developed and improved
properties are generally adequately maintained. Demand for
residential properties in the subject neighborhood is in line with
the current supply. Land for new residential development in the
area is available, but limited.
The permanent population of the city of St. Petersburg is estimated
at 242,690 as of 1999 and is up from 240,318 in 1990. The
population growth in the area has continued to increase at a
decreasing rate. The growth rate for the neighborhood will be
slower due to the relatively large stable population base and the
limited amount of vacant land available new residential
development.
With the exception of the residential development east of 4th
Street North with frontage on Tampa Bay or the canals or small
bodies of water leading to Tampa Bay, the single family
subdivisions in the neighborhood cater to the lower to moderate
income levels. The single family subdivisions are predominately
located south of Gandy Boulevard and were constructed from the
early 1960's to the early 1980's.
Most of the condominium development in the neighborhood took place
in the middle 1970's. These developments were built as an
alternative to traditional detached single family housing. These
complexes generally feature one or two story garden style buildings
and are well maintained in average condition for the area. Many of
the condominium complexes feature covered parking, a swimming pool,
and washer and dryer connections in the units.
The rental housing units in the area range dramatically in size and
age. The newer apartment complexes are generally located along
Gandy Boulevard, 4th Street North or the east side of 9th Street
North. These apartment properties are generally average to good
quality, are from 200 to 600 units in size, and offer a good
amenity package. The older vintage apartment complexes in the
neighborhood are generally located south of Gandy Boulevard. These
complexes are generally average quality, are usually smaller in
size, and have locations on 4th Street North or are mixed with the
residential development. A market investigation was conducted in
the subject neighborhood and it indicated that there is good rental
demand for apartment complexes.
According to local apartment managers in the area, current vacancy
rates for 1980 vintage properties are at about 10%. Vacancy rates
were reported to be unusually higher than normal due primarily to
low interest rates and the loss of tenants to the home buying
market. Monthly rents for one bedroom apartments are from $550 to
$800 a unit and monthly rents for two bedroom apartments are from
$750 to $1,100 a unit. Concessions of 1/2 month to 2 months fee
rent are currently available. Indications are that the high
vacancy rates and rent concessions will be relatively short lived
and have been given little consideration in the recent apartment
complex transactions.
Mobile home parks account for most of the remaining residential
development in the neighborhood. Most of these mobile home parks
are relatively small and offer minimal recreational facilities.
Water, sewer and refuse service, as well as, police and fire
protection are provided by the City of St. Petersburg. Florida
Power Corporation provides electrical service to the area and
Verizon provides telephone service. Local governments appear to
keep the streets and equipment properly maintained.
SITE DESCRIPTION:
The subject site is located on the south side of Gandy Boulevard
about 1,000 feet east of the intersection with 4th Street in the
city of St. Petersburg. The physical mailing address of the
property is 10200 Gandy Boulevard, St. Petersburg, Florida 33702.
The site is an irregular shaped interior parcel with about 1,327
feet of road frontage on Gandy Boulevard. The depth ranges from
about 790 feet to about 1,300 feet. The gross area of the site is
1,375,991 square feet or 31.59 acres.
The subject site is improved with a 379-unit apartment complex
known as Pelican Sound apartments. As a result of development the
terrain of the site is gently rolling. The parcel has a master
drainage system with water retention ponds located at the central
and western portions. Drainage for the site appears to be
adequate. Southern, western, and eastern portions of the site
appear to be wetland areas and are described on the site plan
provided as mitigation areas. From the site plan we have estimated
that about 25% of the site is wetland area. Based on the
improvements to the site, the wetland area was allowed to be used
in determining density.
Based on the site plan provided and a physical inspection of the
property, there were no adverse easements, encroachments or
conditions observed. A 30-foot public underground utility easement
runs in a north-south direction along the eastern portion of the
site. All necessary utilities are available to the site and the
cost is similar to competing areas within the Tampa Bay area.
The subject property is located in flood zone A9. Flood zone
information was determined by F.I.R.M. community panel number
125139 0207C, dated June 1, 1983. Insurance is generally required
for improved structures within an A9 zone.
No soil analysis was made available, however given the existing
improvements to the site and surrounding properties, soil
conditions would appear adequate for development. At the time of
inspection, there were no unusual conditions observed on the site
that would suggest the presence of soil contamination. An
environmental analysis for the subject property is recommended in
the event that one has not already been performed.
Gandy Boulevard, in front of the subject site, is a dividend road
with masonry sidewalks and no curbs. Telephone and electric
service in the area is pole mounted. Traffic counts taken in the
location of the subject for 2000 estimate travel on Gandy Boulevard
at 40,007 cars daily. Travel is by both local and transient
traffic. The visibility of the site is good.
Access to the site is provided only by Gandy Boulevard, to the
north. Access to Gandy Boulevard is available from 4th Street to
the west. Ingress and egress for the site is adequate and is
easily made from all traffic directions. Ingress and egress for
the site appears to be adequate during peak traffic hours.
The subject property is bordered to the west with Derby Lanes, a
seasonal greyhound racing track. To the south, the subject is
bordered with waterfront single family homes. To the north and
east, the subject is bordered with mobile home parks, apartment
complexes and general office, retail, and industrial development.
The existing use of the subject site, as improved with an apartment
complex, provides a good transition from commercial to residential
development.
The subject site is zoned RO-P (Residential Office Parkway) under
the jurisdiction of the City of St. Petersburg. Under the
comprehensive land use plan, the subject has a land use of RO
(Residential/Office General). The zoning classification and land
use are compatible and the existing improvements appear to comply
with zoning.
The enactment of Concurrency Laws in the state of Florida, which
became effective January 1, 1990, can directly impact on the use of
a site. Concurrency is part of the 1985 Growth Management Act,
which states in part that all of an area's infrastructure which are
or will be affected by the development of a property must be in
place or concurrent with development. Concurrency would appear to
have no adverse influence on the subject property.
IMPROVEMENT DESCRIPTION:
The subject is improved with twelve two-story or three-story garden
style walk-up apartment buildings containing 379 units. Amenities
include a clubhouse with leasing office and fitness facility, a
swimming pool and spa, and tennis courts. The apartment buildings
were constructed in 1988.
The buildings are irregular in shape and uniformly arranged on the
site with attention given to the small ponds and lakes. The
clubhouse and pool are located in the northwestern portion of the
complex and the tennis courts and maintenance buildings are located
in the south-central portion of the complex. The construction
quality of the apartment complex is average to good cost. The
exterior walls are wood frame with masonite and brick siding. The
roof designs are gable, constructed of a wood truss system with a
waferboard deck and a composition shingle cover. Aluminum gutters
and down spouts are provided. The foundations of the buildings
are reinforced concrete slabs. Windows are aluminum single hung.
Exterior doors are metal, wood with glass inserts and sliding.
Interior doors are hollow core. Covered entries are located at the
front of each of the units.
The total rentable area of the buildings is 260,867 square feet.
For the purpose of this report, the rentable area includes exterior
and common walls. The square foot sizes are based on the physical
measurements. The clubhouse is 2,063 square feet in size and the
two maintenance structures are respectively 482 square feet and 148
square feet in size.
Landscaping is mature and consists of full sod, small to large
trees, and attractive shrubbery. The landscaped areas are well
maintained and irrigated by a full sprinkler system which draws
from reclaimed water.
Parking, as well as, ingress and egress are concrete paved and
maintained in adequate condition. There are 569 open parking
spaces provided and all are located relatively close to the units.
The apartment complex has 1.50 parking spaces for each unit, which
is considered adequate. Two additional open parking areas are
provided for overflow parking.
The individual units in the complex are made up of four different
type floor plans, two different one-bedroom units, a one-bedroom
with a den unit, and a two-bedroom unit. The smallest of the floor
plans is the one-bedroom one-bath Bay model. These units are 513
square feet in size and there are 128 located within the complex.
The largest one-bedroom one-bath unit is the Cove model. The
complex has 156 of these 713 square foot units. The next larger
floor plan is a one-bedroom one-bath model with a den, known as the
Harbor. These units are 841 square feet in size and there are 27
located within the complex. The largest of the floor plans is the
two-bedroom two-bath Port Model. The complex has 68 of these 901
square foot units. All of the floor plans provide living rooms
with dining areas, exterior storage closets and porches or
balconies. All of rooms in each of the floor plans are adequate in
size and appear to provide adequate functional utility. Units
include a good amount of closet space.
MODEL UNITS TYPE SIZE
Bay 128 3Rm/1Br/1Bth 513
Cove 156 3Rm/1Br/1Bth 713
Harbor 27 4Rm/1Br/1Bth 841
Port 68 4Rm/2Br/2Bth 901
Total 379 1,232 Rooms 260,867
Weighted Average Unit Size = 688 Square Feet
Unit interiors are of average quality construction. The floors are
covered with average quality ceramic tile, carpet and vinyl. The
ceramic tile areas are located at the foyers and the vinyl areas
are located at the kitchens and baths. All of the units have water
heaters, 125 amp electrical panels and central air systems.
Standard equipment includes a refrigerator, a range/oven with a
hood fan, a dishwasher, a disposal, washer and dryer, and monitored
security system. Units are individually metered for electrical,
water and sewer service and have telephone and cable television
hook-ups.
The apartment complex currently has a vacancy rate of 10%, but
typically maintains a vacancy rate of roughly 5%, which includes 3
models. All of the vacant units are reported to be in rentable
condition. The current asking rent is $590 to $615 a month for the
Bay units, $675 to $705 a month for the cove units, $775 to $795 a
month for the Harbor units, and $830 to $880 a month for the Port
units. Rent premiums are charged for view amenities. Tenants are
responsible for payment of electric, water, sewage, telephone and
cable television service. The subject complex has three nonrevenue
producing units which are used as models. The property manager
receives compensation in lieu of the use of a two-bedroom unit
free of charge.
The subject property is well maintained in average condition with
no signs of items which are in need of immediate repair. As is
typical with large wood frame apartment complexes, some minor signs
of exterior wood rot were observed at the time of inspection.
Roofs and exterior paint appear to be in good condition. The unit
interiors and appliances are generally maintained on a continual
basis.
Due to the age of the improvements, the presence of hazardous
materials used in the construction, such as asbestos, is less
likely. No environmental audit has been made available.
HIGHEST AND BEST USE:
"The reasonably probable and legal use of vacant land or an
improved property, which is physically possible, appropriately
supported, financially feasible, and that results in the highest
value."(1)
HIGHEST AND BEST USE AS IMPROVED:
The value of the site with the existing improvements is greater
than the site value alone. There are no known modifications that
could be made to the improvements that would feasibly increase
market value. Thus, the highest and best use of the subject is to
continue use as a 379-unit apartment complex.
(1) Appraisal Institute, The Appraisal of Real Estate,
Eleventh Edition (Chicago: Appraisal Institute, 1996), 297.
SALES COMPARISON APPROACH:
Following this section is a summary and adjustment chart for the
improved comparables used for comparison. Improved comparable sale
information, photographs and a location map are provided at the
addendum.
Where appropriate, adjustments were made to the comparables to
account for material differences from the subject. The comparables
have sale prices which were compared on the basis of unit sale
prices, room sale prices and leasable building square foot sale
prices.
Our search for improved comparable sales found 8 apartment complex
sales in the Pinellas County market that were constructed in the
1980's and sold within the last 12 months. The complexes ranged
from 188 units to 354 units in size and had unit sale prices from
$39,472 to $70,175. The four comparables that will be cited for
comparison well bracket the physical characteristics of the subject
property and provide a good indication of market value for the
subject property.
Improved comparable 1 is the sale of the Chesapeake apartment
complex. The complex is located just west of U.S. Highway 19 in
Dunedin and has limited traffic visibility. The complex was
constructed in 1985, is overall average quality for the time period
it was constructed and has an average unit size of 750 square feet.
The property was in overall average condition at the time of sale.
There is an ongoing project to replace polyurethane piping in the
complex, but appeared to have little or no influence on the
purchase price. The sale price was recorded at $13,973,400, but
apparently did not include a down payment reported at $1,223,400.
The capitalization rate was reported at 8.40% to 8.75% based on
actual income projections at the time of sale and 9.0% based on the
purchasers annual projections.
Improved comparable 2 is the sale of the Hudson Point apartment
complex, formerly known as Post Bay. The complex is located on 4th
Street North in Gateway area of St. Petersburg, but has limited
traffic visibility. The complex was constructed in 1988, is
overall slightly above average quality for the time period it was
constructed and has an average unit size of 844 square feet. The
property was in overall average condition at the time of sale. The
capitalization rate was reported at about 8.0% to 8.65% based on
actual income projections at the time of sale.
