A Self-Contained Real Estate
Appraisal Report of
A Existing 28 Unit Independent Living Facility
Located at 78 Canyon Diablo
Just Outside the Corporate Limits of Sedona, Arizona and
Within the Village of Oak Creek
For
MMR Investment Bank
Post Office Box 781440
Witchita, Kansas 67278-1440
As Of
January 10, 1999
Prepared by
Robert M. McSherry, MAI
Louisiana State Certified General Real Estate Appraiser No. G0891
3760 Chelsea Drive
Baton Rouge, Louisiana 70809
A Self-Contained Real Estate
Appraisal Report of
A Existing 28 Unit Independent Living Facility
Located at 78 Canyon Diablo
Just Outside the Corporate Limits of Sedona, Arizona and
Within the Village of Oak Creek
For
Colonial Trust Company
5336 North 19th Avenue
Phoenix, Arizona 85015
As Of
January 10, 1999
Prepared by
Robert M. McSherry, MAI
Louisiana State Certified General Real Estate Appraiser No. G0891
3760 Chelsea Drive
Baton Rouge, Louisiana 70809
Robert M. McSherry, MAI
A Self-Contained Real Estate
Appraisal Report of
A Existing 28 Unit Independent Living Facility
Located at 78 Canyon Diablo
Just Outside the Corporate Limits of Sedona, Arizona and
Within the Village of Oak Creek
For
Church Loans and Investments
5305 1-40 West
Post Office Box 8203
Amarillo, Texas 79114-8203
As Of
January 10, 1999
Prepared by
Robert M. McSherry, MAI
Louisiana State Certified General Real Estate Appraiser No. G0891
3760 Chelsea Drive
Baton Rouge, Louisiana 70809
Robert M. McSherry, MAI
ROBERT M. MC SHERRY, MAI
3760 Chelsea Drive
Baton Rouge, Louisiana 70809
Phone (504)924-8093
January 11, 1999
MMR Investment Bank
Post Office Box 781440
Witchita, Kansas 67278-1440
RE: An existing 28 unit independent living facility located at 78 Canyon
Diablo Road, just outside the corporate limits of Sedona, Arizona and
within the Village of Oak Creek.
Dear Sir:
In accordance with your request to provide an estimate of the Estimated
Market Value of Fee Simple Interest of the Going Concern of the property
identified as an existing 28 unit Independent Living Facility located
at 78 Canyon Diablo, Sedona, Arizona, we have personally inspected the
subject site and reviewed the submitted plans and specifications for the
improvements and conducted a thorough review and analysis of all matters
pertinent for the Estimate of Market Value herein contained.
Market Value as defined by the Department of the Treasury, Office of
the Comptroller of the Currency, August 24, 1990, 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:
a. buyer and seller are typically motivated;
b. both parties are well informed or well advised, and each acting in
what he considers his own best interest;
c. a reasonable time is allowed for exposure in the open market,
Robert M. McSherry, MAI
ROBERT M. MC SHERRY, MAI
3760 Chelsea Drive
Baton Rouge, Louisiana 70809
Phone (504)924-8093
October 20, 1998
Colonial Trust Company
5336 North 19th Avenue
Phoenix, Arizona 85015
RE: An existing 28 unit independent living facility located at 78 Canyon
Diablo Road, just outside the corporate limits of Sedona, Arizona and
within the Village of Oak Creek.
Dear Sir:
In accordance with your request to provide an estimate of the Estimated
Market Value of Fee Simple Interest of the Going Concern of the property
identified as an existing 28 unit Independent Living Facility located
at 78 Canyon Diablo, Sedona, Arizona, we have personally inspected the
subject site and reviewed the submitted plans and specifications for the
improvements and conducted a thorough review and analysis of all matters
pertinent for the Estimate of Market Value herein contained.
Market Value as defined by the Department of the Treasury, Office of
the Comptroller of the Currency, August 24, 1990, 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:
a. buyer and seller are typically motivated;
b. both parties are well informed or well advised, and each acting in
what he considers his own best interest;
c. a reasonable time is allowed for exposure in the open market,
Robert M. McSherry, MAI
ROBERT M. MC SHERRY, MAI
3760 Chelsea Drive
Baton Rouge, Louisiana 70809
Phone (504)924-8093
October 20, 1998
Church Loans and Investments
5305 1-40 West
Post Office Box 8203
Amarillo, Texas 79114-8203
RE: An existing 28 unit independent living facility located at 78 Canyon
Diablo Road, just outside the corporate limits of Sedona, Arizona and
within the Village of Oak Creek.
Dear Sir:
In accordance with your request to provide an estimate of the Estimated
Market Value of Fee Simple Interest of the Going Concern of the property
identified as an existing 28 unit Independent Living Facility located
at 78 Canyon Diablo, Sedona, Arizona, we have personally inspected the
subject site and reviewed the submitted plans and specifications for the
improvements and conducted a thorough review and analysis of all matters
pertinent for the Estimate of Market Value herein contained.
Market Value as defined by the Department of the Treasury, Office of
the Comptroller of the Currency, August 24, 1990, 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:
a. buyer and seller are typically motivated;
b. both parties are well informed or well advised, and each acting in
what he considers his own best interest;
c. a reasonable time is allowed for exposure in the open market;
Robert M. McSherry, MAI
Page Two
d. payment is made in terms of cash in U.S. dollars or in terms of financial
arrangements comparable thereto; and
e. 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.
Fee Simple Interest is defined by the Appraisal Institute as being, "a
fee without limitations to any particular class of heirs or restrictions
but subject to the limitations of eminent domain, escheat, police power
and taxation. An inheritable estate".
Going Concern Value is "the value created by a proven property operation."
It includes the incremental value associated with the business concern,
which is distinct from the value of the real estate only. Going concern
value includes an intangible enhancement of the value of an operating
business enterprise which is produced by the assemblage of the land, building,
labor, equipment, and marketing operation. This process creates an
economically viable business that is expected to continue. Going concern
value refers to the total value of a property, including both real property
and intangible personal property attributed to business value. Special
purpose properties such as the subject are appropriate for only one use or
for a very limited number of uses. The highest and best use of a special
purpose property as improved, is probably the continuation of its current use,
if that use remains viable. Therefore, in the case of special purpose
properties a going concern value is considered appropriate.
In this instance the subject property has an excellent location within
a viable market. As long as quality management is maintained, it's Market
Value would be the same as it's Going Concern Value.
Included is our appraisal report which contains the various exhibits
and data utilized in arriving at the herein contained estimate of Market
Value for the subject property.
It is our opinion that the property herein identified as the existing
28 Unit Independent Living Facility located at 78 Canyon Diablo Road,
just outside the corporate limits of Sedona, Arizona and within the Village
of Oak Creek, was estimated to have a Market Value based on Stabilized
Net Operating Income, as of January 10, 1999, of:
Robert M. McSherry, MAI
Page Three
THREE MILLION ONE HUNDRED SEVENTY THOUSAND DOLLARS
($3,170,000.00)
Allocated:
LAND: $ 780,000.00
IMPROVEMENTS: $2,350,000.00
FURNITURE, FIXTURES & EQUIPMENT: $ 40,000.00
GOODWILL OF GOING CONCERN -0-
The "As Is" Value of the property, derived by the utilization of the
Discounted Cash Flow Methodology, is estimated to be, as of January 10,
1999, but subject to completion of the property in accordance with submitted
plans and specifications within a reasonable period of time, of:
TWO MILLION NINE HUNDRED TWENTY-FIVE THOUSAND DOLLARS
($2,925,000.00)
The subject property is proposed at the present time and this appraiser
has been provided plans and specifications for the property. The herein
contained Estimate of Market Value is conditioned upon the completion
of the improvements in accordance with the plans and specifications utilizing
quality materials and workmanship within a reasonable period of time.
A final inspection by this appraiser will be required to ascertain the
assumptions utilized in preparing this appraisal report have been fulfilled.
This appraisal report was prepared in accordance with and compliance
of the Uniform Standards of Professional Appraisal Practice promulgated
by the Appraisal Foundation and the Guide Notes to the Standards of
Professional Practice adopted by the Appraisal Institute. These standards
contain binding requirements and specific guidelines that deal with the
procedures to be followed in developing an appraisal, analysis, or opinion.
These uniform
Robert M. McSherry, MAI
Page Four
standards also set the requirements to communicate the appraiser's analysis,
opinions, and conclusions in a manner that will be meaningful and not
misleading in the marketplace, accordingly, the Departure Provision does
not apply.
If we may be of further service to you in regard to this property or
in any other manner, please sitate to contact us at your earliest convenience.
Respectfully Submitted,
/S/ROBERT M MCSHERRY
Robert M McSherry, MAI
Louisiana State Certified General
Real Estate Appraiser No. G0891
Robert M. McSherry, MAI
EXECUTIVE SUMMARY
Location: 78 Canyon Diablo, Sedona, Arizona
Interest Appraised: Fee Simple Interest
Site: 2.78 Acres or 121,097 Square Feet, more or less
Building Description: The property will include twenty-eight (28)
independent living units all located within a
single, T-shaped building. The common area
amenities including a full service kitchen, a
dining area, activities area, office/reception
area, adequate bathrooms which would be fully
equipped to satisfy the needs of the residents
and other required additions to render the
subject property a functional assisted care
facility catering to those desiring independent
living.
Construction characteristics include a
reinforced poured concrete foundation, wood
framing, with a combination of stucco and siding
exterior walls with the roof being built-up.
The property is considered to be a most
functional assisted living facility and is
considered a most attractive property and
should be well accepted by the local market.
