EX-99.(C)(5) 10 d07253exv99wxcyx5y.txt APPRAISAL OF PALM LAKE PALM LAKE 13401 NORTH 50TH STREET TAMPA, FLORIDA MARKET VALUE - FEE SIMPLE ESTATE AS OF DECEMBER 8, 2003 PREPARED FOR: APARTMENT INVESTMENT AND MANAGEMENT COMPANY (AIMCO) C/O LINER YANKELEVITZ SUNSHINE & REGENSTREIF LLP & LIEFF CABRASER HEIMANN & BERNSTEIN ON BEHALF OF NUANES, ET. AL. [AMERICAN APPRAISAL ASSOCIATES(R) LOGO]
UNITED STATES INTERNATIONAL Atlanta Milwaukee Brazil Mexico Boston Minneapolis [AMERICAN APPRAISAL ASSOCIATES(R) LOGO] Canada Morocco Buffalo New Orleans China Peru Charlotte New York 9441 LBJ Freeway Suite 114 Croatia Philippines Chicago Oak Lawn Dallas, Texas 75243 Czech Republic Poland Cincinnati Philadelphia England Portugal Dallas Pittsburg Telephone: (972) 994-9100 Germany Russia Denver Princeton Fax: (972) 994-0516 Greece Spain Detroit Schaumburg Hong Kong Taiwan Houston St. Louis Hungary Thailand Irvine San Francisco Italy Turkey Jacksonville Seattle Japan Venezuela Los Angeles
DECEMBER 23, 2003 Apartment Investment and Management Company ("AIMCO") c/o Mr. Steven A. Velkei, Esq. Liner Yankelevitz Sunshine & Regenstreif LLP 1100 Glendon Avenue, 14th Floor Los Angeles, California 90024-3503 Nuanes, et al. ("Plaintiffs") c/o Ms. Joy Kruse Lieff Cabraser Heimann & Bernstein Embarcadero Center West 275 Battery Street, 30th Floor San Francisco, California 94111 RE: PALM LAKE 13401 NORTH 50TH STREET TAMPA, HILLSBOROUGH COUNTY, FLORIDA In accordance with your authorization, we have completed the appraisal of the above-referenced property. This complete appraisal is intended to report our analysis and conclusions in a summary format. The subject property consists of an apartment project having 150 units with a total of 153,700 square feet of rentable area. The improvements were built in 1974. The improvements are situated on 9.33 acres. Overall, the improvements are in average condition. As of the date of this appraisal, the subject property is 96% occupied. It is our understanding the appraisal will be used by the clients to assist the San Mateo Superior Court in the settlement of litigation between the above mentioned clients. The appraisal is intended to conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") as promulgated by the Appraisal Standards Board of the Appraisal Foundation and the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. The appraisal is presented in a summary report, and the Departure Provision of USPAP has not been invoked in this appraisal. It is entirely inappropriate to use this value conclusion or the report for any purpose other than the one stated. AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 2 PALM LAKE, TAMPA, FLORIDA The opinions expressed in this appraisal cover letter can only be completely understood by reading the narrative report, addenda, and other data, which is attached. The appraisal is subject to the attached general assumptions and limiting conditions and general service conditions. As a result of our investigation, it is our opinion that the fee simple market value of the subject, effective December 8, 2003 is: ($4,300,000) Respectfully submitted, AMERICAN APPRAISAL ASSOCIATES, INC. -s- Frank A. Fehribach December 23, 2003 Frank A. Fehribach, MAI #053272 Managing Principal, Real Estate Group Texas State Certified General Real Estate Appraiser, TX-1323954-G Report By: Alice MacQueen Florida Certified General Real Estate Appraiser #RZ0002202 AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3 PALM LAKE, TAMPA, FLORIDA TABLE OF CONTENTS Cover Letter of Transmittal Table of Contents APPRAISAL DATA Executive Summary .......................................... 4 Introduction ............................................... 9 Area Analysis .............................................. 11 Market Analysis ............................................ 14 Site Analysis .............................................. 16 Improvement Analysis ....................................... 16 Highest and Best Use ....................................... 17 VALUATION Valuation Procedure ........................................ 18 Sales Comparison Approach .................................. 20 Income Capitalization Approach ............................. 26 Reconciliation and Conclusion .............................. 37