Improved comparable 3 is the sale of the Cameron Lakes apartment
complex. The complex is located just west of U.S. Highway 19 in
Clearwater and has limited traffic visibility. The complex was
constructed in 1986, is overall average quality for the time period
it was constructed and has an average unit size of 1,001 square
feet. The property was in overall average condition at the time of
sale. The capitalization rate was reported at about 8.6% based on
actual income projections at the time of sale.
Improved comparable 4 is the sale of the West Port Colony apartment
complex. The complex is located just east of 4th Street North in
Gateway area of St. Petersburg, but has limited traffic visibility.
The complex was constructed in 1989, is overall slightly above
average quality for the time period it was constructed and has an
average unit size of 813 square feet. The property was in overall
average condition at the time of sale. The capitalization rate was
reported at about 8.75% to 9.25% based on annual projections. The
buyer plans about $2,300,000 in capital improvements to the
property and has already made about $200,000 in improvements since
the time of purchase.
All of the comparables were adjusted for differences as compared to
the subject and have adjusted prices between $67.67 and $77.68 a
square foot, between $14,516 and $17,687 a room and between $46,000
and $54,445 a unit. The average adjusted price per square foot is
$73.01, the average adjusted price per room is $16,153 and the
average adjusted price per unit is $50,077.
Based on the cited comparables, it is our opinion that the subject
has an estimated market value, as of the date of the valuation, of
about $73.00 a square foot, $16,000 a room and $51,000 a unit.
260,867 Sq. Ft. X $73.00 a Square Foot = $19,043,291
1,232 Rooms X $15,500 a Room = $19,096,000
379 Units X $50,000 a Unit = $18,950,000
The three units of comparison have similar value conclusions and
were given roughly equal weight.
Estimated Value by the Sales Comparison Approach = $19,000,000
INCOME CAPITALIZATION APPROACH:
The following is a summary of rental rates for the rent comparables
used for comparison. Rent comparable photographs and a rent
comparable location map are provided at the addendum of the report.
RENT COMPARABLE COMPARISON CHART
COMP. # Subject #1 #2 #3
COMPLEX: Pelican Sound Westport Colony Hudson Point Isles
of Gateway
LOCATION: 10200 Gandy Blvd 190 112th Avenue 11901 4th Street
N 10600 4th Street N
UNIT/RENT:
1Bedroom/1Bath
1Bedroom/1Bath
1Bed/1Bath/Den
2Bedroom/2Bath
513sf: $590-$615
713sf: $675-$705
841sf: $775-$795
901sf: $830-$880
550sf: $570
671sf: $635
913sf: $805
630sf: $632
750sf: $716
970sf: $821+
1,150sf: $997+
521sf: $600
707sf: $715-$755
839sf: $835-$885
1,049sf: $905-965
QUALITY: Average+ Average+ Average+ Average+
CONDITION: Average Average Average Average
YEAR BUILT: 1988 1989 1989 1988
AMENITIES: Average Average Average Average
CONCESSIONS: Select Units No Deposit 1 Month Free
$100/Month Off
UTILITIES INCLUDED: None None None None
UNITS: 379 324 312 212
VACANCY: 10% 7% 7% 6%
The current asking rent is $590 to $615 a month for the Bay units,
$675 to $705 a month for the cove units, $775 to $795 a month for
the Harbor units, and $830 to $880 a month for the Port units.
Rent premiums are charged for view amenities. The monthly asking
rents for the subject appear to be in line with the market.
Based on a review of the rent roll provided, monthly rental rates
for the Port units in the complex range from a low of $575 to a
high of $672, with a mean of $604, a median of $605 and a mode of
$615. Rental rates for the Cove units range from a low of $627 to
a high of $755, with a mean of $683, a median of $680 and a mode of
$675. Rental rates for the Harbor units range from a low of $725
to a high of $845, with a mean of $796, a median of $795 and a mode
of $795. Rental rates for the Port units range from a low of $770
to a high of $880, with a mean of $849, a median of $855 and a mode
of $840.
In consideration of both the existing rental rates and current
asking rates, market rent for the small one-bedroom units is
estimated at $610, market rent for the large one-bedroom units is
estimated at $690, market rent for the one-bedroom units with den
is estimated at $795 and market rent for the two-bedroom units is
estimated at $855.
Vacancy and expense information is based on an operating history
for the subject property and supported with data gathered on
comparable properties in the Tampa Bay area. The projected
stabilized market vacancy and collection loss is estimated at 7%,
with other income of 3%. Total expenses are estimated at $3,729 a
unit or 46.3% of effective gross income.
As follows is the reconstructed operating statement for 2001, the
budget for 2002 and our estimated annual income and expense for the
projection period. The projected income and expense figures are
consistent with figures found in the direct capitalization
analysis.
Investors are currently purchasing well-maintained apartment
complexes at capitalization rates of about 8.0% to 9.25%. A survey
in the Fourth Quarter 2001 issue of Valuation Insights &
Perspectives, published by the Appraisal Institute, indicates
required capitalization rates for apartment properties between 7.5%
and 10.0%. Capitalization rates were available for all four
improved comparables used in the sales comparison approach.
Improved comparable 1 had a capitalization rate at about 8.40% to
8.75%, improved comparable 2 had a capitalization rate at about
8.0% to 8.65%, improved comparable 3 had a capitalization rate at
about 8.6% and improved comparable 4 had a capitalization rate of
about 8.75% to 9.25%. The capitalization rates for improved
comparables 1 through 3 were based on actual income projections at
the time of sale. The capitalization rate for the improved
comparable 4 was based on projected income by the purchaser after
consideration for proposed improvements to the property .
Conversations with area lenders indicated that financing could be
obtained for a property such as the subject at an interest rate of
about 7.25% fixed. The typical loan is amortized over 25 years
with a three to five-year balloon. The typical loan to value ratio
for a property such as the subject is about 75% and the typical
required debt coverage ratio is about 1.25. The equity dividend
rate for the subject is estimated at 10.00%. The capitalization
rate for the subject by both the band of investment and the debt
coverage ratio are estimated as follows:
BAND OF INVESTMENTS
Mortgage 0.75 X 0.086737 = 0.065053
Equity 0.25 X 0.100000 = 0.025000
0.090053 Rounded 9.0%
DEBT COVERAGE RATIO
DCR LV MC OAR
1.25 75% 0.086737 = 0.0813 or 8.1%
The capitalization rate for the subject property is estimated at
8.5%.
Based on our analysis, which is summarized on the following page,
the indicated value of the subject property at stabilized occupancy
by the income capitalization approach is estimated to be:
ESTIMATED VALUE BY THE INCOME CAPITALIZATION APPROACH $19,300,000
INCOME CAPITALIZATION APPROACH SUMMARY
RECAPITULATION AND FINAL RECONCILIATION:
SALES COMPARISON APPROACH $19,000,000
INCOME CAPITALIZATION APPROACH $19,300,000
The sales comparison and income capitalization approaches indicate
similar value conclusions and are supported by market evidence.
Therefore, based on the cited market data and the foregoing
analysis, the market value of the fee simple interest in the
subject is estimated to be:
FEE SIMPLE MARKET VALUE
AS OF THE APRIL 8, 2002 EFFECTIVE DATE
NINETEEN MILLION DOLLARS
$19,000,000)
ESTIMATED MARKETING TIME AND EXPOSURE TIME:
We have reviewed the typical marketing times for apartment
complexes in the Tampa Bay area, as well as, discussed the
marketing time with knowledgeable commercial brokers. If
appropriately priced and marketed, the estimated exposure time for
the subject property would have been about 3 to 9 months.
Marketing time of the subject property is also estimated at 3 to 9
months.
ASSUMPTIONS AND LIMITING CONDITIONS
1. The legal description furnished is assumed to be correct. No
responsibility is assumed for the accuracy of the legal
description, or for matters legal in character nor is any
opinion rendered herein as to title which is assumed to be
good and merchantable. It is assumed that the property is
free and clear of liens and encumbrances.
2. It is assumed that surveys and/or plats furnished to or
acquired by the appraiser and used in the making of this
report are correct. The appraiser has not made a land survey
or caused one to be made and, therefore, assumes no
responsibility for their accuracy. Drawings in this report
are to assist the reader in visualizing the property and are
only an approximation of grounds and/or building plan.
3. Certain data used in compiling this report was given to the
appraiser by the client, his counsel, employees, and/or agent,
or from other sources believed to be reliable; however, we do
not guarantee the correctness of such data and assume no
liability or responsibility for its complete accuracy. Should
the user of this report be or become aware of conditions that
would materially alter the conclusions of this report, the
user agrees to immediately notify the appraiser. The
appraiser reserves the right to modify the report to consider
such conditions.
4. The soil and the area the property being appraised appears to
be firm and solid, unless otherwise stated. Subsidence in the
area is unknown or uncommon but the appraiser does not warrant
against this condition or occurrence.
5. Subsurface rights (mineral and oil) were not considered in
making this report, unless otherwise stated. Any riparian
rights and/or littoral rights indicated by survey, map or plat
are assumed to go with the property unless easements or deeds
of record were found by the appraiser to the contrary.
6. The appraiser made a limited visual inspection of the subject
property. The appraisal does not constitute an inspection for
compliance with building, fire, zoning or ADA requirements.
The appraiser assumes that there are no hidden or unapparent
conditions of the property, subsoil or structures which would
render it more or less valuable than otherwise apparently
comparable property. The appraiser assumes no responsibility
for such conditions or for engineering which might be required
to discover such conditions.
7. Possession of this report, or copy thereof, does not carry
with it the right of publication or reproduction nor may it be
used by anyone but the client without prior written consent of
the client and the appraiser and in any event only in its
entirety.
8. This appraisal has been prepared solely for the private use of
the client who is listed as the addressee, for the purpose and
function intended. No other party is entitled to rely on the
information, conclusions or opinions contained herein, without
written consent of the appraiser. The appraiser is not
responsible for the unauthorized use of this report.
9. It is assumed that the property is in full compliance with all
federal, state and local laws and regulations, unless
noncompliance is stated, defined and considered in the
appraisal report. It is also assumed that any licenses,
consents or other administrative approvals, required for the
operation of the property, have been or can be obtained and
renewed for any use on which the value estimate is based.
10. It is assumed that the property is under responsible ownership
and competent management.
11. The appraiser, by reason of this report, is not required to
give testimony in court with reference to the property herein
appraised nor is he obligated to appear before any
governmental body, board or agent unless arrangements have
been previously made thereof.
12. The distribution of the total valuation in this report between
land and improvements applies only under the existing program
of utilization. The separate valuations for land and
improvements must not be used in conjunction with any other
appraisal and is invalid if so used.
13. Neither all nor any part of the contents of this report will
be conveyed to the public through advertising, public
relations, news, sales or other media without the written
consent and approval of the author, particularly as to the
valuation conclusions, the identity of the appraiser or firm
with which he is connected, or any reference to the Appraisal
Institute, or the MAI designation.
14. We are not expert in determining the presence or absence of
hazardous substances, defined as all hazardous or toxic
materials, wastes, pollutants or contaminants (including, but
not limited to, asbestos, PCB, UFFI, or other raw materials or
chemical(s) used in construction, or otherwise present on the
property. We assume no responsibility for the studies or
analyses which would be required to determine the presence or
absence of such substances or for loss as a result of the
presence of such substances. The value estimate is based on
the assumption that the subject property is not so affected.
We do, however, recommend an environmental audit for the
subject property.
15. Acceptance and/or use of this appraisal report constitutes
acceptance of the data, analysis, assumptions and limiting
conditions contained herein.
CERTIFICATE OF APPRAISAL:
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
are my personal, unbiased professional analyses, opinions, and
conclusions.
- - I have no present or prospective interest in the property that
is the subject of this report, and I have no personal interest
or bias with respect to the parties involved.
- - My compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the
cause of the client, the amount of the value estimate, the
attainment of a stipulated result, or the occurrence of a
subsequent event.
- - My reported analyses, opinions, and conclusions were
developed, and this report has been prepared, in conformity
with the Uniform Standards of Professional Appraisal Practice;
and the requirements of the Code of Professional Ethics and
the Standards of Professional Practice of the Appraisal
Institute. Unless otherwise stated herein, the departure
provision does not apply.