Highest and Best Use: Independent Living Facility including all
required amenities
Cost Approach to Value $4,085,000.00
Market Approach to Value $2,520,000.00
Income Approach to Value:
Stabilized Net Income: $3,170,000.00
Robert M. McSherry, MAI
Discounted Cash Flow Value: $2,925,000.00
Final Value Estimate-
Stabilized Net Income: $3,170,000.00
"As Is" Value: $2,925,000.00
Allocated:
Land $ 780,000.00
Improvements $2,350,000.00
Furniture, Fixtures
and Equipment $ 40,000.00
Goodwill of Going
Concern -0-
Robert M. McSherry, MAI
IDENTIFICATION OF THE PROPERTY
The property being inspected, analyzed and for which the Market Value
Estimate of the Fee Simple Interest of the Going Concern is applicable
is a 2.78 acre tract of land which is irregular in shape having frontage
along the Canyon Diablo within the village of Oak Creek which lies just
outside the corporate limits of Sedona,Arizona.
The subject property has been developed as an independent living and/or
assisted living facility for several years and has recently been transferred
to the Biltmore Group of Louisiana, LLC.
The legal description of the property being appraised is described as
follows:
"A tract of land located in the north half of Section 18, T16N-R6E,
G&SRB&M, Yavapai County, more fully described as follows: Tract A and
J of Village Plaza, Section 18, T16N-R6E, G&SRB&M, Yavapai County,
Arizona, containing 121,097 square feet or 2.78 acres, more or less."
Robert M. McSherry, MAI
PURPOSE OF THE APPRAISAL
The purpose of this report is to communicate, in a narrative format,
the data and reasoning that the appraisers have utilized to form the herein
contained estimate of Market Value of the Fee Simple Interest of the Going
Concern for the property identified as an existing 28 unit independent
living facility located at 78 Canyon Diablo just outside the corporate
limits of Sedona, Arizona.
OBJECTIVE OF THE APPRAISAL
The objective and function of this appraisal report is to provide an
estimate of the Market Value of the Fee Simple Interest of the Going Concern
of the property for use by MMR Investment Bank in order to provide long
term financing of the subject property for the Biltmore Group of Louisiana,
L.L.C.
The Subject property was personally inspected by this appraiser both
before and after the date of this appraisal and the submitted plans and
specifications reviewed. As the property is existing construction, no
final inspection of the property will be required by the appraiser with
the property having recently undergone total renovation and is now considered
an excellent quality independent living facility utilizing quality workmanship
and materials throughout.
Robert M. McSherry, MAI
PURPOSE OF THE APPRAISAL
The purpose of this report is to communicate, in a narrative format,
the data and reasoning that the appraisers have utilized to form the herein
contained estimate of Market Value of the Fee Simple Interest of the Going
Concern for the property identified as an existing 28 unit independent
living facility located at 78 Canyon Diablo, Sedona, Arizona.
OBJECTIVE OF THE APPRAISAL
The objective and function of this appraisal report is to provide an
estimate of the Market Value of the Fee Simple Interest of the Going Concern
of the property for use by Colonial Trust Company in order to provide
long term financing of the subject property for the Biltmore Group of
Louisiana, L.L.C.
The Subject property was personally inspected by this appraiser both
before and after the date of this appraisal and the submitted plans and
specifications reviewed. As the property is proposed construction, a
final inspection of the property will be required by the appraiser to
ascertain the assumptions utilized within this appraisal report have been
fulfilled and this appraisal is also conditioned upon being completed
in accordance with the plans and specifications utilizing quality materials
and workmanship throughout. Other additional conditions are contained
in an additional section of this report.
Robert M. McSherry, MAI
PURPOSE OF THE APPRAISAL
The purpose of this report is to communicate, in a narrative format,
the data and reasoning that the appraisers have utilized to form the herein
contained estimate of Market Value of the Fee Simple Interest of the Going
Concern for the property identified as an existing 28 unit independent
living facility located at 78 Canyon Diablo just outside the corporate
limits of Sedona, Arizona.
OBJECTIVE OF THE APPRAISAL
The objective and function of this appraisal report is to provide an
estimate of the Market Value of the Fee Simple Interest of the Going Concern
of the property for use by Church Loans and Investments in order to provide
long term financing of the subject property for the Biltmore Group of
Louisiana, L.L.C.
The Subject property was personally inspected by this appraiser both
before and after the date of this appraisal and the submitted plans and
specifications reviewed. As the property is proposed construction, a
final inspection of the property will be required by the appraiser to
ascertain the assumptions utilized within this appraisal report have been
fulfilled and this appraisal is also conditioned upon being completed
in accordance with the plans and specifications utilizing quality materials
and workmanship throughout. Other additional conditions are contained
in an additional section of this report.
Robert M. McSherry, MAI
DATE OF THE APPRAISAL
The effective date of this appraisal is January 10, 1999. The subject
property was personally inspected by this appraiser both before and after
this date.
Robert M. McSherry, MAI
DEFINITION OF SIGNIFICANT TERMS
Market Value, as defined by the Department of the Treasury, Office of
the Comptroller of the Currency, August 24, 1990, 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 data and the passing of title from seller to buyer under
conditions whereby:
a. buyer and seller are typically motivated;
b. both parties are well informed or well advised, and each acting in
what he considers his own best interest;
c. a reasonable time is allowed for exposure in the open market;
d. payment is made in terms of cash in U.S. dollars or in terms of financial
arrangements comparable thereto; and
e. 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.
Fee Simple Interest is defined by the Appraisal Institute as being, "a
fee without limitations to any particular class of heirs or restrictions
but subject to the limitations of eminent domain, escheat, police power
and taxation. An inheritable estate".
Going Concern Value is "the value created by a proven property operation."
It includes the incremental value associated with the business concern,
which is
Robert M. McSherry, MAI
distinct from the value of the real estate only. Going concern value
includes an intangible enhancement of the value of an operating business
enterprise which is produced by the assemblage of the land, building,
labor, equipment, and marketing operation. This process creates an
economically viable business that is expected to continue. Going concern
value refers to the total value of a property, including both real property
and intangible personal property attributed to business value.
Special purpose properties such as the subject are appropriate for only one
use or for a very limited number of uses. The highest and best use of a
special purpose property as improved, is probably the continuation of its
current use, if that use remains viable. Therefore, in the case of special
purpose properties a going concern value is considered appropriate.
Robert M. McSherry, MAI
PROPERTY RIGHTS APPRAISED
This assignment concerns the appraisal of the Fee Simple Interest with
Fee Simple Interest defined in Real Estate Appraisal Terminology as being,
"a fee without limitations to any particular class of heirs or restrictions
but subject to the limitations of eminent domain, escheat, police power
and taxation, An inheritable estate".
STATEMENT OF OWNERSHIP AND RECENT HISTORY
The subject property was previously owned by Church Loans and Investment
Trust and Colonial Trust Company and had been acquired by these two entities
through the foreclosure of the property by the previous owner. The property
was conveyed to the Biltmore Group of Louisiana, LLC on October 16, 1998,
for a combined consideration of $2,176,000.00 for the real property, an
additional $350,000.00 was provided by the sellers for the renovation
of the property and $174,000.00 for overhead, lease up and operating capital
for the first year of operation indicating a total consideration of
$2,700,000.00.
The total consideration paid for the property and which was
financed by Church Loans and Investment Trust and Colonial Trust Company is
$2,700,000.00 which is considered to be below the Market Value of the subject
property once stabilized occupancy and stabilized income is achieved.
Robert M. McSherry, MAI
As the property has been involved in numerous legal actions in the recent
past, numerous transactions affect the property but the transaction between
Church Loans and Investment Trust and Colonial Trust Company as sellers
and the Biltmore Group of Louisiana, LLC as buyers is considered an arms-length
transaction.
Robert M. McSherry, MAI
ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal report has been made with the following assumptions and
limiting conditions:
1. No responsibility is assumed for the legal description or for matters
including legal or title consideration. Title to the property is assumed
to be good and marketable unless otherwise stated.
2. The property is appraised free and clear of any and all liens or
encumbrances unless otherwise stated.
3. Responsible ownership and competent property management are assumed.
4. The information furnished by others is believed to be reliable.
No warranty, however, is given for its accuracy.
5. All engineering is assumed to be correct. The plot plans and illustrative
material in this report are included only to assist the reader in
visualizing the property.
6. It is assumed that there are no hidden or apparent conditions of the
property, subsoil, or structures that render it more or less valuable.
No responsibility is assumed for such conditions or for arranging for
engineering studies that may be required to discover them.
7. It is assumed that there is full compliance with all applicable federal,
state, and local environmental regulations and laws unless noncompliance
is stated, defined, and considered in the appraisal report.
8. It is assumed that all applicable zoning and use regulations and
restrictions have been complied with, unless a nonconformity has been
stated, defined, and considered in the appraisal report.
9. It is assumed that all required licenses, certificates of occupancy,
consents, or other legislative or administrative authority from any local,
state or national government or private entity or organization have been,
or can be obtained or renewed for any use on which the value estimate
contained in this report is based.
Robert M. McSherry, MAI
10. It is assumed that the utilization of the land and improvements is
within the boundaries or property lines of the property described and
that there is no encroachment or trespass unless noted in the report.
11. The distribution, if any, of the total valuation in this report between
land and improvements applies only under the stated program of
utilization. The separate allocations for land and buildings must not
be used in conjunction with any other appraisal and are invalid if so
used.
12. The appraisers herein, by reason of this appraisal, are not required
to give further consultation, testimony, or be in attendance in court
with reference to the property in question unless arrangements have been
previously made.
13. Possession of this report, or a copy thereof, does not carry with
it the right of publication. It may not be used for any purpose by any
person other than the party to whom it is addressed without the written
consent of the appraisers, and in any event only with proper written
qualification and only in its entirety.
14. Neither all nor any part of the contents of this report (especially
any conclusions as to value, the identity of the appraisers, or the firm
with which the appraisers are connected) shall be disseminated to the
public through advertising, public relations, new, sales, or other media
without the prior written consent and approval of the appraisers.
15. The existence of hazardous materials, which may or may not be present
on the subject property, was not observed by the appraisers.
The appraisers have the knowledge of the existence of such materials
on or in the subject property. However, the appraisers are not qualified
to detect such substances and the presence of potential hazardous
materials may affect the value of the property. This value estimate
contained within this report is predicated on the assumption that no
such hazardous materials are present on or in the property. No
responsibility is assumed for any such conditions or for any expertise
or any knowledge required to discover these items. This should be
accomplished by an expert in the field and is a condition of this
appraisal report.
16. That the appraiser has personally inspected the subject property
and finds no obvious evidence of structural deficiencies, except as stated
in this report; however, no responsibility for hidden defects or
conformity to specific governmental requirements, such as the Americans
with Disabilities (ADA) or fire, building and safety, earthquake, or
occupancy
Robert M. McSherry, MAI
codes, etc., can be assumed without provision of specific professional
or governmental inspections.
17. This appraisal is not based on a requested minimum valuation, a specific
valuation or the approval of the loan.
Robert M. McSherry, MAI
SEDONA AREA DATA
Sedona is one of Arizona's premier tourism, recreation, resort, retirement
and art centers. It's location at the mouth of scenic Oak Creek Canyon
and at the center of the state's legendary Red Rock Country affords
breath-taking panoramas, a mild climate, plenty of sunshine and clean, fresh
air. The area is the second most visited site in the state after the Grand
Canyon.
Established in 1902 and incorporated in 1988, the community was named
for Sedona Schnebly, an elderly settler. Sedona spreads across the
boundaries of two north central Arizona counties, Coconico and Yavapai. It
sits at an elevation of 4,500 feet, 3,200 feet higher than Phoenix which is
120 miles south, and 2,600 feet lower than the rim country of Flagstaff, 30
miles to the north.
The average daily temperature in January is 55 degrees, April 72 degrees,
July 95 degrees and October 78 degrees. The average annual participation
is 17.15 inches, snowfall - 8.8 inches.
The population in Sedona for 1996 was 9,235, while the population of
Coconino County was 113,475 and Yavapai County 134,600. The City of Sedona
has growth rapidly over the past decade and may exceed 15,00 by the year
2010.
There are 6 financial institutions, 1 medical center, 2 health care clinics
and the population is served by 7 physicians, 3 dentists and 7 other health
care specialists.
Robert M. McSherry, MAI
There are 12 Protestant churches and 2 Catholic churches serving the
area.
Recreational facilities include parks, a library, golf courses, motion
picture theaters, art museums and a live theater.
There are 2 elementary schools, 1 high school as well as several private
schools in the area.
The population base of the City of Sedona is largely comprised of the
age group which is either retired or near retirement. About 48 percent
of the population is 55 years of age or older.
Robert M. McSherry, MAI
OVERVIEW OF ASSISTED AND INDEPENDENT LIVING INDUSTRY
In anticipation that more elderly Americans will live in assisted living
homes than nursing homes in the near future, consumer industry groups
are saying it is time to put some minimum standards into law. One of
the most important things for the industry is to try not to admit residents
it cannot provide quality care for. Many assisted living homes charge
additional fees for personal services residents may come to need as they
grow older. Some will help residents if they get sick by permitting periodic
visits from nurses, for example, or providing supervision for people with
Alzheimer's Disease.
In order to minimize residents need to move, the consumer or trade groups
say assisted living facilities should be required to offer at least some
help with the dozen daily activities including meals, using the bathroom,
taking medication and shopping. Those facilities which accept people
with Alzheimer's or other types of dementia would also be required to
provide 24 hour awake staff and special training for those workers.
Assisted living has become the hottest new housing option for older people
by promising to provide a happy medium between their homes and a full
nursing home facility. Industry estimates show that the number of elderly
Americans living in settings that could be described as assisted living
has probably doubled from 560,000 in 1990 to as many as 1,000,000 in 1997.
By early next century, experts predict assisted living homes will care
for more elderly Americans than nursing homes.
Robert M. McSherry, MAI
Although numbers are inexact, assisted living facilities ranging from
luxury apartment buildings to modest group homes provide housing along
with personal services and some health care. Residents may be too frail
to live alone but too healthy to need the 24 hour medical attention of
nursing homes. Assisted living can be less expensive than nursing homes.
A 1997 survey by the National Center for Assisted Living found that 52%
costs $1,001.00 to $2,000.00 per month and 24% cost less than $1,000.00
per month. In contrast, monthly nursing home fees average above $3,000.00.
Assisted living's affordability has attracted the attention of law makers
worried about how the nation will ensure elderly care for the huge baby
boom generation now middle aged.
Medicaid programs for the poor in 28 states have begun to cover some
assisted living services and the Department of Health and Human Services
is conducting a fact finding survey.
Unlike nursing homes, assisted living homes are not regulated by the
Federal Government. Fewer than half of the states require licensing before
it opens. That allows for flexibility and partly explains assisted living's
popularity.
In summary, the assisted living facilities currently expanding throughout
the United States are the most popular and desirable alternative living
situation for those elderly which require some minimal level of care but
not the extensive
Robert M. McSherry, MAI
level required by nursing home patients. As the population continues
to grow older but maintain better health, the appeal thus desirability
of assisted living facilities will continue to be enhanced.
Robert M. McSherry, MAI
SCOPE OF THE APPRAISAL
The appraiser has personally inspected the subject site and conducted
an in-depth inspection of the neighborhood in which the subject property
is located observing it's trends of development and characteristics.
Vacant land sales utilized in conjunction with the Cost Approach to Value
and in determining the estimated Market Value of the subject site, as
if vacant, and owned in Fee Simple have been inspected by this appraiser
and a combination of data provided by the Marshall Valuation Service Cost
Manual and other available in-file data has been utilized in the process
of estimating the replacement cost new of the subject improvements.
In the final analysis, the appraiser has utilized and relied upon the
experience of judgment based on the opinion of the quality and quantity
of the data in arriving at the final value estimate of the Fee Simple
Interest in the subject property.
The Income Approach to Value has been completed utilizing a stabilized
net income capitalized into value and a discounted cash flow method.
Economic rents were determined by rent comparables and current data utilized
with respect to expense projections. Information provided by the publication
"Trends in the Health Care Industry" as well as information provided by
other actual ongoing facilities similar to the subject have been utilized
in the process of estimating the projected expenses which were included
in the Income Approach to Value. Although the subject property is proposed
at the present time and has
Robert M. McSherry, MAI
no income or expense history, it is considered to be a functional facility
and a facility which is demand with respect to providing long term assisted
living care.
Robert M. McSherry, MAI
DESCRIPTION OF THE PROPERTY
Site Data
Size, Shape and Topography
The subject site is a 2.78 acre or 121,097 square foot site which is
slightly irregular in shape having approximately 465 feet of frontage
along the east side of Canyon Diablo Road and 212 feet of frontage along
the south side of Horse Canyon Road all within the Village of Oak Creek
which is located just outside the incorporated areas of Sedona, Arizona.
The property is located just off State Highway 179 "Rimrock-Sedona Highway"
and is within approximately 10 minutes drive of the Interstate Highway
System.
The subject property is level to gently rolling due to extensive site
preparation and the entire site is either improved with the improvements,
asphalt parking areas, landscape areas consisting of creek washed rocks,
lava rocks or sodded grass and the site is considered an excellent site
having all the amenities required to be developed as an above average
quality independent living facility.
Utilities
The subject property is located within the Village of Oak Creek and is
provided with all available utilities and services available to properties
in the area including electrical service, police and fire protection,
public water, sewerage disposal and refuge pick-up. Telephone service
and natural gas service is provided by local utility companies serving
the area with natural gas being
Robert M. McSherry, MAI
primarily propane and all services and utilities are considered adequate
to provide for the requirements of the subject property.
Access
Access to the subject property is provided as the result of frontage
along Canyon Diablo Road, a dual-lane, municipally maintained traffic
artery which is asphalt in nature and provides a connection with Arizona
Highway 179 approximately 200 feet from the subject property.
Arizona Highway 179 provides assess to the Interstate Highway System
as well as to the incorporated areas of Sedona, Arizona and, overall,
access from all areas of the Village of Oak Creek and Sedona, Arizona
as well as the other inhabited areas within this portion of Arizona is
well provided.
Zoning
Conversations with representatives in the local Zoning and Planning Office
indicated that the current zoning for the subject site is "R2-3" Multiple
Dwelling District with a special use permit for food services and other
health services. Land uses are also controlled by deed restrictions or
other restrictive covenants which run with the land and, although this
appraiser has not conducted an in-depth review of the abstract to the
subject site, no deed restrictions or other restrictive covenants are
assumed to exist which would affect the utilization of the subject site
as a site of an assisted living facility.
Robert M. McSherry, MAI
This appraiser has not conducted an in-depth review with respect to the
abstract to the subject site but no deed restrictions or other restrictive
covenants are assumed to exist which would affect the development of the
subject property to its highest and best use. However, this should be
ascertained by competent legal authority and is a condition of this appraisal
report.
Drainage
Review of Flood Hazard Maps found in the local Community Office indicated
the subject property to be located in a Flood Zone "C" according to Flood
Map No. 040093-0880 having an effective date of August 19, 1995. This
indicates no flood insurance is required for the subject property.
Tax Data
The subject property is currently accessed as Parcel 13-405-41-065A-1
with the land accessed at $420,000.00 and the improvements at $1,083,599.00
for a total of $1,503,599.00 which is the estimated depreciated replacement
costs estimate for the property.
Conversations with representatives in the County Treasurer's Office indicated
the subject property to be affected by two different millage rates and
two separate accessed values as follows:
Millage 6.3091 Mills
Robert M. McSherry, MAI
Assessed Value $141,730.00
Millage 3.8712
Assessed Value $150,060.00
Total Taxes Due - 1998 $13,777.36
Note: These taxes were paid in 1998.