- - William W. Atkinson made a personal inspection of the property
that is the subject of this report. Robert E. Riggins did not
inspect the property.
- - No one provided significant professional assistance to the
person signing this report.
- - The appraiser has preformed within the context of the
competency provision of the Uniform Standards of Professional
Appraisal Practice.
- - This report was not based on a requested minimum valuation, a
specific valuation, or the approval of a loan.
- - The use of this report is subject to the requirements of the
Appraisal Institute relating to review by its duly authorized
representatives.
- - As of the date of this report, both William W. Atkinson and
Robert E. Riggins have completed the requirements of the
continuing education program of the Appraisal Institute.
- - This appraisal recognizes the following definition of value:
Market Value: as defined in Chapter 12, Code of Federal
Regulations, Part 34.42(f) is, "The most probable price which
a property should bring in a competitive and open market under
all conditions requisite to a fair sale, the buyer and seller
each acting prudently knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition
is the consummation of a sale as of a specified date and the
passing of title from seller to buyer under conditions
whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised, and
acting in what they consider their own best interests;
3. a reasonable time is allowed for exposure in the open
market;
4. payment is made in terms of cash in United States dollars
or in terms of financial arrangements comparable thereto;
and
5. the price represents the normal consideration for the
property sold unaffected by special or creative financing
or sales concessions granted by anyone associated with
the sale.
Based on the cited market data and the foregoing analysis, the
market value of the fee simple interest in the subject is estimated
to be:
FEE SIMPLE MARKET VALUE
AS OF THE APRIL 8, 2002 EFFECTIVE DATE
NINETEEN MILLION DOLLARS
($19,000,000)
Riggins, Atkinson, Combs & Associates, Inc.:
/s/ Robert E. Riggins /s/ William W. Atkinson
Robert E. Riggins, MAI, SRA, CCIM William W. Atkinson, MAI, CCIM
President Vice President
State-Certified General State-Certified General
Appraiser 0000605 Appraiser 0001221
Did Not Inspect
ADDENDUM
APPRAISAL REPORT OF
Pelican Sound Apartments
A 379-Unit Apartment Complex
10200 Gandy Boulevard
St. Petersburg, Florida 33702
PREPARED FOR
Decade Companies Income Properties, Ltd.
Attention: Jeffrey Keierleber
General Partner of Decade Companies
250 Patrick Boulevard, Suite 140
Brookfield, Wisconsin 53045
TYPE OF REPORT
Limited, Summary
EFFECTIVE DATE
April 8, 2002
BY /s/ Robert E. Riggins
Robert E. Riggins, MAI, SRA
State-certified general real estate appraiser
0000605
/s/ William W. Atkinson
William W. Atkinson, MAI, CCIM
State-certified general real estate appraiser
0001221
RIGGINS, ATKINSON, COMBS & ASSOCIATES, INC.
18840 U.S. HIGHWAY 19 NORTH, SUITE 401
CLEARWATER, FLORIDA 33764
(727) 530-9793
April 17, 2002
Decade Companies Income Properties, Ltd.
Attention: Jeffrey Keierleber
General Partner of Decade Companies
250 Patrick Boulevard, Suite 140
Brookfield, Wisconsin 53045
Re: Summary Appraisal Report
Pelican Sound Apartments
A 379-Unit Apartment Complex
10200 Gandy Boulevard
St. Petersburg, Florida 33702
Dear Decade Companies Income Properties, Ltd.:
As requested, we have prepared a summary appraisal on the above
captioned property. The purpose of the appraisal is to estimate
the market value of the subject property in "as is" condition.
Market value is defined in the certificate of the appraisal.
This report is the result of a limited appraisal process in that
certain allowable departures from the specific guidelines of the
Uniform Standards of Professional Appraisal Practice (USPAP) were
invoked. This is a Limited Appraisal because it relies solely on
the Sales Comparison and Income Capitalization Approaches. The
intended user of this report is warned that the reliability of the
value conclusion provided may be impacted to the degree there is
departure from specific guidelines of USPAP.
Both the appraisal report and attached addenda that accompany this
letter describe the approaches to value used and contain the data,
analysis, assumptions and limiting conditions on which the value
conclusions have been based. The assumptions and limiting
conditions of the report are included in the text.
Based on the cited data and analysis contained within the appraisal
report, attached addenda, and appraisal file, it is our opinion and
conclusion that the market value of the subject property, is
estimated at:
FEE SIMPLE MARKET VALUE
AS OF THE APRIL 8, 2002 EFFECTIVE DATE
NINETEEN MILLION DOLLARS
($19,000,000)
Respectfully submitted:
/s/ Robert E. Riggins /s/ William W. Atkinson
Robert E. Riggins, MAI, SRA, CCIM William W. Atkinson, MAI, CCIM
President Vice President
State-Certified General State-Certified General
Appraiser 0000605 Appraiser 0001221
Did Not Inspect
NEIGHBORHOOD MAP
[picture not filed]
TAX MAP
[picture not filed]
SUBJECT PHOTOGRAPHS
[pictures not filed]
SUBJECT PROPERTY - FACING SOUTHWEST
FROM GANDY BOULEVARD
[pictures not filed]
FRONT OF CLUBHOUSE/LEASING OFFICE
[pictures not filed]
SWIMMING POOL WITH SURROUNDING LAKE AND APARTMENT
[pictures not filed]
TENNIS COURTS
[pictures not filed]
APARTMENT BUILDINGS AND PARKING AREA
[pictures not filed]
INTERIOR OF VACANT UNIT
[pictures not filed]
GANDY BOULEVARD - FACING EAST
[pictures not filed]
GANDY BOULEVARD - FACING WEST
[pictures not filed]
IMPROVED COMPARABLE NO. 1:
[pictures not filed]
Chesapeake Apartments
2307 Cumberland Road
PARCEL NUMBER: 30-28-16-00000-210-0300
DATE: December 2001
GRANTOR: Phoenix Life Insurance Company
GRANTEE: Chesapeake Apartment
O.R. BOOK & PAGE: 11756/2549
SALE PRICE: $15,196,800 ($13,973,400 -Recorded)
FINANCING: 1st KeyBank National Association $12,750,000
DESIGN: Garden
CONSTRUCTION: Frame, Average Cost
CONDITION: Average for Age
UNIT MIX: No. Total
Units Rms/Bd/Ba Sq. Ft. Sq. Ft.
96 3/1/1 600 - 796 = 59,616
80 3/1/1 662 - 835 = 53,680
64 3/1/1 718 = 45,952
88 4/2/2 911 - 926 = 80,828
26 4/2/2 980 = 25,480
354 1,176 Rooms 750 SF 265,556
YEAR BUILT: 1985
RENTABLE BUILDING AREA: 265,556 Square Feet
AVERAGE UNIT SIZE: 750 Square Feet
AMENITIES: Lakes, Swimming Pool, Tennis and Racquetball
Courts, and Clubhouse
PROJECT SIZE: 354 Units/27.50 Acres/12.87 u.p.a.
UNIT VALUES:
$ Per Unit $42,929
$ Per Room $12,922
$ Per Square Foot $57.23
O.A.R. 8.40% to 8.75%
COMMENTS:
The actual sale price for the apartment complex was not disclosed,
but was reported to be above the $13,973,400 recorded sale price
and in the low $40,000 a unit price range. There was a reported
down payment of $1,223,400, which down payments are not always
reflected in the recorded sale prices. For analysis, the down
payment has been added to the recorded sale price, which indicates
a price of $42,928 a unit, which is consistent with the
confirmation. The property was believed to be a stabilized
occupancy at the time of sale with typical deferred maintenance and
an ongoing project to replace polybutylene piping. The
capitalization rate was reported at 8.40% to 8.75% based on actual
income projections at the time of sale and 9.0% based on the
purchasers annual projections.
IMPROVED COMPARABLE NO. 2:
[pictures not filed]
Hudson Point
(formerly known as Post Bay)
11901 4th Street North
PARCEL NUMBER: 07-30-17-72696-001-0010
DATE: February 2002
GRANTOR: Post Apartment Homes, LP
GRANTEE: Hudson Asset Management Ltd
O.R. BOOK & PAGE: 11820/2223
SALE PRICE: $18,100,000
FINANCING: First National Bank of Florida $14,450,000
DESIGN: Garden
CONSTRUCTION: Frame, Average+ Cost
CONDITION: Average for Age
UNIT MIX: No. Total
Units Rms/Bd/Ba Sq. Ft. Sq. Ft.
48 2/1/1 558 = 26,784
72 3/1/1 750 = 54,000
72 3/1/1 630 = 45,360
48 4/2/1 970 = 46,560
12 4/2/2 1,150 = 13,800
60 4/2/2 1,280 = 76,800
312 1,008 Rooms 844 SF 263,304
YEAR BUILT: 1988
RENTABLE BUILDING AREA: 263,304 Square Feet
AVERAGE UNIT SIZE: 844 Square Feet
AMENITIES: Swimming Pool and Clubhouse with Fitness
Facility
PROJECT SIZE: 312 Units/12.83 Acres/24.32 u.p.a.
UNIT VALUES:
$ Per Unit $58,013
$ Per Room $17,956
$ Per Square Foot $68.74
O.A.R. 8.0% to 8.65%
COMMENTS:
The capitalization rate was reported at about 8.0% to 8.65% based
on actual income projections at the time of sale.
IMPROVED COMPARABLE NO. 3:
[pictures not filed]
Cameron Lakes
2550 Stag Run Boulevard
PARCEL NUMBER: 06-29-16-00000-440-0100
DATE: December 2001
GRANTOR: Archstone Smith Operating Trust
GRANTEE: Cameron Lakes Multihousing Limited Partnership
O.R. BOOK & PAGE: 11743/2284
SALE PRICE: $12,250,000
FINANCING: Holliday Fenoglio Fowler, L.P. $10,125,000
DESIGN: Garden
CONSTRUCTION: Frame\Masonry, Average Cost
CONDITION: Average for Age
UNIT MIX: No. Total
Units Rms/Bd/Ba Sq. Ft. Sq. Ft.
56 3/1/1 791 = 44,296
28 3/1/1 876 = 24,528
56 4/2/1 1,021 = 57,176
28 4/2/2 1,106 = 30,968
10 4/2/2 1,268 = 12,680
5 4/2/2 1,340 = 6,700
4 4/2/1.5 1,090 = 4,360
8 4/2/2 1,250 = 10,000
8 4/2/2 1,269 = 10,152
4 5/3/2 1,588 = 6,352
207 748 Rooms 1,001 SF 207,212
YEAR BUILT: 1986
RENTABLE BUILDING AREA: 207,212 Square Feet
AVERAGE UNIT SIZE: 1,001 Square Feet
AMENITIES: Lake, Swimming Pool, Racquetball Court, and
Clubhouse
PROJECT SIZE: 207 Units/18.22 Acres/11.36 u.p.a.
UNIT VALUES:
$ Per Unit $59,179
$ Per Room $16,377
$ Per Square Foot $59.12
O.A.R. 8.60%
COMMENTS:
The sale price and capitalization rate were based on a 6% vacancy
and collection loss and operating expenses of $821,742 or $3,970
a unit, including reserves.
IMPROVED COMPARABLE NO. 4:
[picture not filed]
West Port Colony
190 112th Avenue North
PARCEL NUMBER: 18-30-17-11306-001-0020
DATE: August 2001
GRANTOR: West Port St. Petersburg, Inc.
GRANTEE: West Port Colony Apartments
O.R. BOOK & PAGE: 11504/0392
SALE PRICE: $16,200,000
FINANCING: Cash
DESIGN: Garden
CONSTRUCTION: Frame, Average-Good Cost
CONDITION: Average for Age
UNIT MIX: No. Total
Units Rms/Bd/Ba Sq. Ft. Sq. Ft.
72 3/1/1 550 = 39,600
34 3/1/1 677 = 23,018
86 3/1/1 782 = 67,252
48 4/2/2 918 = 44,064
48 4/2/2 970 = 46,560
24 4/2/2 1,145 = 27,974
12 5/3/2 1,280 = 15,360
324 1,116 Rooms 813 SF 263,334
YEAR BUILT: 1989
RENTABLE BUILDING AREA: 263,334 Square Feet
AVERAGE UNIT SIZE: 813 Square Feet
AMENITIES: Swimming Pool, Spa, Tennis Courts, Racquetball
Court and Clubhouse with Fitness Facility
PROJECT SIZE: 324 Units/26.69 Acres/12.14 u.p.a.
UNIT VALUES:
$ Per Unit $50,000
$ Per Room $14,516
$ Per Square Foot $61.52
O.A.R. 8.75%-9.25%
COMMENTS:
The capitalization rate was reported at about 8.75% to 9.25% based
on the purchasers annual projections. The capitalization rate
based on actual income projections was lower. The buyer plans
about $2,300,000 in capital improvements to the property and has
already made about $200,000 in improvements since the time of
purchase.
IMPROVED COMPARABLE LOCATION MAP
[picture not filed]
RENT COMPARABLE #1
[picture not filed]
RENT COMPARABLE #2
[picture not filed]
RENT COMPARABLE #3
[picture not filed]
RENT COMPARABLE LOCATION MAP
[picture not filed]
[Item 12. Exhibits (c)(2)]
[LETTERHEAD OF RIGGINS, ATKINSON, COMBS, & ASSOCIATES, INC.]
APPRAISAL REPORT
Town Place Apartments
A 240-Unit Apartment Complex
2524 NE Coachman Road
Clearwater, Florida 34625
EFFECTIVE DATE OF APPRAISAL:
April 8, 2002
INSPECTION DATE:
April 8, 2002
PURPOSE OF APPRAISAL:
The purpose of the appraisal is to estimate the market value of the
subject property in "as is" condition. Market value is defined in
the appraisal certification.
INTENDED USE OF THE APPRAISAL:
The intended use of the appraisal is to provide the client with a
fair market value estimate for potential sale of the subject
property.
PROPERTY RIGHTS:
Fee Simple - Liens or encumbrances, if not described, are unknown
and the property has been analyzed as if free and clear.
SCOPE OF THE APPRAISAL:
This is a Limited Summary Appraisal Report which is intended to
comply with the reporting requirements set forth under Standard
Rule 2-2(b) of the Uniform Standards of Professional Appraisal
Practice. As such, it presents only summary discussions of the
data, reasoning, and analyses that were used in the appraisal
process to develop the appraiser's opinion of value. The depth of
discussion contained in this report is specific to the needs of the
client and for the intended use as stated. The appraiser is not
responsible for unauthorized use of this report.
Once a physical inspection was completed, the economic conditions
of the region and neighborhood were investigated and analyzed in
relation to the relevant factors which effect the market value of
the subject. The sales comparison and income capitalization
approaches were used to evaluate the relevant factors and estimate
the market value of the subject. Per prior agreement with the
client, the cost approach was not used. The appraisal process,
therefore, involved departure from Standard Rule 1-4(b). The
intended user of this report is warned that the reliability of the
value conclusion provided may be impacted to the degree there is
departure from specific guidelines of USPAP. Data sources used to
collect comparable market information include Comps, MicroBase,
Iris, Metroscan, MLS, public records, and internal appraisal files.
All of the comparables used in the report were physically inspected
and confirmed with a knowledgeable source.
The sales comparison approach values the subject property by
comparing it to similar sales in the market area. The primary
factors which were considered in the search for improved
comparables were age and quality of the properties, the date of
sale and the location.
The income capitalization approach estimates the value of the
subject by dividing net operating income by a capitalization rate.
Net operating income is derived by estimating the gross potential
income of the subject and then deducting for vacancy, collection
loss and operating expenses. The primary factors which were
considered in the search for rent comparables were the age and
quality of the properties and the location.
LEGAL DESCRIPTION:
Parcel of land located in Section 7, Township 29 South, Range 16
East, being more particularly described at the addendum of the
report.
The legal description is assumed to be correct. No warranty is
made as to the accuracy of the legal description.
TAX INFORMATION:
Parcel Number: 07-29-16-00000-110-0500
Owner of Record: Decade Companies Income Properties, Ltd.
2001 Tax Valuation: $8,104,200
Millage Rate: 23.0975
2001 Gross Tax: $187,186.76
Delinquent Taxes: None Known
SALES HISTORY OF THE SUBJECT PROPERTY:
To our knowledge, there have been no other arm's-length ownership
transfers of the subject property within the last five years. To
our knowledge, the subject property is not actively on the market
for sale and has not been on the market within the last year.
NEIGHBORHOOD DESCRIPTION:
The subject property is located on the south side of NE Coachman,
west of U.S. Highway 19 in the city of Clearwater. The surrounding
neighborhood primarily consists of well established, fully
developed, residential properties with supporting commercial
facilities lining the major thoroughfares. The neighborhood
boundaries could readily be described as Sunset Point Road to the
north, McMullen-Booth Road and Old Tampa Bay to the east, East Bay
Drive to the south, and Highland Avenue to the west.
The improvements in the subject neighborhood contain a mixture of
commercial and residential uses. The main traffic arteries are
typically lined with commercial improvements, including offices,
service stations, convenience stores, restaurants, service shops,
auto sales/repair facilities, banks, and other commercial uses. The
balance of the surrounding areas is primarily developed with a
mixture of single family and multiple family development. Single
family properties in the area range substantially in size and age,
thus catering from lower to higher income ranges. Likewise, the
multi-family properties in the area command rents from the lower to
higher income ranges. Properties are adequately maintained and
many of the older ones show signs of renovation.
A small municipal airport is located at the northeastern portion of
the neighborhood. Several public parks, schools, shopping, a golf
course, and a baseball stadium (used in the summer months by the
Philadelphia Phillies) are conveniently located throughout the
neighborhood. Public Beaches, regional malls, employment, and
other supporting facilities are located within the neighborhood or
within a short driving distance. Tampa International airport is
located within a twenty-five minute driving distance, east of the
subject.
The major north-south arteries in the neighborhood are McMullen-
Booth Road, U.S. Highway 19, Belcher Road, Hercules Avenue, Keene
Road, and Highland Avenue. U.S. Highway 19 is a well traveled
thoroughfare located in the eastern portion of the neighborhood and
is heavily developed with office and retail properties. Both
Belcher Road and McMullen-Booth Road provide alternate north-south
travel routes to U.S. Highway 19, and are both improved with mixed
residential and commercial development. Highland Avenue is
primarily developed with residential type properties with a
scattered small amount of commercial development. Hercules Avenue
is primarily developed with commercial and industrial type
properties.
The major east-west arteries in the neighborhood are Sunset Point
Road, Drew Street, Gulf-to-Bay Boulevard, Druid Road, Sunset Point
Road, Belleair Road, and East Bay Drive. Both Gulf-to-Bay
Boulevard and East Bay Drive are heavily developed commercial
thoroughfares which carry large volumes of vehicular traffic. The
remaining east-west roads are primarily developed with small "Mom
and Pop" commercial properties, scattered multi-family properties,
and single family subdivisions.
The roads in the neighborhood provide good traffic flow and are
well maintained on a continual basis. Interstate access for the
neighborhood is located within a 20 minute driving distance east or
southeast of the neighborhood. Many of neighborhoods in Pinellas
County lack nearby interstate access and is not considered to have
any adverse influence on the subject neighborhood.
Single family development in the subject neighborhood varies
dramatically from older masonry or frame homes in the lower to
moderate price range, to newer custom built homes in the upper
price range. The majority of the homes are typically older one
story, concrete block structures that are about 800 to 1,700 square
feet in size.
The market for rental housing units in the area is well diversified
and is available for all household income levels. A market
investigation was conducted in the subject neighborhood and it
indicated that there is good demand for apartment complexes.
According to local apartment managers in the area, current vacancy
rates for 1980 vintage properties are at about 10%. Vacancy rates
were reported to be unusually higher than normal due primarily to
low interest rates and the loss of tenants to the home buying
market. Monthly rents for one bedroom apartments are from $500 to
$750 a unit and monthly rents for two bedroom apartments are from
$650 to $950 a unit. Concessions of 1/2 month to 2 months fee rent
are currently available. Indications are that the high vacancy
rates and rent concessions will be relatively short lived and have
been given little consideration in the recent apartment complex
transactions. Several of the apartment complexes which directly
compete with the subject property are Coachman Crossing, Cameron
Lakes, Sunchase of Clearwater, Coral Cove, and Chesapeake. All
five apartment complexes, like the subject, feature clubhouses
and/or leasing offices, swimming pools and laundry facilities.
As the result of the city of Clearwater being nearly fully
developed, there has been relatively little population growth from
1990 to 1999. The permanent population of Clearwater is estimated
at 104,281 as of 1999 and was estimated at 98,784 in 1990.
All necessary public utilities are readily available in the
neighborhood, including water, sewer, telephone, and electrical
service. Police and fire protection are supplied by the city of
Clearwater. Local governments appear to keep the streets and
equipment properly maintained.
SITE DESCRIPTION:
The subject site is located on the south side of NE Coachman Road
about 280 feet southwest of the intersection with U.S. Highway 19
in the city of Clearwater. The physical mailing address of the
property is 2545 NE Coachman Road, Clearwater, Florida 34625.
The site is an irregular shaped non-contiguous interior parcel with
about 852 feet of road frontage on NE Coachmen Road and a depth of
about 1,335 feet. The gross area of the site is 750,310 square
feet or 17.22 acres.
The topography is basically level and slopes gradually downward
from north to south. The site is improved with a 240-unit
apartment complex known as Town Place Apartments. The parcel has
a master drainage system with water retention located at the
southeastern portion of the site. Drainage for the site appears to
be adequate. Based on the survey provided and a physical
inspection of the property, there were no adverse easements,
encroachments or conditions observed. All necessary utilities are
available to the site and the cost is similar to competing areas
within the Tampa Bay area.
The subject property is located in flood zones X and AE. Flood
zone information was determined by F.I.R.M. community panel number
125096 0010 D, dated August 19, 1991. Insurance is generally
required for improved structures within the AE zone.
No soil analysis was made available, however given the existing
improvements to the site and surrounding properties, soil
conditions would appear adequate for development. At the time of
inspection, there were no unusual conditions observed on the site
that would suggest the presence of soil contamination. It was
reported that a 1992 environmental analysis for the subject
property found favorable results.
NE Coachman Road, in front of the subject site, is a two-lane road
with masonry sidewalks and no curbs. Telephone and electric
service in the area is wood pole mounted. U.S. Highway 19 to the
east of the site is a six-lane road with center turn lanes. The
intersection of NE Coachman Road and U.S. Highway 19 is signaled
with a traffic light. Traffic counts taken in the location of the
subject for 2000 estimate travel on NE Coachman Road at 15,889 cars
daily and travel on U.S. Highway 19 at 79,379 cars daily. Travel
is by both local and transient traffic. The visibility of the site
is adequate.
Access to the site is provided only by NE Coachman Road, to the
north. Access to NE Coachman Road is available from U.S. Highway
19 to the east and Old Coachman Road or Belcher Road to the west.
Ingress and egress for the site is adequate and is easily made from
all traffic directions. Ingress and egress for the site may be
slightly more difficult during peak traffic hours.
The subject property is bordered to the north with a Walmart and to
the east with a motel and vacant commercial sites fronting on U.S.
Highway 19. To the south, the subject is bordered with vacant land
owned by Pinellas County, as well as, the spring training facility
for the Philidelphia Phillies, Major League Baseball team. About
200 feet south of the subject site, is the Seaboard Coast Line
railroad. To the west, the subject is bordered with high tension
power lines and a competing 218 unit apartment complex, known as
Coachman Crossing. The location of the high tension power lines
and the railroad tacks are believed to have no significant adverse
influence on the subject property. Located within the complex, but
separately owned, is a public tennis facility. The land where the
front entrance is located, belongs to the tennis facility, however
the apartment complex maintains the entrance and has an ingress and
egress easement over the land. The existing use of the subject
site as improved with an apartment complex provides a good
transition from commercial to residential development.
The subject site is zoned MDR (Medium Density Residential District)
under the jurisdiction of the City of Clearwater. The
comprehensive land use plan, indicates that the subject has a land
use of MD (Medium Density Residential 15 u.p.a.). The zoning
classification and land use are compatible and the existing
improvements appear to comply with zoning.
The enactment of Concurrency Laws in the state of Florida, which
became effective January 1, 1990, can directly impact on the use of
a site. Concurrency is part of the 1985 Growth Management Act,
which states in part that all of an area's infrastructure which are
or will be affected by the development of a property must be in
place or concurrent with development. Concurrency would appear to
have no adverse influence on the subject property.
IMPROVEMENT DESCRIPTION:
The subject is improved with twenty-four two-story or three-story
garden style walk-up apartment building containing 240 units.
Amenities for the apartment complex include a leasing office, a
swimming pool and spa, tennis courts, and a laundry/maintenance
room. The apartment buildings were constructed in 1984.