Robert M. McSherry, MAI
LOCATION MAP
Robert M. McSherry, MAI
DESCRIPTION OF THE IMPROVEMENTS
Independent Living Facility
The existing facility containing the 28 independent living units is
constructed within a somewhat modified T-shaped building but with the indoor
swimming pool and activity building being separate from the primary structure
containing the 28 independent living units and common areas. Construction
characteristics include a reinforced poured concrete foundation, wood frame
exterior walls with a stucco exterior and roof being a commercial tar and
gravel built-up roof. Gutters and downspouts are in place at strategic
locations, windows are horizontal slide doubled paned insulated windows with
screens and exterior doors are metal insulated doors. The building is totally
sprinklered for fire protection, has emergency lighting in place and an
emergency call system which connects each individual guest room to a central
control console.
The property includes 16 efficiency units containing 401 square feet
each, 8 one bedroom/one bath units containing 490 square feet each and
4 two bedroom/one bath units containing also 490 square feet each. The
common area includes a full service kitchen and serving area, foyer, 2
administrative offices, large hallways, a combination living/dining activities
area which features a hand laid stone fireplace with gas fire logs are
contained within the main building and encompass approximately 9,930 square
feet. The enclosed swimming pool and activities building encompasses
approximately 2,100 square feet for a total of 24,332 square feet of heating
and cooled area within the subject property.
Robert M. McSherry, MAI
Each of the individual guest rooms features a combination of carpet and
glazed tile flooring, painted sheet rock interior walls and ceilings with
the kitchen including a small microwave unit and a small refrigerator.
All units are sprinklered for fire protection, provide a 24 hours intercom
system which is monitored at a central console and feature a very efficient
functional design. The bathroom found within these units features a large
open shower which is also of glazed tile construction with respect to
the floor and surrounding walls and these showers are accessible to handicap
and wheelchair patients as well as normal persons. Each of these units
is heated and cooled by an individual HVAC system which is on a separate
meter and has an individual thermostat in each of the rooms.
The common areas feature a large institutional kitchen which contains
all of the typical kitchen equipment necessary for operating a facility
such as the subject. This equipment is all in working order, of stainless
steel construction and of the highest quality and is adequate to provide
functional food service for the subject property. The remaining common
areas include large open corridors with skylight ceilings which house
individual group seating areas and feature carpet flooring and painted
shetrock walls and a vaulted ceiling again with skylights. The two
administrative offices feature carpet flooring, painted sheetrock walls and
are of adequate size to render them functional.
The major common area is the combination living/dining and activities
area which features carpet flooring, painted sheetrock walls with wallpaper
and a large amount of open glass viewing areas of the picturesque scenery
facing the
Robert M. McSherry, MAI
rear of the subject property. This picturesque scenery is such as to
generate additional income from the rooms enjoying this view with the
rooms facing the front of the structure enjoy slightly less view amenities.
The living area is improved with a hand laid stone fireplace with gas
logs with lighting provided by ceiling fans, recessed fixtures and chandeliers
and this area is most functional and livable.
The separate activities building contains the heated 4 foot deep gunite
pool features a concrete apron around the pool, wood walls and ceiling
which have been painted with a hand painted Muriel painted by a local
artist and is climate controlled. The activities room is located just
off the pool and is separated by a small partition and features carpet
flooring and painted sheetrock walls and an adequate area for exercise
classes and various excercise equipment.
As noted, the entire property contains a total of 24,322 square feet
of gross building area and it contains 28 efficiency, one bedroom and
two bedroom living units as well as the common areas and all required
amenities to make this a functional, very desirable development.
Although the property is existing construction, approximately $350,000.00
worth of renovation expense has been incurred since October, 1998 and
thus all deferred maintenance has been cured in the property. It's effective
age is effectively 0-1 year with a total economic life of 40 years and
no functional obsolescence was found within the layout or design or any
economic obsolescence throughout the neighborhood.
Robert M. McSherry, MAI
The property being appraised is considered to be a most functional independent
living facility containing the required amenities to make it a success
in this particular retirement community market.
Robert M. McSherry, MAI
HIGHEST AND BEST USE
Introduction
The Appraisal Institute defined highest and best use as follows, "that
legal use, at the time of the appraisal, which is the most profitable
likely use to which a property can be put."
There are several basic factors which must be considered in order to
make a proper determination of Highest and Best Use:
1. The use must be legal, that is, legally adaptable regarding zoning
and other restrictions;
2. The use must be probable, not conjectural or speculative;
3. The property must be physically adaptable to use contemplated,
4. There must be a demand for such use,
5. The use must be profitable, the highest return to the land over the
longest period of time.
Highest and best use of the land (or site) if vacant and available for
use may be different from the highest and best use of the improved property.
This is true if the improvement is not an appropriate use, but it makes
a contribution to the total property value in excess of the value of the
site.
The above five tests have been applied to the subject property's vacant
site. In arriving at the estimate of highest and best use, the subject
site has been carefully analyzed.
Robert M. McSherry, MAI
HIGHEST AND BEST USE ASSUMING A VACANT SITE
Permissible Use
An investigation has been conducted in order to determine the zoning
classification that encumbers the subject property. The results of this
investigation has revealed that the subject site is zoned "R-2-3" Multiple
Dwelling District with Special Use Exception granted for food and medical
services to be provided. This zoning classification allows a large number
of residential uses to be permitted for this classification and considering
the overall condition and design of the subject, it's location within
a combination residential/commercial area, the access provided the property
and other pertinent factors indicate the present utilization as an independent
living facility with certain amenities including medical and food services
to be one of the better is not the best permissible use of the site and
would be a legal, conforming permissible use.
Possible Use
Inspection of the subject property's neighborhood has been made to determine
any physical limitations that might be present. The result of this inspection
has revealed the neighborhood is developed with mix of property types.
The zoning which is currently applicable to the subject property does
allow for an assisted care facility to be constructed on the site as well
as other types of multi-family construction. This zoning classification
will allow the property to be developed as proposed within this appraisal
report and this is considered the most likely probable use to which the
subject property could be put.
Robert M. McSherry, MAI
In the final analysis, the proposed utilization of the subject property
is considered to constitute one of it's Highest and Best Uses.
Robert M. McSherry, MAI
THE APPRAISAL PROCESS
The real estate appraisal profession typically utilizes three basic approaches
in the process of estimating the value of a parcel of real property.
These approaches include the Cost Approach, the Income Approach and the
Market Data Approach. The Cost Approach utilizes an estimate of reproduction
or replacement costs new of the building and other on-site improvements
to be contained within the subject property less accrued depreciation
from all sources including physical curable and incurable deterioration,
functional obsolescence and economic obsolescence to arrive at an estimate
of depreciated reproduction or replacement costs for the improvements.
The estimated value of the site, as if vacant, and determined by the
comparison of the subject site with other similar parcels in either the
immediate proximity of the subject or in other comparable areas is added
to the depreciated reproduction or replacement cost estimate of the
improvements to provide an indication of value of the property being
appraised from the Cost Approach.
The Cost Approach is generally accorded the greatest credence in instances
where the property being appraised is either a proposed property or a
new property having little or no accrued depreciation or instances where
the property being appraised represents a special purpose type property.
In these instances, the Cost Approach is an accurate indication of value
for the property and is accorded considerable credence in the reconciliation
process.
Robert M. McSherry, MAI
The Income Approach to Value utilizes an estimate of gross annual income
to be generated by the property being appraised as determined to be
representative of economic rentals for this type property within the area
less an allowance considered typical for vacancy and collection losses to
arrive at an estimate of effective gross annual income which is to be
generated by the property. Expenses typically associated with the operation
of this type property in accordance with prevailing lease terms and conditions
in the area as well as data provided by analysis of the operating history of
other similar type properties are projected and deducted from the effective
gross annual income to arrive at an estimate of net operating income before
recapture attributable to the subject. This net operating income is then
capitalized by the most appropriate method available with respect to the
subject property in particular and the appraisal problem in general into an
indication of value for the property being appraised from the Income Approach.
Another method of utilizing the Income Approach is the Gross Income
Multiplier technique. This technique identifies the relationship between
the sales price (value) of a property and its gross annual income earning
potential. The Gross Income Multiplier is derived by dividing the sales
price of a property by its gross potential income and, thus, is an excellent
indicator of buyer, seller and investor attitudes toward the property being
analyzed. An effective gross income multiplier is also excellent as it
utilizes the actual gross income after vacancy to derive the multiplier. use
depends upon available data.
The Market Data or Direct Sales Comparison Approach utilize sales of
comparable improved properties in either the immediate proximity of the
subject
Robert M. McSherry, MAI
or in other comparable areas to derive a unit of comparison. Each of
the various comparable sales are carefully reviewed and analyzed by the
appraiser, adjusted for any dissimilarities between the subject property
and the comparable sale in such areas as date of sale, location, design,
condition, and other physical characteristics to result in an adjusted
unit of comparison to be utilized in the Market Data or Direct Sales
Comparison Approach to provide an indication of value for the property being
appraised.
The reconciliation is the method whereby all data provided by the various
approaches utilized in the appraisal report are carefully analyzed and
accorded weight in varying degrees. The approach which is considered
to be the most representative of current buyer, seller and investor attitudes
towards the subject property is accorded the greatest credence in the
final analysis but all the approaches are interrelated and all data gathered
and utilized in the various approaches must be carefully analyzed in the
reconciliation process and to ignore any available data would be improper.
Robert M. McSherry, MAI
COST APPROACH TO VALUE
The Cost Approach to Value, like the Sales Comparison and Income Approaches,
is based on comparison. in the Cost Approach, the cost to construct a
building and the value of any existing building are compared. The Cost
Approach to Value reflects market thinking in the recognition that market
participants relate value to cost. Buyers tend to judge the value of
an existing structure by comparing it to the value of a newly constructed
building with optimal functional utility. Moreover, buyers adjust the
prices they are willing to buy by estimating the cost to bring an existing
structure to desired levels of functional utility.