The buildings are irregular in shape and uniformly arranged on the
site, with the leasing office, swimming pool and tennis courts
located toward the southern rear portion of the site. The
construction quality of the apartment complex is average cost. The
exterior walls are wood frame with wood siding. The roof designs
are gable, constructed of a wood truss system with a wood deck and
a composition shingle cover. Aluminum gutters and down spouts are
not provided. The foundations of the buildings are reinforced
concrete slabs. Windows are aluminum sliding. Exterior doors are
metal and interior doors are hollow core. Covered entries are
located at the front of each of the units.
The total rentable area of the buildings is 202,004 square feet.
For the purpose of this report, the rentable area includes exterior
and common walls. The square foot sizes are based on the physical
measurements. The leasing office is 854 square feet in size and
the laundry/maintenance room is 1,056 square feet in size. The six
washers and six dryers in the laundry/storage room are all leased
by the apartment complex.
Landscaping is mature and consists of full sod, small to large
trees, and attractive shrubbery. The landscaped areas are
adequately maintained and irrigated by a full sprinkler system
which draws water from the lake.
Parking, as well as, ingress and egress are asphalt paved and
maintained in adequate condition. There are 397 open parking
spaces provided and all are located relatively close to the units.
The apartment complex has 1.65 parking spaces for each unit, which
is considered adequate.
The individual units in the complex are made up of four different
type floor plans, two one-bedroom units and two two-bedroom units.
The smallest of the floor plans is the one-bedroom one-bath Jasmine
model. These units are 525 square feet in size and there are 36
located within the complex. The largest one-bedroom one-bath unit
is the Gardenia model. The complex has 76 of these 720 square foot
units. The next larger floor plan is a two-bedroom one-bath model
known as the Azalea. These units are 877 square feet in size and
there are 32 located within the complex. The largest and most
abundant of the floor plans is the Hibiscus Model. The complex has
96 of these 1,045 square foot units. All of the floor plans
provide living rooms with dining areas. All of rooms in each of
the floor plans are adequate in size and appear to provide adequate
functional utility. Units include a good amount of closet space.
MODEL UNITS TYPE SIZE
Jasmine 36 3Rm/1Br/1Bth 525
Gardenia 76 3Rm/1Br/1Bth 720
Azalea 32 4Rm/2Br/1Bth 877
Hibiscus 96 4Rm/2Br/2Bth 1,045
Total 240 848 Rooms 202,004
Weighted Average Unit Size = 842 Square Feet
Unit interiors are of average quality construction. The floors are
covered with average quality carpet and vinyl. The vinyl areas are
located at the foyers, kitchens, baths and sun room areas. All of
the units have 30 gallon water heaters, 125 amp electrical panels
and central air systems. Standard kitchen equipment includes a
refrigerator, a range/oven with a hood fan, a dishwasher, and a
disposal. Units are individually metered for electrical service
and have telephone and cable television hook-ups. Hook-ups for
washers and dryers are optional in all of the models. Each unit is
equipped with a fire alarm.
As of the date of inspection, the apartment complex had 29 vacant
units. All of the vacant units were in rentable condition. The
current asking rent is $580 a month for the Jasmine units, $600 to
$640 a month for the Gardenia units, $705 to $725 a month for the
Azalea units, and $760 to $790 a month for the Hibiscus units.
Rent premiums are charged washer and dryer hook-ups and view
amenities. Tenants are responsible for payment of electric, water,
sewage, telephone and cable television service. The subject
complex has two nonrevenue producing units. One is used as a model
and the other is occupied by the assistant manager. The property
manager receives compensation in lieu of the use of a two-bedroom
unit free of charge.
The subject property is well maintained in average condition with
no signs of items which are in need of immediate repair. As is
typical with large wood frame apartment complexes, some minor signs
of exterior wood rot were observed at the time of inspection.
Roofs and exterior paint appear to be in adequate condition.
Asphalt resurfacing and striping will likely be required in the
near future. The unit interiors and appliances are generally
maintained on a continual basis.
Due to the age of the improvements, the presence of hazardous
materials used in the construction, such as asbestos, is less
likely. No environmental audit has been made available, however it
was reported that a 1992 environmental analysis for the subject
property found favorable results.
HIGHEST AND BEST USE:
"The reasonably probable and legal use of vacant land or an
improved property, which is physically possible, appropriately
supported, financially feasible, and that results in the highest
value."(1)
HIGHEST AND BEST USE AS IMPROVED:
The value of the site with the existing improvements is greater
than the site value alone. There are no known modifications that
could be made to the improvements that would feasibly increase
market value. Thus, the highest and best use of the subject is
continue use as a 240-unit apartment complex.
SALES COMPARISON APPROACH:
Following this section is a summary and adjustment chart for the
improved comparables used for comparison. Improved comparable sale
information, photographs and a location map are provided at the
addendum.
Where appropriate, adjustments were made to the comparables to
account for material differences from the subject. The comparables
have sale prices which were compared on the basis of unit sale
prices, room sale prices and leasable building square foot sale
prices.
Our search for improved comparable sales found 8 apartment complex
sales in the Pinellas County market that were constructed in the
1980's and sold within the last 12 months. The complexes ranged
from 188 units to 354 units in size and had unit sale prices from
$39,472 to $70,175. The four comparables that will be cited for
comparison well bracket the physical characteristics of the subject
property and provide a good indication of market value for the
subject property.
Improved comparable 1 is the sale of the Chesapeake apartment
complex. The complex is located just west of U.S. Highway 19 in
Dunedin and has limited traffic visibility. The complex was
constructed in 1985, is overall average quality for the time period
it was constructed and has an average unit size of 750 square feet.
The property was in overall average condition at the time of sale.
There is an ongoing project to replace polyurethane piping in the
complex, but appeared to have little or no influence on the
purchase price. The sale price was recorded at $13,973,400, but
apparently did not include a down payment reported at $1,223,400.
The capitalization rate was reported at 8.40% to 8.75% based on
actual income projections at the time of sale and 9.0% based on the
purchasers annual projections.
(1)Appraisal Institute, The Appraisal of Real Estate, Eleventh
Edition (Chicago: Appraisal Institute, 1996), 297.
Improved comparable 2 is the sale of the Hudson Point apartment
complex, formerly known as Post Bay. The complex is located on 4th
Street North in Gateway area of St. Petersburg, but has limited
traffic visibility. The complex was constructed in 1988, is
overall slightly above average quality for the time period it was
constructed and has an average unit size of 844 square feet. The
property was in overall average condition at the time of sale. The
capitalization rate was reported at about 8.0% to 8.65% based on
actual income projections at the time of sale.
Improved comparable 3 is the sale of the Cameron Lakes apartment
complex. The complex is located just west of U.S. Highway 19 in
Clearwater and has limited traffic visibility. The complex was
constructed in 1986, is overall average quality for the time period
it was constructed and has an average unit size of 1,001square
feet. The property was in overall average condition at the time of
sale. The capitalization rate was reported at about 8.6% based on
actual income projections at the time of sale.
Improved comparable 4 is the sale of the West Port Colony apartment
complex. The complex is located just east of 4th Street North in
Gateway area of St. Petersburg, but has limited traffic visibility.
The complex was constructed in 1989, is overall slightly above
average quality for the time period it was constructed and has an
average unit size of 813 square feet. The property was in overall
average condition at the time of sale. The capitalization rate was
reported at about 8.75% to 9.25% based on annual projections. The
buyer plans about $2,300,000 in capital improvements to the
property and has already made about $200,000 in improvements since
the time of purchase.
All of the comparables were adjusted for differences as compared to
the subject and have adjusted prices between $51.06 and $62.08 a
square foot, between $12,339 and $15,067 a room and between $44,000
and $50,303 a unit. The average adjusted price per square foot is
$56.51, the average adjusted price per room is $13,795 and the
average adjusted price per unit is $47,747.
Based on the cited comparables, it is our opinion that the subject
has an estimated market value, as of the date of the valuation, of
about $57.00 a square foot, $13,500 a room and $48,000 a unit.
202,004 Sq. Ft. X $57.00 a Square Foot =$11,514,228
848 Rooms X $13,500 a Room =$11,448,000
240 Units X $48,000 a Unit =$11,520,000
The three units of comparison have similar value conclusions and
were given roughly equal weight.
Estimated Value by the Sales Comparison Approach = $11,500,000
INCOME CAPITALIZATION APPROACH:
The following is a summary of rental rates for the rent comparables
used for comparison. Rent comparable photographs and a rent
comparable location map are provided at the addendum of the report.
RENT COMPARABLE COMPARISON CHART
COMP. # Subject #1 #2 #3
COMPLEX: Town Place Coachman Crossing Cameron Lakes Coral
Cove
LOCATION: 2545 NE Coachman 2481 NE Coachman 2550 Stag Run
Blvd 25 N Belcher
UNIT/RENT:
1Bedroom/1Bath
1Bedroom/1Bath
2Bedroom/1Bath
2Bedroom/2Bath 2Bedroom/2Bath
540sf: $580
720sf: $600-$640
877sf: $705-$725
1,045sf: $760-$790
652sf: $629-$659
748sf: $705-$719
873sf: $799-$815
1,078sf: $869-$915
791sf: $710
1,021sf: $820
1,268sf: $880
550sf: $550
616sf: $619
787sf: $689
936sf: $749
QUALITY: Average Average Average Average
CONDITION: Average Average Average Average
YEAR BUILT: 1985 1985 1986 1985
AMENITIES: Average Average Average Average
CONCESSIONS: 1 Month Free 2 Month Free 1 Month Free Select
Units
UTILITIES INCLUDED: None None None None
UNITS: 240 218 207 200
VACANCY: 12% 11% 9% 9%
The current asking rent is $580 a month for the Jasmine units, $600
to $640 a month for the Gardenia units, $705 to $725 a month for
the Azalea units, and $760 to $790 a month for the Hibiscus units.
Rent premiums are charged for washer and dryer hook-ups and view
amenities. The monthly asking rents for the subject appear to be
in line with the market.
Based on a review of the rent roll provided, monthly rental rates
for the Jasmine units in the complex range from a low of $525 to a
high of $580, with a mean of $569, a median of $565 and a mode of
$565. Rental rates for the Gardenia units range from a low of $525
to a high of $665, with a mean of $607, a median of $605 and a mode
of $605. Rental rates for the Azalea units range from a low of
$685 to a high of $750, with a mean of $706, a median of $705 and
a mode of $705. Rental rates for the Hibiscus units range from a
low of $725 to a high of $835, with a mean of $767, a median of
$760 and a mode of $755.
In consideration of both the existing rental rates and current
asking rates, market rent for the small one-bedroom units is
estimated at $575, market rent for the large one-bedroom units is
estimated at $610, market rent for the small two-bedroom units is
estimated at $710 and market rent for the large two-bedroom units
is estimated at $775.
Vacancy and expense information is based on an operating history
for the subject property and supported with data gathered on
comparable properties in the Tampa Bay area. The projected
stabilized market vacancy and collection loss is estimated at 7%,
with other income of 3%. Total expenses are estimated at $3,877 a
unit or 49.3% of effective gross income.
As follows is the reconstructed operating statement for 2001, the
budget for 2002 and our estimated annual income and expense for the
projection period. The projected income and expense figures are
consistent with figures found in the direct capitalization
analysis.
Investors are currently purchasing well-maintained apartment
complexes at capitalization rates of about 8.0% to 9.25%. A survey
in the Fourth Quarter 2001 issue of Valuation Insights &
Perspectives, published by the Appraisal Institute, indicates
required capitalization rates for apartment properties between 7.5%
and 10.0%. Capitalization rates were available for all four
improved comparables used in the sales comparison approach.
Improved comparable 1 had a capitalization rate at about 8.40% to
8.75%, improved comparable 2 had a capitalization rate at about
8.0% to 8.65%, improved comparable 3 had a capitalization rate at
about 8.6% and improved comparable 4 had a capitalization rate of
about 8.75% to 9.25%. The capitalization rates for improved
comparables 1 through 3 were based on actual income projections at
the time of sale. The capitalization rate for the improved
comparable 4 was based on projected income by the purchaser after
consideration for proposed improvements to the property .
Conversations with area lenders indicated that financing could be
obtained for a property such as the subject at an interest rate of
about 7.25% fixed. The typical loan is amortized over 25 years
with a three to five-year balloon. The typical loan to value ratio
for a property such as the subject is about 75% and the typical
required debt coverage ratio is about 1.25. The equity dividend
rate for the subject is estimated at 10.00%. The capitalization
rate for the subject by both the band of investment and the debt
coverage ratio are estimated as follows:
BAND OF INVESTMENTS
Mortgage 0.75 X 0.086737 = 0.065053
Equity 0.25 X 0.100000 = 0.025000
0.090053
Rounded 9.0%
DEBT COVERAGE RATIO
DCR LV MC OAR
1.25 75% 0.086737 = 0.0813 or 8.1%
The capitalization rate for the subject property is estimated at
8.5%.
Based on our analysis, which is summarized on the following page,
the indicated value of the subject property at stabilized occupancy
by the income capitalization approach is estimated to be:
ESTIMATED VALUE BY THE INCOME CAPITALIZATION APPROACH $11,300,000
INCOME CAPITALIZATION APPROACH SUMMARY
RECAPITULATION AND FINAL RECONCILIATION:
SALES COMPARISON APPROACH $11,500,000
INCOME CAPITALIZATION APPROACH $11,300,000
The sales comparison and income capitalization approaches indicate
similar value conclusions and are supported by market evidence.
Therefore, based on the cited market data and the foregoing
analysis, the market value of the fee simple interest in the
subject is estimated to be:
FEE SIMPLE MARKET VALUE
AS OF THE APRIL 8, 2002 EFFECTIVE DATE
ELEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($11,500,000)
ESTIMATED MARKETING TIME AND EXPOSURE TIME:
We have reviewed the typical marketing times for apartment
complexes in the Tampa Bay area, as well as, discussed the
marketing time with knowledgeable commercial brokers. If
appropriately priced and marketed, the estimated exposure time for
the subject property would have been about 3 to 9 months.
Marketing time of the subject property is also estimated at 3 to 9
months.
ASSUMPTIONS AND LIMITING CONDITIONS
1. The legal description furnished is assumed to be correct. No
responsibility is assumed for the accuracy of the legal
description, or for matters legal in character nor is any
opinion rendered herein as to title which is assumed to be
good and merchantable. It is assumed that the property is
free and clear of liens and encumbrances.
2. It is assumed that surveys and/or plats furnished to or
acquired by the appraiser and used in the making of this
report are correct. The appraiser has not made a land survey
or caused one to be made and, therefore, assumes no
responsibility for their accuracy. Drawings in this report
are to assist the reader in visualizing the property and are
only an approximation of grounds and/or building plan.
3. Certain data used in compiling this report was given to the
appraiser by the client, his counsel, employees, and/or agent,
or from other sources believed to be reliable; however, we do
not guarantee the correctness of such data and assume no
liability or responsibility for its complete accuracy. Should
the user of this report be or become aware of conditions that
would materially alter the conclusions of this report, the
user agrees to immediately notify the appraiser. The
appraiser reserves the right to modify the report to consider
such conditions.
4. The soil and the area the property being appraised appears to
be firm and solid, unless otherwise stated. Subsidence in the
area is unknown or uncommon but the appraiser does not warrant
against this condition or occurrence.
5. Subsurface rights (mineral and oil) were not considered in
making this report, unless otherwise stated. Any riparian
rights and/or littoral rights indicated by survey, map or plat
are assumed to go with the property unless easements or deeds
of record were found by the appraiser to the contrary.
6. The appraiser made a limited visual inspection of the subject
property. The appraisal does not constitute an inspection for
compliance with building, fire, zoning or ADA requirements.
The appraiser assumes that there are no hidden or unapparent
conditions of the property, subsoil or structures which would
render it more or less valuable than otherwise apparently
comparable property. The appraiser assumes no responsibility
for such conditions or for engineering which might be required
to discover such conditions.
7. Possession of this report, or copy thereof, does not carry
with it the right of publication or reproduction nor may it be
used by anyone but the client without prior written consent of
the client and the appraiser and in any event only in its
entirety.
8. This appraisal has been prepared solely for the private use of
the client who is listed as the addressee, for the purpose and
function intended. No other party is entitled to rely on the
information, conclusions or opinions contained herein, without
written consent of the appraiser. The appraiser is not
responsible for the unauthorized use of this report.
9. It is assumed that the property is in full compliance with all
federal, state and local laws and regulations, unless
noncompliance is stated, defined and considered in the
appraisal report. It is also assumed that any licenses,
consents or other administrative approvals, required for the
operation of the property, have been or can be obtained and
renewed for any use on which the value estimate is based.
10. It is assumed that the property is under responsible ownership
and competent management.
11. The appraiser, by reason of this report, is not required to
give testimony in court with reference to the property herein
appraised nor is he obligated to appear before any
governmental body, board or agent unless arrangements have
been previously made thereof.
12. The distribution of the total valuation in this report between
land and improvements applies only under the existing program
of utilization. The separate valuations for land and
improvements must not be used in conjunction with any other
appraisal and is invalid if so used.
13. Neither all nor any part of the contents of this report will
be conveyed to the public through advertising, public
relations, news, sales or other media without the written
consent and approval of the author, particularly as to the
valuation conclusions, the identity of the appraiser or firm
with which he is connected, or any reference to the Appraisal
Institute, or the MAI designation.
14. We are not expert in determining the presence or absence of
hazardous substances, defined as all hazardous or toxic
materials, wastes, pollutants or contaminants (including, but
not limited to, asbestos, PCB, UFFI, or other raw materials or
chemical(s) used in construction, or otherwise present on the
property. We assume no responsibility for the studies or
analyses which would be required to determine the presence or
absence of such substances or for loss as a result of the
presence of such substances. The value estimate is based on
the assumption that the subject property is not so affected.
We do, however, recommend an environmental audit for the
subject property.
15. Acceptance and/or use of this appraisal report constitutes
acceptance of the data, analysis, assumptions and limiting
conditions contained herein.
CERTIFICATE OF APPRAISAL:
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
are my personal, unbiased professional analyses, opinions, and
conclusions.
- - I have no present or prospective interest in the property that
is the subject of this report, and I have no personal interest
or bias with respect to the parties involved.
- - My compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the
cause of the client, the amount of the value estimate, the
attainment of a stipulated result, or the occurrence of a
subsequent event.
- - My reported analyses, opinions, and conclusions were
developed, and this report has been prepared, in conformity
with the Uniform Standards of Professional Appraisal Practice;
and the requirements of the Code of Professional Ethics and
the Standards of Professional Practice of the Appraisal
Institute. Unless otherwise stated herein, the departure
provision does not apply.
- - William W. Atkinson made a personal inspection of the property
that is the subject of this report. Robert E. Riggins did not
inspect the property.
- - No one provided significant professional assistance to the
person signing this report.
- - The appraiser has preformed within the context of the
competency provision of the Uniform Standards of Professional
Appraisal Practice.
- - This report was not based on a requested minimum valuation, a
specific valuation, or the approval of a loan.
- - The use of this report is subject to the requirements of the
Appraisal Institute relating to review by its duly authorized
representatives.
- - As of the date of this report, both William W. Atkinson and
Robert E. Riggins have completed the requirements of the
continuing education program of the Appraisal Institute.
- - This appraisal recognizes the following definition of value:
Market Value: as defined in Chapter 12, Code of Federal
Regulations, Part 34.42(f) is, "The most probable price which
a property should bring in a competitive and open market under
all conditions requisite to a fair sale, the buyer and seller
each acting prudently knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition
is the consummation of a sale as of a specified date and the
passing of title from seller to buyer under conditions
whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised, and
acting in what they consider their own best interests;
3. a reasonable time is allowed for exposure in the open
market;
4. payment is made in terms of cash in United States dollars
or in terms of financial arrangements comparable thereto;
and
5. the price represents the normal consideration for the
property sold unaffected by special or creative financing
or sales concessions granted by anyone associated with
the sale.
Based on the cited market data and the foregoing analysis, the
market value of the fee simple interest in the subject is estimated
to be:
FEE SIMPLE MARKET VALUE
AS OF THE APRIL 8, 2002 EFFECTIVE DATE
ELEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($11,500,000)
Riggins, Atkinson, Combs & Associates, Inc.:
/s/ Robert E. Riggins /s/ William W. Atkinson
Robert E. Riggins, MAI, SRA, CCIM William W. Atkinson, MAI, CCIM
President Vice President
State-Certified General State-Certified General
Appraiser 0000605 Appraiser 0001221
Did Not Inspect
ADDENDUM
APPRAISAL REPORT OF
Town Place Apartments
A 240-Unit Apartment Complex
2524 NE Coachman Road
Clearwater, Florida 34625
PREPARED FOR
Decade Companies Income Properties, Ltd.
Attention: Jeffrey Keierleber
General Partner of Decade Companies
250 Patrick Boulevard, Suite 140
Brookfield, Wisconsin 53045
TYPE OF REPORT
Limited, Summary
EFFECTIVE DATE
April 8, 2002
BY /s/ Robert E. Riggins
Robert E. Riggins, MAI, SRA
State-certified general real estate appraiser
0000605
/s/ William W. Atkinson
William W. Atkinson, MAI, CCIM
State-certified general real estate appraiser
0001221
RIGGINS, ATKINSON, COMBS & ASSOCIATES, INC.
18840 U.S. HIGHWAY 19 NORTH, SUITE 401
CLEARWATER, FLORIDA 33764
(727) 530-9793
April 17, 2002
Decade Companies Income Properties, Ltd.
Attention: Jeffrey Keierleber
General Partner of Decade Companies
250 Patrick Boulevard, Suite 140
Brookfield, Wisconsin 53045
Re: Summary Appraisal Report
Town Place Apartments
A 240-Unit Apartment Complex
2524 NE Coachman Road
Clearwater, Florida 34625
Dear Decade Companies Income Properties, Ltd.:
As requested, we have prepared a summary appraisal on the above
captioned property. The purpose of the appraisal is to estimate
the market value of the subject property in "as is" condition.
Market value is defined in the certificate of the appraisal.
This report is the result of a limited appraisal process in that
certain allowable departures from the specific guidelines of the
Uniform Standards of Professional Appraisal Practice (USPAP) were
invoked. This is a Limited Appraisal because it relies solely on
the Sales Comparison and Income Capitalization Approaches. The
intended user of this report is warned that the reliability of the
value conclusion provided may be impacted to the degree there is
departure from specific guidelines of USPAP.
Both the appraisal report and attached addenda that accompany this
letter describe the approaches to value used and contain the data,
analysis, assumptions and limiting conditions on which the value
conclusions have been based. The assumptions and limiting
conditions of the report are included in the text.
Based on the cited data and analysis contained within the appraisal
report, attached addenda, and appraisal file, it is our opinion and
conclusion that the market value of the subject property, is
estimated at:
FEE SIMPLE MARKET VALUE
AS OF THE APRIL 8, 2002 EFFECTIVE DATE
ELEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($11,500,000)
Respectfully submitted:
/s/ Robert E. Riggins /s/ William W. Atkinson
Robert E. Riggins, MAI, SRA, CCIM William W. Atkinson, MAI, CCIM
President Vice President
State-Certified General State-Certified General
Appraiser 0000605 Appraiser 0001221
Did Not Inspect
NEIGHBORHOOD MAP
[Picture not filed]
TAX MAP
[picture not filed]
SUBJECT PHOTOGRAPHS
[pictures not filed]
SUBJECT PROPERTY - FACING SOUTHEAST
FROM NE COACHMAN ROAD
SWIMMING POOL AND SURROUNDING APARTMENTS
TENNIS COURTS
APARTMENT BUILDINGS AND PARKING AREA
INTERIOR OF APARTMENT UNIT
INTERIOR OF APARTMENT UNIT
NE COACHMAN ROAD - FACING EAST
NE COACHMAN ROAD - FACING WEST
IMPROVED COMPARABLE NO. 1:
[pictures not filed]
Chesapeake Apartments
2307 Cumberland Road
PARCEL NUMBER: 30-28-16-00000-210-0300
DATE: December 2001
GRANTOR: Phoenix Life Insurance Company
GRANTEE: Chesapeake Apartment
O.R. BOOK & PAGE: 11756/2549
SALE PRICE: $15,196,800 ($13,973,400 -Recorded)
FINANCING: 1st KeyBank National Association $12,750,000
DESIGN: Garden
CONSTRUCTION: Frame, Average Cost
CONDITION: Average for Age
UNIT MIX: No. Total
Units Rms/Bd/Ba Sq. Ft. Sq. Ft.