Thus, by applying the Cost Approach, an appraiser attempts to estimate
the difference in worth to a buyer between the property being appraised
and a newly constructed building with optimal utility. An appraiser makes
a sound value estimate by estimating the cost to construct a reproduction
of or a replacement of the existing structure and then deducts all evidence
of accrued depreciation in the property being appraised from the cost
of the reproduction or replacement structure and the resulting figure,
plus the value of the land, plus any entrepreneurial profit provides a
value indication through the application of the Cost Approach.
The decision to utilize reproduction or replacement costs is most pertinent
and the selection plays and important part in contributing to the validity
of the Cost Approach. Replacement cost is defined in Real Estate Appraisal
as
Robert M. McSherry, MAI
being, "the cost of construction at current prices of a building having
utility equivalent to the building being appraised but built with modern
materials and according to the current standards, design and layout. The
use of the replacement cost concept presumably eliminates all functional
obsolescence and the only depreciation to be measured is physical deterioration
and economic obsolescence." The appraisers will utilize the replacement
cost method supported by Marshall Valuation Service in conjunction with
the construction cost estimate provided by knowledgeable contractors/engineers
or architects.
DEPRECIATION
All types of accrued depreciation affecting the subject improvements
were considered. Accrued depreciation is defined as, "the difference
between reproduction cost new as of the date of the appraisal and the
present contributory value of the improvements." Accrued depreciation
is divided into three basic categories:physical deterioration (which
includes curable and incurable), functional obsolescence (including curable
and incurable), and economic obsolescence(which is always incurable). The
following is a discussion of each type of depreciation and the observed
depreciation applicable to the subject property.
Physical Deterioration, Curable
This type of depreciation is defined as, "the loss in value from cost
new which can be recovered or offset through correction, repair, or replacement
of the defective items causing the loss, providing the resultant value
approximates the
Robert M. McSherry, MAI
cost of the work." The property is existing but has had all the deferred
maintenance cured thus no deferred maintenance exists.
Physical Deterioration, Incurable
This type of depreciation is defined as, "the loss from cost new which
is impossible to offset or which would involve an expenditure substantially
in excess of the value increase resulting therefrom." The property is
existing but has an effective age of 1 year and a total economic life
of 40 years thus no physical incurable deterioration is present.
Functional Obsolescence
Functional obsolescence is defined as, "the loss from cost new as of
the date of the appraisal which is caused by a superadequacy, inadequacy,
unattractive style, poor or inefficient layout or design." Items causing
functional obsolescence can be either curable or incurable; it is curable
only when it is profitable to cure the item. Incurable, functional
obsolescence involves items of initiate which would not be economical to
correct because the value would not increase so much as the cost of
correction. Based on my inspection of the subject improvements, it is my
opinion that they are totally adequate and comparable to similar properties
in the same general price range, therefore, no loss of value from functional
obsolescence exists.
Robert M. McSherry, MAI
Economic Obsolescence
This type of depreciation is defined as, "the loss from cost new as of
the date of the appraisal due to causes external to the property boundaries."
To measure this type of obsolescence the appraiser capitalizes the rent
lost due to the external factor for the prorata share applicable to the
building. As indicated in the site date, there are no undesirable external
influences and, thus, there is no loss to the subject improvements due
to economic obsolescence.
Entrepreneurial Profit
For the Cost Approach to provide a sound indication of value, a market
derived entrepreneurial profit must be added to the direct and indirect
costs. The profit figure is typically expressed as a percentage of total
direct and indirect costs. Entrepreneurial profit is a necessary element
in the motivation to construct the improvements. However, part or all
of the profit may be lost as functional or external obsolescence if the
market indicates that the improvements have a Market Value less than the
current reproduction or replacement cost less physical deterioration.
The results of the investigation and analysis of this market data will
appear as follows:
Robert M. McSherry, MAI
COMPARABLE LAND SALE 1
Date of Sale: January 31, 1997
Recordation: Conveyance Book 3351, Page 598,
Sedona,Arizona
Vendor: Frederick Coleman, III
Vendee: IDNANI Investment Group, LLC
Size: 1.09 Acres or 47,480 Square Feet
Consideration: $450,000.00
Indicated Price/Acre: $412,844.009/acre
Indicated Price/Square Foot: $9.47/square foot
Brief Legal Description: The north 300 feet of Tract C, Lake
Plaza, in Section 18, T16N-R6E
Financing: Typical
Site Utilities: Public
Terrain: Relatively Level
Access: Adequate
Zoning: "C2-A"
Highest and Best Use: Commercial or Motel
Confirmation: Public Records
Robert M. McSherry, MAI
COMPARABLE LAND SALE 2
Date of Sale: August 25, 1997
Recordation: Conveyance Book 3465, Page 256,
Sedona,Arizona
Vendor: 6th Avenue Apartments
Vendee: Sedona Fore District
Size: 1.63 Acres or 71,002 Square Feet
Consideration: $680,9070.00
Indicated Price/Acre: $417,773/acre
Indicated Price/Square Foot: $9.59/square foot
Brief Legal Description: Part of Trach H, Village Square
amended, Section 13, T16N-R5E
Financing: Typical
Site Utilities: Public
Terrain: Relatively Level
Access: Adequate
Zoning: "C2-2"
Highest and Best Use: Commercial
Confirmation: Public Records
Robert M. McSherry, MAI
COMPARABLE LAND SALE 3
Date of Sale: November 6, 1996
Recordation: Conveyance Book 3307, Page 211,
Sedona,Arizona
Vendor: Dale Scott
Vendee: Gene Baccola
Size: .17 Acres or 7,500 Square Feet
Consideration: $77,000.00
Indicated Price/Acre: $447,674.00/acre
Indicated Price/Square Foot: $10.26/square foot
Brief Legal Description: Lot 7, Village Square Amended
Financing: Typical
Site Utilities: Public
Terrain: Relatively Level
Access: Adequate
Zoning: "C2-2"
Highest and Best Use: Commercial
Confirmation: Public Records
Robert M. McSherry, MAI
COMPARABLE LAND SALES SUMMARY CHART
Date Size/Usable Price/Acre Location
Sale 1 1/97 1.09 Acres $412,844.00 Sedona,AZ
Sale 2 8/97 1.63 Acres $417,773.00 Sedona,AZ
Sale 3 11/96 .17 Acres $447,674.00 Sedona,AZ
Robert M. McSherry, MAI
ANALYSIS OF COMPARABLE LAND SALES
Analysis of the three vacant comparable land sales indicated all sales
to be current with respect to date of sale and the appraiser discovered
several additional small square footage sales similar to Comparable Sale
3 but have not included them in the actual report but utilized them for
analysis purposes.
Vacant Comparable Land Sale 2 and 3 are both of nearly the same size
as the subject, feature a similar location but a slightly superior zoning
classification requiring a downward adjustment of these sales. All physical
characteristics are considered similar requiring no adjustment and no
adjustment is required for the date of sale.
Vacant Land Sale 3 is significantly smaller than the subject requiring
a downward adjustment for this factor as well as a downward adjustment
for it's superior zoning classification. All other physical characteristics
are similar requiring no adjustment nor does this property require adjustments
for the time differential.
In the final analysis, Vacant Comparable Land Sale 1 is considered to
be the best available indicator as it is located almost adjacent to the
subject site and this sale has been accorded the greatest credence. However,
considerable weight has been accorded Vacant Land Sale 2 in the analysis
process.
Robert M. McSherry, MAI
In the final analysis, after each of these various vacant land sales
have been carefully inspected and adjusted by the appraiser for dissimilarity
between the comparable sale and the subject, it is our opinion that the
available market data indicates a per square foot value for the subject
site, as if vacant and in it's present condition, of $6.50 per square
foot and is indicative of current attitudes in this particular market
when the location and zoning of the subject site are considered.
Therefore, the estimated value of the subject, as if vacant, is thus
derived:
121,097 square feet @ $6.50/square foot $787,130.00
INDICATED VALUE OF THE SUBJECT SITE,
AS IF VACANT (R/T) $780,000.00
Robert M. McSherry, MAI
DISCUSSION OF COST APPROACH
In the construction of any project, the total cost of development can
be divided into basic categories: direct or hard cost, and indirect or
soft costs. As defined in Real Estate Appraisal Terminology, the definition
of Direct Costs is, "the cost of direct labor and materials devoted
specifically to a unit of work. In construction, these costs are directly
related to site acquisition and construction of the improvements..." Defined
in this same text, Indirect Cost is, "that cost in the development of a
property which would not be included in a general contract for construction
or for land acquisition..."
Direct costs include the cost of items such as land acquisition, construction
of the buildings, equipment and fixtures, the builder's profit and overhead,
any temporary buildings for on-the-job usage, power line installation,
and the electrical power used in the construction. As indicated in the
Cost Approach Schedule which follows, direct or hard costs have been broken
down into categories of building area, elevators and other primary building
costs.
Indirect, or soft costs, generally include fees, financing costs, and
overhead. As the Cost Approach Schedule indicates, the indirect costs
fall into 8 categories The permits and fees sections include the estimated
costs of a building permit, an appraisal, a survey and accounting and
inspection charges. Architectural engineering estimates have been based
on typical market charges. The legal expenses includes work done on both
interim and permanent loan packages.
Robert M. McSherry, MAI
The insurance costs indicated are limited to construction-period coverage
including the builder's risk.
The closing cost estimate includes costs of closing both the interim
and permanent loans. The interest expense is based on typical current
market conditions and covers the period of time required to complete the
construction of the project. The loan commitment fees are also based
on current typical market conditions.
The appraiser's have relied upon the Marshall Valuation Service, a publication
of Marshall & Swift, 1617 Beverly Boulevard, Post Office Box 26307, Los
Angeles, California, in estimating the replacement costs new of the subject
property improvements.
The Cost Approach to Value, as it applies to the property being appraised,
is as follows:
Robert M. McSherry, MAI
COST APPROACH TO VALUE
Cost Source: Marshall-Swift Cost Manual and
Contractor Cost Data
Direct Costs:
Primary Structure
24,332 sq. ft. @ $93.15/sq. ft. $2,266,525.00
Total Direct Costs: Improvements $2,266,525.00
Indirect Costs:
Plans, Specifications, Inspection Included in Direct Costs
Contractor's Overhead/Profit $248,540.00
Interim Interest $104,000.00
Legal, Audit, Appraisal $ 82,000.00
Financing Fees - Construction $ 41,400.00
Misc. Expenses $ 50,000.00
Financing Fees - Long Term $248,000.00
Total Indirect Costs $ 773,940.00
Total Replacement Costs New: Improvements $3,040,465.00
Less:Accrued Depreciation
Physical Curable -0-
Physical Incurable -0-
Functional Obsolescence -0-
Economic Obsolescence -0-
Total Accrued Depreciation -0-
Depreciated Replacement Costs: Improvements $3,040,465.00
Add: Land Value
2.78 acres @ $45,000.00/acre $ 780,000.00
Add: Site Improvements
Including Landscaping, Parking, Lighting,
Walks, Patio, Porches $ 60,000.00
Robert M. McSherry, MAI
Add: Contributing Value of Pool $ 25,000.00
Add: Furniture, Fixtures and Equipment $ 40,000.00
Add: Entrepreneurial Profit @ 5% $ 140,000.00
Total All Costs and Value Components $4,085,465.00
INDICATED VALUE OF SUBJECT FROM
COST APPROACH (R/T) $4,085,000.00
Note: Cost of Furniture, Fixture and Equipment based on costs association
with actual costs experienced by other comparable facilities.
Robert M. McSherry, MAI
MARKET DATA APPROACH TO VALUE
Market data is discussed in all the approaches to value. Data analysis
is needed in the Cost Approach to develop a land value indication and
to support costs and depreciation indicators; in the Income Approach to
establish rent levels, vacancy indications, expenses, and capitalization
rates; and in the Direct Sales Comparison Approach to establish comparability.
The appraiser has carefully perused the area market with respect to sales
of properties considered similar to the subject property and none were
found. However, available data from other appraisers has revealed the
sale of three similar type properties in other areas of the United States
and these are included merely for analysis purposes as follows:
Robert M. McSherry, MAI
IMPROVED PROPERTY SALE 1
VENDOR: American Retirement, Inc.
VENDOR: Horizon Retirement, Inc.
LOCATION: 2601 Chimney Rock Road,
Hendersonville, North Carolina
RECORDATION: N/A
DATE: February, 1993
CONSIDERATION: $6,480,000.00
TERMS: $2,224,000.00 cash, assumption of a
mortgage balance of $4,316,000.00.
terms are considered to be cash
equivalent.
SITE SIZE: N/A
IMPROVEMENTS: This is a 110 unit senior living
community constructed in 1988. The
units are housed in a three-story
building of wood frame construction.
Construction quality is considered to
be average; condition at the time of
sale was good. The gross building area
is approximately 96,058 square feet with
an average unit size of 873 square feet.
ESTIMATED GROSS INCOME: $1,706,255.00
ESTIMATED EXPENSE RATIO: Approximately 56 percent
NET OPERATING INCOME: Approximately $751,844.00
UNIT INDICATORS: SP/Unit = $58,909.00
SP/SF = $ 67.46
SP/GI = 3.80 GIM
NOI/SP = .1160 OAR
Robert M. McSherry, MAI
IMPROVED PROPERTY SALE 2
VENDOR: American Retirement, Inc.
VENDOR: Emeritus Corporation
LOCATION: 2601 Chimney Rock Road,
Hendersonville, North Carolina
RECORDATION: N/A
DATE: September, 1995
CONSIDERATION: $9,483,523.00
TERMS: Cash
SITE SIZE: N/A
IMPROVEMENTS: This is a 110 unit senior living
community constructed in 1988. The
units are housed in a three-story
building of wood frame construction.
Construction quality is considered
to be average; condition at the time
of sale was good. The gross building
area is approximately 96,058 square
feet with an average unit size of
873 square feet.
ESTIMATED GROSS INCOME: Approximately $2,175,000.00
ESTIMATED EXPENSE RATIO: Approximately 56 percent
NET OPERATING INCOME: Approximately $957,000.00
UNIT INDICATORS: SP/Unit = $86,214.00
SP/SF = $ 98.73
SP/GI = 4.36 GIM
NOI/SP = 0.1009 OAR
Robert M. McSherry, MAI
IMPROVED PROPERTY SALE 3
VENDOR: ABD Investments, Inc.
VENDOR: Merrill Associates, LP
LOCATION: 6725 Inglewood Avenue, Stockton,
California
RECORDATION: N/A
DATE: July, 1994
CONSIDERATION: $4,200,000.00
TERMS: Cash
SITE SIZE: N/A
IMPROVEMENTS: This is a 74 unit senior living
community constructed in 1989. The
units are housed in two-story buildings
of wood frame construction. Construction
quality is considered to be average;
condition at the time of sale was good.
The gross building area is approximately
63,730 square feet with an average unit
size of 861 square feet.
ESTIMATED GROSS INCOME: Approximately $1,395,000.00
ESTIMATED EXPENSE RATIO: Approximately 70 percent
NET OPERATING INCOME: Approximately $418,500.00
UNIT INDICATORS: SP/Unit = $56,757.00
SP/SF = $ 65.90
SP/GI = 3.01 GIM
NOI/SP = 0.0996 OAR
Robert M. McSherry, MAI
SUMMARY
Sale One Sale Two Sale Three
Indicated OAR 11.6% 10.09% 9.96%
Price/Unit $58,909.00 $86,214.00 $56,757.00
Gross Income Multiplier 3.80 4.36 3.01
Estimated Expense Ratio 56% 56% 70%
The three Improved Property Sales included within this report have been
provided this appraiser by knowledgeable sources and other appraisers
and are deemed accurate as they were verified by knowledgeable and ethical
persons. The appraiser has conducted an in-depth review of conveyances
of similar type assisted living or congregate care facilities in the Sedona,
Arizona area and none were found which were considered to be reflective
of true arms-length transactions between willing buyers and willing sellers
with no undue duress being experienced. These three Improved Property
Sales have been included for the purpose of deriving an indicated Overall
Capitalization Rate, an indicated price per unit and an indicated Gross
Income Multiplier for utilization in the analysis process with respect
primarily to the Income Approach to Value. The level of services provided
by these facilities are similar to those to be provided by the subject
property which would include three (3) meals per day, utilities, maid
service one (1) day a week, flat linen service one (1) day a week, various
assistance with respect to bathing, exercise, and transportation to various
off-site functions as well as on-site recreational functions, counseling,
with other services provided on a more extensive basis for additional
expense paid by the
Robert M. McSherry, MAI
guest or resident of the facility. It is acknowledged that a large number
of the residents residing in the independent living facilities are requiring
increased levels of care and these additional expenses are being passed
directly to the tenant as they upset the economies of an assisted care
facility having to provide this extraordinary level of care without additional
remuneration.
The price per unit indicated by Improved Property Sale 2 is considered
the best available and has been accorded the greatest credence. Accordingly:
28 Units @ $90,000.00/Unit $2,520,000.00
INDICATED VALUE OF SUBJECT FROM
THE MARKET DATA OR DIRECT SALES
COMPARISON APPROACH (R/T) $2,520,000.00
Robert M. McSherry, MAI
INCOME APPROACH TO VALUE
Introduction
The Income Approach reflects the subject's income-producing capabilities
and requires an analysis of the project's probable market rent. In the
comparative analysis, we have considered factors that would probably influence
market acceptance of properties in the area. The factors include proximity
to major traffic arteries; location; design; amenities; and the quality
of management.
To develop a supportable estimate of value using the Income Capitalization
Approach, realistic projections of income and expenses must be made.
Independent living facilities are unique forms of real estate with many
unusual characteristics, such as an intensive use of labor, costs of goods
sold, expenses categories, and product identity. Therefore, special care
in data gathering and analysis are required to create an estimate of the
future income for the subject. The appraiser will utilize data provided
by the publication, Trends in the Health Care Industry for supporting
data.
The subject property is existing at the present time but has not been
operated as an independent living facility in the past and thus no historical
income or expense data is available for the property.
The subject property will contain 28 independent living units including
16 efficiencies, 8 one bedroom and 4 two bedroom units with half of the
units facing the front of the building and half facing the rear. The
units facing the rear of the
Robert M. McSherry, MAI
building enjoy the picturesque view amenity of the mountains and other
view amenities and should generate slightly additional income than those
facing the front of the building.
In the processing of arriving at a projected economic rental rate for
the subject units, the only competing facility in the Sedona, Arizona
area has been surveyed by the appraiser. This development is identified as
the Ktria Kachi Point Retirement Community which contains not only
independent living units but also assisted care units,a nursing home unit and
dementia units. The units include one and two bedroom units ranging in size
from 400 square foot to a high of 963 square feet with the one bedroom units
leasing from a low of $2,000.00 to a high of $2,600.00 per unit while the two
bedrooms lease from a low of $2,600.00 to a high of $3,100.00 per unit.
These rents include utilities with the exception of a telephone and cable
television but only one meal per day, weekly housekeeping and a limited
amount of other services. The services provided by this comparable property
are vastly inferior to the services projected to be provided by the subject
and this has been taken into consideration when projecting economic rental
rates for the subject units.
Based on our analysis, it is felt that the efficiency units facing the
view amenity will lease for $2,400.00 each while the units facing the
front of the building will lease for $2,200.00. The one bedroom units
enjoying the view amenity will lease for $2,800.00 while the units facing
the front will be $2,600.00 each. The two bedroom units facing the view
amenity will lease for $3,200.00 with the two bedroom units facing the
front of the building leasing for $3,000.00. These rents
Robert M. McSherry, MAI
will include all utility services including cable TV, valet service,
24 hour security, three complete meals chosen from a menu, town car and
van transportation for shopping and doctor's appointments, a private club
with heated pool and spa, turndown bed service nightly, a library/computer
area, activities area, extensive wellness programs including mind, body
and spirit, 24 hour staffing, daily freshening of apartments with intensive
weekly housekeeping and weekly laundry service.