96 3/1/1 600 - 796 = 59,616
80 3/1/1 662 - 835 = 53,680
64 3/1/1 718 = 45,952
88 4/2/2 911 - 926 = 80,828
26 4/2/2 980 = 25,480
354 1,176 Rooms 750 SF 265,556
YEAR BUILT: 1985
RENTABLE BUILDING AREA: 265,556 Square Feet
AVERAGE UNIT SIZE: 750 Square Feet
AMENITIES: Lakes, Swimming Pool, Tennis and
Racquetball Courts, and Clubhouse
PROJECT SIZE: 354 Units/27.50 Acres/12.87 u.p.a.
UNIT VALUES:
$ Per Unit $42,929
$ Per Room $12,922
$ Per Square Foot $57.23
O.A.R. 8.40% to 8.75%
COMMENTS:
The actual sale price for the apartment complex was not disclosed,
but was reported to be above the $13,973,400 recorded sale price
and in the low $40,000 a unit price range. There was a reported
down payment of $1,223,400, which down payments are not always
reflected in the recorded sale prices. For analysis, the down
payment has been added to the recorded sale price, which indicates
a price of $42,928 a unit, which is consistent with the
confirmation. The property was believed to be a stabilized
occupancy at the time of sale with typical deferred maintenance and
an ongoing project to replace polybutylene piping. The
capitalization rate was reported at 8.40% to 8.75% based on actual
income projections at the time of sale and 9.0% based on the
purchasers annual projections.
IMPROVED COMPARABLE NO. 2:
[pictures not filed]
Hudson Point
(formerly known as Post Bay)
11901 4th Street North
PARCEL NUMBER: 07-30-17-72696-001-0010
DATE: February 2002
GRANTOR: Post Apartment Homes, LP
GRANTEE: Hudson Asset Management Ltd
O.R. BOOK & PAGE: 11820/2223
SALE PRICE: $18,100,000
FINANCING: First National Bank of Florida $14,450,000
DESIGN: Garden
CONSTRUCTION: Frame, Average+ Cost
CONDITION: Average for Age
UNIT MIX: No. Total
Units Rms/Bd/Ba Sq. Ft. Sq. Ft.
48 2/1/1 558 = 26,784
72 3/1/1 750 = 54,000
72 3/1/1 630 = 45,360
48 4/2/1 970 = 46,560
12 4/2/2 1,150 = 13,800
60 4/2/2 1,280 = 76,800
312 1,008 Rooms 844 SF 263,304
YEAR BUILT: 1988
RENTABLE BUILDING AREA: 263,304 Square Feet
AVERAGE UNIT SIZE: 844 Square Feet
AMENITIES: Swimming Pool and Clubhouse with Fitness
Facility
PROJECT SIZE: 312 Units/12.83 Acres/24.32 u.p.a.
UNIT VALUES:
$ Per Unit $58,013
$ Per Room $17,956
$ Per Square Foot $68.74
O.A.R. 8.0% to 8.65%
COMMENTS:
The capitalization rate was reported at about 8.0% to 8.65% based
on actual income projections at the time of sale.
IMPROVED COMPARABLE NO. 3:
[picture not filed]
Cameron Lakes
2550 Stag Run Boulevard
PARCEL NUMBER: 06-29-16-00000-440-0100
DATE: December 2001
GRANTOR: Archstone-Smith Operating Trust
GRANTEE: Cameron Lakes Multihousing Limited Partnership
O.R. BOOK & PAGE: 11743/2284
SALE PRICE: $12,250,000
FINANCING: Holliday Fenoglio Fowler, L.P. $10,125,000
DESIGN: Garden
CONSTRUCTION: Frame\Masonry, Average Cost
CONDITION: Average for Age
UNIT MIX: No. Total
Units Rms/Bd/Ba Sq. Ft. Sq. Ft.
56 3/1/1 791 = 44,296
28 3/1/1 876 = 24,528
56 4/2/1 1,021 = 57,176
28 4/2/2 1,106 = 30,968
10 4/2/2 1,268 = 12,680
5 4/2/2 1,340 = 6,700
4 4/2/1.5 1,090 = 4,360
8 4/2/2 1,250 = 10,000
8 4/2/2 1,269 = 10,152
4 5/3/2 1,588 = 6,352
207 748 Rooms 1,001 SF 207,212
YEAR BUILT: 1986
RENTABLE BUILDING AREA: 207,212 Square Feet
AVERAGE UNIT SIZE: 1,001 Square Feet
AMENITIES: Lake, Swimming Pool, Racquetball Court,
and Clubhouse
PROJECT SIZE: 207 Units/18.22 Acres/11.36 u.p.a.
UNIT VALUES:
$ Per Unit $59,179
$ Per Room $16,377
$ Per Square Foot $59.12
O.A.R. 8.60%
COMMENTS:
The sale price and capitalization rate were based on a 6% vacancy
and collection loss and operating expenses of $821,742 or $3,970
a unit, including reserves.
IMPROVED COMPARABLE NO. 4:
[picture not filed]
West Port Colony
190 112th Avenue North
PARCEL NUMBER: 18-30-17-11306-001-0020
DATE: August 2001
GRANTOR: West Port St. Petersburg, Inc.
GRANTEE: West Port Colony Apartments
O.R. BOOK & PAGE: 11504/0392
SALE PRICE: $16,200,000
FINANCING: Cash
DESIGN: Garden
CONSTRUCTION: Frame, Average-Good Cost
CONDITION: Average for Age
UNIT MIX: No. Total
Units Rms/Bd/Ba Sq. Ft. Sq. Ft.
72 3/1/1 550 = 39,600
34 3/1/1 677 = 23,018
86 3/1/1 782 = 67,252
48 4/2/2 918 = 44,064
48 4/2/2 970 = 46,560
24 4/2/2 1,145 = 27,974
12 5/3/2 1,280 = 15,360
324 1,116 Rooms 813 SF 263,334
YEAR BUILT: 1989
RENTABLE BUILDING AREA: 263,334 Square Feet
AVERAGE UNIT SIZE: 813 Square Feet
AMENITIES: Swimming Pool, Spa, Tennis Courts, Racquetball
Court and Clubhouse with Fitness Facility
PROJECT SIZE: 324 Units/26.69 Acres/12.14 u.p.a.
UNIT VALUES:
$ Per Unit $50,000
$ Per Room $14,516
$ Per Square Foot $61.52
O.A.R. 8.75%-9.25%
COMMENTS:
The capitalization rate was reported at about 8.75% to 9.25% based
on the purchasers annual projections. The capitalization rate
based on actual income projections was lower. The buyer plans
about $2,300,000 in capital improvements to the property and has
already made about $200,000 in improvements since the time of
purchase.
IMPROVED COMPARABLE LOCATION MAP
[picture not filed]
RENT COMPARABLE #1
[picture not filed]
RENT COMPARABLE #2
[picture not filed]
RENT COMPARABLE #3
[picture not filed]
RENT COMPARABLE LOCATION MAP
[picture not filed]
[Item 12(c)(3)]
[THE VALUATIONS GROUP LETTERHEAD]
April 23, 2002
Decade Companies Income Properties
250 Patrick Blvd.
Suite 140
Brookfield, WI 53045-5864
Gentlemen:
The Valuations Group, Inc. ("TVG") has been advised by the
General Partner ("the General Partner") of Decade Companies
Income Properties (the "Partnership") that the Partnership and
Jeffrey L. Kierleber (the "Offerors"), severally and not jointly,
will offer to acquire up to 7,700 units of limited partnership
interest (the "Offer") in the Partnership at a price of $895 per
Interest (the "Offer Price").
The General Partner has requested that TVG evaluate and
provide an opinion as to the fairness of the Offer Price, from a
financial point of view, to the Limited Partners. In arriving
at the opinion set forth below, we have:
Reviewed the tender offer documentation (the "Offering
Document") describing the terms of the Offer and the method for
determining the Offer Price.
Reviewed written limited appraisal reports prepared by
Riggins, Atkinson, Combs & Associates, Inc. for each of the
Partnership's two remaining properties, Pelican Sound Apartments
and Town Place Apartments (the "Properties").
Reviewed the operating history and audited financial
statements of the Partnership for the year ended December 31,
2001 as summarized on Form 10-KSB filed with the Securities and
Exchange Commission (the "SEC").
Reviewed relevant provisions of the Amended and Restated
Limited Partnership Agreement dated September 30, 1996.
Discussed the Offer, the Partnership's history and future
outlook with the senior management.
Reviewed published data regarding transactions of limited
partnership interests in the informal partnership secondary
market for interests in other limited partnerships.
Performed other analyses and inquiries as deemed relevant
and appropriate.
In rendering this opinion, TVG relied, without independent
verification, on the accuracy and completeness of all appraisal,
financial and other information contained in the Offering
Document or that was otherwise furnished by the General Partner
or the Partnership. TVG has not endeavored to make an independent
assessment, evaluation or appraisal of the assets and liabilities
of the Partnership nor has it physically inspected the
Properties. In addition, TVG has relied on the representations
of the Partnership and the General Partners that any and all
financial and appraisal information provided to us was prepared
in good faith and reflects the best information available as of
the date of the Opinion; that no material changes have occurred
in the value of the Properties between April 8, 2002 and the date
of this Opinion; and that the Partnership and the General
Partners are not aware of any information or facts regarding the
Partnership or the Properties that would cause the information
supplied to TVG to be incomplete or misleading in any manner.
TVG has not been requested to, nor did it: (i) make any
recommendation to the Limited Partners or the General Partner as
to the merits of the Offer or as to whether any limited partner
should reject or accept the Offer; (ii) determine the amount of
the Offer Price (the terms of the Offer, including determination
of the amount of the Offer Price to be paid were solely derived
by the Offerors); (iii) opine as to the decision to proceed with
the Offer, alternatives to the Offer or the tax impact of the
Offer on the Limited Partners in the Partnership; or (iv) whether
or not alternative methods of determining the Offer Price would
have also provided fair results or results substantially similar
to that method used. Our opinion is based upon circumstances and
conditions as they existed and could be reasonably evaluated on
the date of the Opinion. The Opinion should not be construed as
assurance that the Offer would provide the highest possible price
to the limited partners electing to sell their interests in the
Partnership, rather that the Offer Price to be paid to the
limited partners electing to sell their interests in the
Partnership in connection with the Offer is adequate based upon
the information supplied to and analyzed by TVG. Events
occurring after the date of the Opinion could materially affect
the assumptions used in preparing this opinion.
In rendering the Opinion, TVG was most influenced by the
following considerations:
1. Based on TVG's analysis, the Offer Price represents a
discount of 32% to the value of the Partnership's remaining
adjusted net assets as of December 31, 2001 (estimated at $1,305
per unit) assuming a sale of the Partnership's remaining two
properties at their April 2002 appraised values. This level of
discount is consistent with the results of the 2001 Discount
Study published by Partnership Profiles, Inc. which indicated
that equity partnerships reporting moderate to high debt levels
and making distributions traded at an average discount of 26%
during the two month period ending May 31st, 2001. TVG believes
the additional discount spread is warranted due to substantial
uncertainty regarding the Partnership's future liquidation plans
(see item #4 below) as well as the Partnership's cash flow yield
characteristics.
2. Although TVG has not independently appraised, evaluated or
otherwise assessed the Properties for purposes of rendering the
Opinion, TVG has reviewed the appraisals and believes the
methodology, key assumptions, and resulting conclusions to be
reasonable and the documentation adequate.
3. The Offer Price is higher, by a substantial margin, than any
recently reported secondary transactions involving interests in
the Partnership. The General Partner has reported to TVG several
transactions (most occurring with related parties) occurring
since January 1999 at prices ranging from $550 - $600 per unit.
4. Although the General Partner has indicated the potential for
a near term liquidation of the Partnership, it has not yet
clearly enunciated an exit strategy and, in fact, has indicated
it may elect to pursue additional tax deferred exchange
transactions rather than selling the Partnership's remaining
properties and distributing the proceeds to Limited Partners. As
such, there currently exists substantial uncertainty as to the
Partnership's remaining holding period and future asset
composition thereby limiting the likelihood that significant
buyside interest will develop in the near term to compete with
the Offer.
5. The Offer Price will not require payment of a brokerage
commissions or transfer fees, resulting in a potential cost
savings to limited partners who might otherwise chose to sell
their interests through a third-party broker engaged in the
partnership re-sale market.
Based upon and subject to the foregoing, it is TVG's opinion
that, as of the date of the information considered in this
analysis, the Offer Price is fair, from a financial point of
view, to the Partnership's limited partners who elect to sell
their interests in the Partnership pursuant to the Offer.