As noted, the amenity package enjoyed by the subject property is vastly
superior to that enjoyed by the only comparable in the area and the actual
units are vastly superior to these comparable units.
The appraiser has had the opportunity to appraise a number of assisted
and independent living facilities throughout the southeast over the last
several years and has relied on data provided by these facilities, various
industry publications and data provided by various health care facilities
and groups and experts in arriving at the estimated monthly rental rates
and expenses including fixed expenses, operating expenses, staffing, dietary,
reserves for replacement and other appropriate expenses.
The level of care and the amenities offered by the subject property are
greatly in excess of these typically offered an assisted unit facility.
However, this appraiser has reviewed per unit expenses associated with
similar design assisted living facilities throughout the southeast and
adjusted these expenses to allow for the provision of the various amenities
to be provided by the subject.
Robert M. McSherry, MAI
Based on the projected economic rental rates for the subject property
as quoted in this appraisal report and our estimated expenses associated
with the operation of the subject property, the Income Approach to Value
is as follows. It is appropriate to note that the appraiser has reviewed
the current publication Trends in the Health Care Industry with respect
to historical operating expenses for independent living units in arriving
at our estimates of the appropriate expenses.
The Income Approach to Value as it applies to the property being appraised
based on economic rental rates herein quoted and utilizing a three year
period in order to achieve a stabilized net occupancy and thus a stabilized
net operating income with rental rates anticipated to increase 10% between
year two and three are completed as follows:
Robert M. McSherry, MAI
INCOME APPROACH TO VALUE
Year One
Gross Annual Potential Income:
8 - Efficiency Units @ $2,200.00/month $ 211,200.00
8 - Efficiency Units @ $2,400.00/month $ 230,400.00
4 - One Bedroom Units @ $2,600.00/month $ 124,800.00
4 - One Bedroom Units @ $2,800.00/month $ 134,400.00
2 - Two Bedroom Units @ $3,000.00/month $ 72,000.00
2 - Two Bedroom Units @ 3,200.00/month $ 76,800.00
Total Gross Annual Potential Income $ 849,600.00
Less: Vacancy and Collection Losses (25%) $ 212,400.00
Total Vacancy and Collection Loss $ 212,400.00
Effective Gross Annual Potential Income $ 637,200.00
Expenses:
Administrative $158,000.00
Plant Operations $ 71,400.00
Dietary $ 91,200.00
Housekeeping $ 25,000.00
Aides $ 76,500.00
Activities $ 30,000.00
Reserves for Replacement $ 15,000.00
Total Expenses $ 467,100.00
Net Operating Income $ 170,100.00
Note: Management fee included in Administrative Expense.
Robert M. McSherry, MAI
INCOME APPROACH TO VALUE
Year Two
Gross Annual Potential Income:
Gross Annual Potential Income:
8 - Efficiency Units @ $2,200.00/month $ 211,200.00
8 - Efficiency Units @ $2,400.00/month $ 230,400.00
4 - One Bedroom Units @ $2,600.00/month $ 124,800.00
4 - One Bedroom Units @ $2,800.00/month $ 134,400.00
2 - Two Bedroom Units @ $3,000.00/month $ 72,000.00
2 - Two Bedroom Units @ 3,200.00/month $ 76,800.00
Total Gross Annual Potential Income $ 849,600.00
Less: Vacancy and Collection Losses (10%) $ 84,960.00
Total Vacancy and Collection Loss $ 84,960.00
Effective Gross Annual Potential Income $ 764,640.00
Expenses:
Administrative $158,000.00
Plant Operations $ 84,000.00
Dietary $107,310.00
Housekeeping $ 25,000.00
Aides $ 90,000.00
Activities $ 30,000.00
Reserves for Replacement $ 15,000.00
Total Expenses $ 509,310.00
Net Operating Income $ 255,330.00
Note: Management Fee included in Administrative Expense.
Robert M. McSherry, MAI
INCOME APPROACH TO VALUE
Year Three
Gross Annual Potential Income:
Gross Annual Potential Income:
8 - Efficiency Units @ $2,420.00/month $ 232,320.00
8 - Efficiency Units @ $2,640.00/month $ 253,440.00
4 - One Bedroom Units @ $2,800.00/month $ 137,280.00
4 - One Bedroom Units @ $3,080.00/month $ 147,840.00
2 - Two Bedroom Units @ $3,300.00/month $ 79,200.00
2 - Two Bedroom Units @ 3,520.00/month $ 84,480.00
Total Gross Annual Potential Income $ 934,560.00
Less- Vacancy and Collection Losses (5%) $ 46,728.00
Total Vacancy and Collection Loss $ 46,728.00
Effective Gross Annual Potential Income $ 887,832.00
Expenses:
Administrative $180,000.00
Plant Operations $ 90,000.00
Dietary $115,000.00
Housekeeping $ 25,000.00
Aides $ 98,000.00
Activities $ 30,000.00
Reserves for Replacement $ 15,000.00
Total Expenses $ 553,000.00
Net Operating Income $ 334,832.00
Note: Management Fee included in Administrative Expense.
Robert M. McSherry, MAI
JUSTIFICATION OF CAPITALIZATION RATE
Direct Capitalization is a method used to convert a single year's income
estimate into a value indication in the Income Capitalization Approach.
The direct capitalization formula using an overall property capitalization
rate is
Value / Net Operating Income = Overall Capitalization Rate
In this appraisal, the appraisers will employ two different methods to obtain
an overall capitalization rate:
1) Band of Investment - mortgage and equity components
2) Underwriter's Method (derivation from debt coverage ratio)
Band of Investment
The appraisers contacted local lenders regarding rates and terms of alternate
investments as well as current market rates applicable for this market.
Annual Constant - In developing the mortgage components for the Band
of Investment Method, the appraisers reviewed the National Mortgage
Commitment Survey conducted by the Appraisal Institute Research Department
which surveyed sample lenders in various geographical regions throughout the
United States. The data quoted is based on national averages and do not
reflect conditions inherent in all markets. Therefore, the appraisers
contacted local lenders regarding rates and terms applicable for this
market area. Lenders in the local market are quoting rates at prime plus
1%, terms of 20 years. 75% and a loan-to-value ratio. The local market
closely approximates the national averages for the subject property type.
Robert M. McSherry, MAI
The appraisers reviewed available data concerning current national and
local quoted mortgage rates and talked to various lenders in the Louisiana
area which confirm that market rates and terms for loans of the quality
of the subject property are available at 9% interest rate with monthly
payments amortized for a 20 year term, a 75% loan-to-value ratio. Therefore,
the mortgage constant is derived to be .1079671.
Equity Dividend - Current rates of return available from alternative
investment vehicles are reviewed. These alternative investments are more
liquid than an investment in real estate, therefore any potential investor
would expect a higher rate of return. Based on this, we have been able
to conclude that a 9% equity dividend rate is required to attract investment
capital to the subject property's type which is considered to be slightly
more risky than other types of real estate investments.
In order to ascertain the appropriate equity dividend or "cash-on-cash"
rate, the appraiser has reviewed money rates for other alternate investments
as of January 10, 1999. The results of this analysis of comparable and
alternative money rates are as follows:
Certificates of Deposit 30 Day 4.29%
90 Day 4.51%
180 Day 4.67%
Treasury Bill Rates 3 Months 4.39%
6 Months 4.40%
52 Weeks 4.33%
Robert M. McSherry, MAI
30 Year Treasury Bond Rate 5.21%
Merrill-Lynch Ready Assets 30 Day 54.65 (Average Yield)
As can be reflected by the above alternate investment vehicles. Current
rates for both short and long term yields is between the high 4.00% to
the low 5.00% range. The projected 9.00% equity yield or "cash-on-cash"
return projected for the subject property provides an excellent return
on the investor's cash, approximately 3.00% in excess of other alternate
investment vehicles. Accordingly, the 9.00% equity dividend rate is considered
appropriate when the overall risk and competitive rates are considered.
Derivation of Capitalization Rate - The band of investment (or weighted
average) formula for deriving an overall rate when the mortgage constant
and equity dividend rates is known as:
Mortgage Percent x Mortgage Constant
Plus
Equity Percent x Equity Dividend Rate
Equals
Overall Capitalization Rate
.75 x . 1 079671 = .0809
.25 x .09 = .0225
Total = .10340
Rounded to .103
Underwriter's Method
In making loan decisions, institutional lenders use a debt coverage ratio
(DCR), which is the ratio of net operating income to annual debt service.
This measure
Robert M. McSherry, MAI
of constraint is frequently used by institutional lenders, who are general
fiduciaries. They manage and lend the money of others, including depositors
and policy holders. Because of the fiduciary responsibility, institutional
lenders are particularly sensitive to the safety and profit and are anxious
to avoid default and possible foreclosure. Consequently, when they underwrite
income property loans, institutional lenders try to provide a cushion
so that the borrower will be able to meet the debt service obligations
on the loan even if the building income declines.
The debt coverage ratio may also be used to estimate the overall capitalization
rate by multiplying the ratio by the mortgage loan constant (RM) and the
loan-to-value ratio (M). The debt coverage ratio, mortgage loan constant,
and loan-to-value ratio have already been determined to be 1.20, .1079671
and .75, respectfully. The formula for derivation of an overall capitalization
rate from debt coverage ratio is as follows:
RO = DCR x RM x M
RO = 1.20 X. 1 079671 X.75
RO =.0971
R/T = .097
Review of the three (3) improved property sales contained within this
report have indicated an Overall Capitalization Rate from a low of 9.96%
to a high of 11.6%. These indicated Overall Capitalization Rates which
have been derived from available market data indicates the rate chosen
for the capitalization of the net
Robert M. McSherry, MAI
income into an indication of value based upon stabilized income of 10.5%
is reflective of current industry attitudes and is considered appropriate
with respect to this particular appraisal assignment.
Conclusion
Based on the available information we have concluded that a 10.5% is
the most appropriate capitalization rate which is derived from the actual
band of investments method and supported by the Underwriter's Method and
available market data. The location of the subject has also been considered.
Thus:
NET OPERATING INCOME
------------------------ = VALUE
OVERALL CAPITALIZATION RATE
$334,832.00
--------------- = $3,188,876.00
.105
INDICATED VALUE OF SUBJECT FROM
INCOME APPROACH (R/T) $3,170,000.00
Robert M. McSherry, MAI
DISCOUNTED CASH FLOW ANALYSIS
The subject property will require a period in excess of one year to achieve
stabilized net income. In order to provide an estimate of the present
value of the improvements upon completion but prior to achieving stabilized
net operating income, the discounting process is utilized.
The income stream generated by the subject until stabilized income is
reached is discounted into an estimate of present value and the reversionary
value of the improvements as estimated upon achieving a stabilized net
income is also discounted to present worth. The market indicates a discount
rate of 11% to be appropriate to be utilized in discounting the income
and reversion and this is based on current rates of return on alternate
investments and the risk associated with the subject.
Robert M. McSherry, MAI
Present Worth of Income Stream
Year One: $170,100.00x.900901 = $ 153,243.00
Year Two: $255,330.00 x.811622 = $ 207,231.00
Year Three: $334,832.00 x.731191 $ 244,826.00
Total Present Value of Income Stream $ 605,300.00
Present Worth of Reversion
$3,170,000.00 x.731191 $2,317,875.00
Summation:
Present Worth of Income Stream $ 605,300.00
Present Worth/Reversion $2,923,175.00
Total $2,923,175.00
INDICATED VALUE OF SUBJECT FROM
INCOME APPROACH/DISCOUNTED
CASH FLOW $2,925,000.00
Robert M. McSherry, MAI
RECONCILIATION AND FINAL VALUE
The three approaches to value have indicated the following value estimates
of the property being appraised:
COST APPROACH TO VALUE $4,085,000.00
MARKET APPROACH TO VALUE $2,520,000.00
INCOME APPROACH TO VALUE
OVERALL CAPITALIZATION RATE $3,170,000.00
DISCOUNTED CASH FLOW
ANALYSIS $2,925,000.00
The subject property is existing construction and only preliminary plans
and specifications have been provided this appraiser in order to complete
the Cost Approach to Value. Costs are extremely difficult to estimate
and no two competent contractors will ever agree on the actual cost to
construct a property. However, this appraiser has utilized reliable sources
including the Marshall Valuation Service Cost Manual as well as actual
construction costs affecting a similar type property in order to complete
the Cost Approach to Value and this approach is considered reflective
of the cost new of the subject property.
The subject property is considered an income producing and has been valued
based on it being a Going Concern. The property is under competent ownership
and will have excellent management in place and the utilization of the
Going Concern concept is considered appropriate with respect to this particular
appraisal problem. Accordingly, the Indicated Value of the Property based
on stabilized net income being generated at the end of the third year
is considered
Robert M. McSherry, MAI
the best available indicator of it's current Market Value and has been
accorded the greatest credence in the final analysis.
Based on the data contained within this report, other in-file data, and
this appraiser's review and analysis of said data, it is our opinion that
the existing property identified as the 28 Unit Independent Living Facility
located at 78 Canyon Diablo, within the corporate limits of Sedona, Arizona
was estimated to have a Market Value, as of January 10, 1999, and based
upon Stabilized Net Operating Income, of:
THREE MILLION ONE HUNDRED SEVENTY THOUSAND DOLLARS
($3,170,000.00)
Allocated:
Land $ 780,000.00
Improvements: $2,350,000.00
Furniture, Fixtures and Equipment $ 40,000.00
Goodwill of Going Concern -0-
The estimated "as is" value is estimated to be, as of January 10, 1999
and subject to completion within a reasonable period of time, is:
TWO MILLION NINE HUNDRED TWENTY-FIVE THOUSAND DOLLARS
($2,925,000.00)
Robert M. McSherry, MAI
ADDENDA
Robert M. McSherry, MAI
APPRAISER'S CERTIFICATION
I certify that, to the best of my knowledge and belief,...
(1) The statements of fact contained in this report are true and correct.
(2) The reported analyses, opinions, and conclusions are limited only
by the report assumptions and limiting conditions, and are my personal,
unbiased professional analyses, opinion and conclusions.
(3) 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.
(4) 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.
(5) My analyses, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice.
(6) I have made a personal inspection of the property that is the subject
of this report and all rent comparables.
(7) No one provided significant professional assistance to the person
signing this report.
(8) The reported analyses, opinions, and conclusions were developed,
and this report has been prepared, in conformity with the requirements
of the Code of Professional Ethics and the Standards of Professional
Practice of the American Institute of Real Estate Appraisers.
(9) The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
(10) I am not currently certified under the voluntary continuing education
program of the American Institute of Real Estate Appraisers.
Robert M. McSherry, MAI
(11) I certify that the use of this report is subject to the requirements of
the Appraisal Institute relating to review by its authorized
representatives.
Estimated Market Value: /S/ROBERT M MCSHERRY
$3,170,000.00 ---------------------------
Robert M. McSherry, MAI
LA State Certified General Estate
Appraiser No. G0891
Allocated:
Land $ 780,000.00
Improvements $2,350,000.00
Furniture, Fixtures and
Equipment $ 40,000.00
Goodwill of Going
Concern -0-
As Of: January 10, 1999
Robert M. McSherry, MAI
QUALIFICATIONS OF ROBERT M. MC SHERRY, MAI
EDUCATIONAL BACKGROUND AND TRAINING:
Graduate of Louisiana State University, Baton Rouge, Louisiana, Bachelor
of Science Degree in Business Administration with a Major in Finance.
Real Estate Appraisal Course 1-A, Basic Fundamentals, Methods and
Techniques, 1974, AIREA
Real Estate Appraisal Course 1-B, Capitalization, 1975, AIREA
Real Estate Appraisal Course VIII, Single-Family Residential Appraisal,
1974, AIREA
Real Estate Appraisal Course II, Techniques and Application, 1976 and
1980, AIREA
Real Estate Appraisal Course III, Rural Properties, 1979
Real Estate Appraisal "Industrial Valuation" Course, 1984
Seminar: R-41 C - New Orleans, Louisiana, AIREA, 1978
"Standards of Professional Practice" Course, AIREA, 1987
"Capitalization Theory and Techniques, Part A" Course, AIREA, 1987
"Standards of Professional Practice" Course, Appraisal Institute, 1992
"Advanced Level Finance I & II", 1997
"Risk Management/Ethics/Fair Housing", 1997
"How to Value Louisiana Timberland", 1997
"Uniform Standards of Professional Appraisal Practice" Seminar, 1997
PROFESSIONAL EXPERIENCE
Real Estate Broker, State of Louisiana (1971)
Robert M. McSherry, MAI
Monroe Redevelopment Agency, Monroe, Louisiana (1971)
Ford, Bacon & Drive Construction and Engineering Company, Monroe,
Louisiana (1972)
Mississippi power and Light Company, Jackson, Mississippi (1973-1976)
Cameron-Brown South, Inc., Mortgage Bankers, Baton Rouge, Louisiana
(1976-1977)
Real Estate Appraiser, Monroe, Louisiana (1978-1985)
Real Estate Appraiser, Baton Rouge, Louisiana and Jackson, Mississippi
(1985-Present)
PROFESSIONAL MEMBERSHIPS:
Residential Member, American Institute of Real Estate Appraisers,
Certification Number 1040
Licensed Real Estate Broker, State of Louisiana
Fee Inspector for the Louisiana Homeowners Warranty Corporation
FNMA Approved Level III Appraiser, Number 1027135
Member, American Institute of Real Estate Appraisers - MAI Designation
(1981), Number 6291
Certified Licensed General Appraiser, State of Louisiana, Number 0891
Robert M. McSherry, MAI
PHOTOGRAPHS
Robert M. McSherry, MAI
[PHOTO OF FRONT ENTRANCE]
[PHOTO OF FRONT ENTRANCE]
Robert M. McSherry, MAI
[PHOTO OF SURROUNDING AREA]
[PHOTO OF FACILTIY]
Robert M. McSherry, MAI
[PHOTO OF INTERIOR HALLWAY]
[PHOTO OF SHOWER]
Robert M. McSherry, MAI
[PHOTO OF UNIT KITCHEN]
[PHOTO OF UNIT LIVING ROOM]
Robert M. McSherry, MAI
[PHOTO OF INTERIOR HALLWAY]
[PHOTO OF REAR ENTRANCE]
Robert M. McSherry, MAI
[PHOTO OF FACILTIY]
[PHOTO OF FACILITY]
Robert M. McSherry, MAI
[PHOTO OF FACITLITY EXTERIOR]
[PHOTO OF FACITLITY EXTERIOR]
Robert M. McSherry, MAI
[PHOTO OF SWIMMING POOL]
[PHOTO OF COMMON AREA]
Robert M. McSherry, MAI
[PHOTO OF COMMON AREA]
[PHOTO OF FACILITY EXTERIOR]
Robert M. McSherry, MAI
FLOOR PLAN
Robert M. McSherry, MAI
[FLOOR PLAN OF STANDARD UNIT]
Robert M. McSherry, MAI
[FLOOR PLAN OF 1 BEDROOM UNIT]
Robert M. McSherry, MAI
[FLOOR PLAN OF 2 BEDROOM UNIT]
Robert M. McSherry, MAI
[SITE PLAN]
Robert M. McSherry, MAI