Respectfully Submitted,
/s/ Michael D. Phelan
The Valuations Group, Inc.
By: Michael D. Phelan, as its President
[Correspondence Exhibits with SEC]
[Letterhead of Quarles & Brady LLP]
April 24, 2002
VIA FACSIMILE AND EDGAR
Julia E. Griffith, Esq.
Special Counsel
Office of Mergers and Acquisitions
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington DC 20549
Dear Ms. Griffith:
This letter is written in response to your letter dated April 17,
2002.
Each of your comments is addressed in the order that you
presented.
1. In future filings, include the contact information
required by Schedule TO on your cover page.
Response 1: In the future, on all of our Schedule TOs we file,
we will include the contact information, as well. We apologize
for inadvertently excluding this. We had previously sent a cover
letter with the filings to the SEC and had hoped that this would
have served the same purpose.
2. Please confirm that you intend to comply with Rule 13e-3.
If you do intend to comply, substantially revise your document to
include disclosure responsive to all of the item requirements of
Schedule 13e-3. In particular, Rule 13e-3 requires that each
issuer and affiliate engaged in a going private transaction file
a Schedule 13E-3 and furnish the required disclosures. It
appears that Jeffrey L. Keierleber, by virtue of his control of
the General Partner, as well as the General Partner itself, are
filing persons. See Item II.C.4 of the Division of Corporation
Finance's "Current Issues and Rule Making Projects" outline,
dated July 25, 2000, available on our website at www.sec.gov.
Further, note that all filing persons must comply with the
requirements of Rule 13e-3 including the fairness determination
and recommendation requirements. See Question 5 of SEC Release
No. 34-17719 (April 13, 1981). We will comment more fully when
we have seen your response.
Response 2: Jeffrey L. Keierleber and the Partnership intend to
comply with the requirements of Rule 13e-3. Pursuant to
Instruction I of Schedule 13e-3, both Jeffrey L. Keierleber and
the Partnership filed independent combined statements on Schedule
13e-3 and TO under cover of a Schedule TO. Pursuant to
Instruction J of Schedule TO, the Rule 13e-3 box was properly
marked on each Schedule TO. Item 13 of each Schedule TO also
contained the additional information required by Schedule 13e-3.
However, because of a misunderstanding in the EDGAR filing
process, the Schedule TO filings were not filed with a Schedule
13e-3 submission header, but only with Schedule TO submission
header. On April 19, 2002, the Schedule TO filings are being
filed with the Schedule 13e-3 submission header. Both Jeffrey L.
Keierleber and the Partnership comply with the recommendation and
fairness determination requirements with the disclosures provided
in the sections of the Offer to Purchase entitled "The Offer
Introduction Background" and "The Offer Fairness of the
Transaction; Reports, Opinions, Appraisals and Certain
Negotiations; No Approvals Required; No Appraisal Rights."
Summary Term Sheet
3. You make reference throughout your document to "an
unaffiliated March 20 offer of $550 per interest for a limited
number of interests". Briefly describe this offer in greater
detail, including the name of the party making the offer, and
whether or not it is still open.
Response 3: As you will note in the attached supplemental
letter, we have described the offer in greater detail, including
the name of the party making the offer and whether or not it is
still open.
4. Refer to the disclosure concerning withdrawal rights.
Please explain how you will prorate your offer and comply with
the provisions of Rule 13e-4(f)(5) requiring prompt payment for
the securities tendered. We may have further comment when we
have read your response.
Response 4: The method of proration is described in detail in
the section of the Offer to Purchase entitled "Procedure for
Tendering Interests," beginning on page 21. The proration method
is in accordance with Rule 13e-4(f)(3) and follows the terms of
the Partnership's 1996 tender offer, which was developed with the
Staff's assistance. Pursuant to Rule 13e-4(f)(3)(i), the Offer
will first accept tenders from Limited Partners who own fewer
than 100 Interests and who tender all their Interests.
Thereafter, the Offerors will prorate tenders based upon the
ratio of the number of Interests tendered by (i) each Limited
Partner who owns more than 100 Interests or (ii) Limited Partners
who own fewer than 100 Interest, but do not tender all of their
Interests, and the total number of Interests tendered under these
circumstances. Please see Response 5 regarding complying with
Rule 13e-4(f)(5) prompt payment requirements.
5. It does not appear that your proposed means of payment, by
sending a check by first class mail up to five days after the
expiration date comports with prompt payment. Tell us what
consideration you have given to more expeditious payment methods.
Response 5: The Offerors intend to promptly pay for all
purchases. In fact, it is hoped that they could deliver a check
within one or two days of the Expiration Date. However, in the
event of a proration, it might be a little difficult to calculate
the numbers and provide for payment. Therefore, the parties have
provided for the "by five days." Our hope is that without
proration we could actually pay within one or two days. With
proration, it could take us two to three days to calculate what
amounts are being purchased. Please note our revised disclosure
in the supplemental offer where we note this in more detail.
Fairness of the Transaction ... No Appraisal Rights
6. We note that you incorporate by reference the financial
information required by Item 1010(a) of Regulation M-A. Item
1010(c) requires that at least a summary of that information be
disseminated to option holders. See Instruction 6 to Item 10 of
Schedule TO and Regulation M-A telephone interpretation H.7,
available at www.sec.gov in the July 2001 Supplement to the
Division of Corporation Finance's Manual of Publicly Available
Telephone Interpretations on the results.
Response 6: See the supplemental letter where we have included a
summary of the information. We also note that our pro forma
information also included financial information on the results.
Withdrawal Rights
7. In addition to the withdrawal rights described in your
documents, please disclose that any Interests you have not
accepted for exchange by the fortieth business day after
commencement may be withdrawn. See Rule 13e-4(f)(2)(ii).
Response 7: Please see the revised disclosure in the
supplemental letter.
Certain Conditions to the Offer
8. Refer to subparagraph (c). You disclose that your offer may
be amended or terminated if, in your reasonable judgment, there
has been any actual or threatened change in the business,
operations or prospects of the company. This appears to include
both positive and negative effects on the business. Revise your
disclosure to clarify those changes that would allow amendment or
termination of the offer.
Response 8: Please see the revised conditions terms in the
supplemental letter.
9. The statement that the conditions may be waived by the
Offerors "in whole or in part at any time and from time to time
in its reasonable discretion" implies that conditions may be
waived after expiration. Revise the disclosure to clarify that
all conditions, other than regulatory approvals, will be
satisfied or waived prior to expiration.
Response 9: Please see the revised terms in the supplemental
letter.
Very truly yours,
Quarles & Brady LLP
/s/Walter J. Skipper
Walter J. Skipper
[Correspondence Exhibits with SEC]
[Letterhead of Quarles & Brady LLP]
April 26, 2002
VIA FACSIMILE AND EDGAR
Julia E. Griffith, Esq.
Special Counsel
Office of Mergers and Acquisitions
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington DC 20549
Dear Ms. Griffith:
This letter is written in response to your letter dated April
25, 2002.
Each of your comments is addressed in the order that you
presented.
1. It appears that the information called for by Schedule TO
and Schedule 13E-3 should be filed as an amendment to those
documents rather than as a supplemental letter to interest holders.
Please revise your documents accordingly.
Response 1: We have revised the letter to the Limited
Partners to reflect that the information contained in the letter is
an amendment to the Offer to Purchase dated April 8, 2002, rather
than a supplemental letter. The letter does alert Limited Partners
that they should read the information in the letter, together with
the Offer to Purchase. The Schedule TO/13E-3 filing will confirm
that the information in the letter amends the Offer to Purchase.
The Partnership and other clients of the firm here have previously
communicated amendments to offers to purchase with Limited Partners
by sending them these types of letters. The SEC has not previously
commented on the Partnership's method of communicating the
amendments.
Schedule TO-I and Schedule 13e-3
2. The cover page of your filings should reflect the General
Partner, Mr. Keierleber, and the Issuer as filing persons. Each
filing person must specifically respond to each of the
requirements of the schedule. If the filing person has adopted
the conclusions or analysis of another person, the disclosure
must so state. Please revise.
Response 2: Mr. Keierleber and the Issuer (the Decade
Companies Income Properties (the "Partnership)) independently filed
a combined Schedule TO/13e-3, under the Schedule TO and Schedule
13e-3 EDGAR submission headings. Each of the Schedule 13e-3
filings specifically respond to the requirements of Schedule 13e-3
for Mr. Keierleber and the Partnership, respectively.
3. Please revise your document to include disclosure
responsive to Items 6 and 7 of Schedule 13e-3. See Items 1006 and
1013 of Regulation M-A. In particular, explain the purpose of the
transaction with respect to the Company and unaffiliated holders of
the partnership, the reasons for entering into the transaction at
this time, and the effects of the transaction on the company and
the unaffiliated holders. Consider Instruction 1 to Item 1013 of
Regulation M-A in drafting your response.
Response 3: The Offer to Purchase currently includes
disclosures responsive to Items 1006 and 1013 of Regulation M-A.
Item 1006 requires certain disclosures regarding purpose of the
transaction and plans or proposals. The Schedule TO/13e-3 filings
for Mr. Keierleber and the Partnership incorporate by reference the
following portions of the Offer to Purchase in response to Item
1006: "The Offer Introduction Background" which discusses the
purpose of the offer; and "The Offer Introduction Post Offer
Plans" which discusses any plans or proposals the Partnership or
Mr. Keierleber in response to the requirements of Item 1006(c).
Item 1013 requires certain disclosures regarding purposes,
alternatives, reasons and effects of the going-private transaction.
The Schedule TO/13e-3 filings for Mr. Keierleber and the
Partnership incorporate by reference the following portions of the
Offer to Purchase in response to Item 1013: "The Offer
Introduction Background" which discusses the reasons for the
offer; "The Offer Introduction Certain Effects of the Offer"
which discusses certain effects of Offer; and "The Offer Risk
Factors" which further discusses certain effects of tendering in
the Offer. Also, the next amendment to the Schedule TO/13e-3
filings will incorporate by reference the portion Offer to Purchase
entitled "The Offer Certain Federal Income Tax Consequences"
under this requirement.
4. Disclose both the benefits and the detriments of the
transaction to the subject company, the unaffiliated holders and
the affiliates.
Response 4: The benefits and detriments of the transaction to
the subject company, the unaffiliated holders and the affiliates
can be found in the following portions of the Offer to Purchase:
"The Offer Introduction Background," "The Offer Introduction
Post Offer Plans," "The Offer Introduction Interests of
Certain Persons in the Offer," "The Offer Introduction Certain
Effects of the Offer" and "The Offer Risk Factors."
5. Include a discussion of the effects of the transaction on
the General Partner's and Mr. Keierleber's interest in the net book
value and net earnings of the company in terms of both dollar
amounts and percentages. See Instruction 3 to Item 1013 of
Regulation M-A.
Response 5: Please see the revised disclosure in the
amendment letter.
6. Revise your fairness disclosure to include a discussion
of all of the factors mentioned in Item 1014 of Regulation M-A. If
a filing person did not consider one of the factors, the disclosure
should reflect that. If a filing person adopted the conclusions of
an advisor or another filing person, the disclosure must reflect
that as well.
Response 6: Please see the revised disclosure in the
amendment letter. In addition, some of the factors listed in
Instruction 2 to Item 1014 are currently listed in the Offer to
Purchase under "Fairness of the Transaction; Reports, Opinions,
Appraisals and Certain Negotiations; No Approvals Required; No
Appraisal Rights." The items are comparable as follows: (i)
current market prices the Offer to Purchase indicates, on page
18, that the Offerors considered (i) an unaffiliated March 2002
offer of $550 per Interest; and (ii) historical market prices the
Offer to Purchase indicates that the Offerors considered (g)
repurchase prices paid by the Partnership in the last three years
and (h) the price paid in secondary market transactions over the
last three years.
7. We note your references to the underlying analysis,
supporting information and additional information generated in
connection with the Appraisal Report. File these materials as
exhibits to the Schedule 13e-3. See Items 1015 and 1016 of
Regulation M-A. We may have further comment when we have reviewed
the material.
Response 7: We intend to file the two appraisal reports as
exhibits to the next amendments of the Schedule TO/13e-3 filings
for both Mr. Keierleber and the Partnership. All of the
information in the Amendment came from these reports.
Very truly yours,
Quarles & Brady LLP
/s/ Walter J. Skipper
Walter J. Skipper