ADDENDA Exhibit A - Photographs of Subject Property Exhibit B - Summary of Rent Comparables and Photograph of Comparables Exhibit C - Assumptions and Limiting Conditions Exhibit D - Certificate of Appraiser Exhibit E - Qualifications General Service Conditions AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 4 PALM LAKE, TAMPA, FLORIDA EXECUTIVE SUMMARY PART ONE - PROPERTY DESCRIPTION PROPERTY NAME: Palm Lake LOCATION: 13401 North 50th Street Tampa, Florida INTENDED USE OF ASSIGNMENT: Court Settlement PURPOSE OF APPRAISAL: "As Is" Market Value of the Fee Simple Estate INTEREST APPRAISED: Fee simple estate DATE OF VALUE: December 8, 2003 DATE OF REPORT: December 23, 2003 PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS: SITE: Size: 9.33 acres, or 406,415 square feet Assessor Parcel No.: U-10-28-19-ZZZ-000001-31320 Floodplain: Community Panel No. 120112 0210E (August 15, 1989) Flood Zone C, an area outside the floodplain. Zoning: SPIUC (Special Public Interest University Community) BUILDING: No. of Units: 150 Units Total NRA: 153,700 Square Feet Average Unit Size: 1,025 Square Feet Apartment Density: 16.1 units per acre Year Built: 1974 UNIT MIX AND MARKET RENT: GROSS RENTAL INCOME PROJECTION
Market Rent Square --------------------- Monthly Annual Unit Type Feet Per Unit Per SF Income Income --------------------------------------------------------------------------------------------- 1Br/1Ba 775 $ 525 $ 0.68 $ 12,600 $ 151,200 2Br/1Ba 900 $ 600 $ 0.67 $ 57,000 $ 684,000 4Br/2Ba 1,600 $ 1,000 $ 0.63 $ 31,000 $ 372,000 -------- ---------- Total $100,600 $1,207,200 ======== ==========
OCCUPANCY: 96% ECONOMIC LIFE: 45 Years EFFECTIVE AGE: 20 Years REMAINING ECONOMIC LIFE: 25 Years AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5 PALM LAKE, TAMPA, FLORIDA SUBJECT PHOTOGRAPHS AND LOCATION MAP: SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] APARTMENT COMPLEX ENTRANCE TYPICAL APARTMENT BUILDING - FRONT VIEW AREA MAP [MAP] AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6 PALM LAKE, TAMPA, FLORIDA NEIGHBORHOOD MAP [MAP] HIGHEST AND BEST USE: As Vacant: Hold for future multi-family development As Improved: Continuation as its current use METHOD OF VALUATION: In this instance, the Sales Comparison and Income Approaches to value were utilized. AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 7 PALM LAKE, TAMPA, FLORIDA PART TWO - ECONOMIC INDICATORS INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION Amount $/Unit --------------------- ---------- ------- Potential Rental Income $1,207,200 $ 8,048 Effective Gross Income $1,164,120 $ 7,761 Operating Expenses $ 642,935 $ 4,286 55.2% of EGI Net Operating Income: $ 446,185 $ 2,975 Capitalization Rate 10.00% DIRECT CAPITALIZATION VALUE $4,500,000 * $30,000 / UNIT DISCOUNTED CASH FLOW ANALYSIS: Holding Period 10 years 2002 Economic Vacancy 15% Stabilized Vacancy & Collection Loss: 15% Lease-up / Stabilization Period N/A Terminal Capitalization Rate 10.50% Discount Rate 12.00% Selling Costs 2.00% Growth Rates: Income 2.50% Expenses: 3.00% DISCOUNTED CASH FLOW VALUE $4,400,000 * $29,333 / UNIT RECONCILED INCOME CAPITALIZATION VALUE $4,400,000 $29,333 / UNIT
SALES COMPARISON APPROACH PRICE PER UNIT: Range of Sales $/Unit (Unadjusted) $20,128 to $28,620 Range of Sales $/Unit (Adjusted) $25,915 to $29,613 VALUE INDICATION - PRICE PER UNIT $4,100,000 * $27,333 / UNIT EGIM ANALYSIS Range of EGIMs from Improved Sales 3.41 to 4.61 Selected EGIM for Subject 3.70 Subject's Projected EGI $1,164,120 EGIM ANALYSIS CONCLUSION $4,300,000 * $28,667 / UNIT NOI PER UNIT ANALYSIS CONCLUSION $4,200,000 * $28,000 / UNIT RECONCILED SALES COMPARISON VALUE $4,200,000 $28,000 / UNIT
---------------------------- * Value indications are after adjustments for concessions, deferred maintenance, excess land and lease-up costs, if any. AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 8 PALM LAKE, TAMPA, FLORIDA PART THREE - SUMMARY OF VALUE CONCLUSIONS SALES COMPARISON APPROACH: Price Per Unit $4,100,000 NOI Per Unit $4,200,000 EGIM Multiplier $4,300,000 INDICATED VALUE BY SALES COMPARISON $4,200,000 $28,000 / UNIT INCOME APPROACH: Direct Capitalization Method: $4,500,000 Discounted Cash Flow Method: $4,400,000 INDICATED VALUE BY THE INCOME APPROACH $4,400,000 $29,333 / UNIT RECONCILED OVERALL VALUE CONCLUSION: $4,300,000 $28,667 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9 PALM LAKE, TAMPA, FLORIDA INTRODUCTION IDENTIFICATION OF THE SUBJECT The subject property is located at 13401 North 50th Street, Tampa, Hillsborough County, Florida. Tampa identifies it as U-10-28-19-ZZZ-000001-31320. SCOPE OF THE ASSIGNMENT The property, neighborhood, and comparables were inspected by Alice MacQueen on December 8, 2003. Alice MacQueen made a personal inspection of the subject property, performed the research, valuation analysis, and wrote the report. Frank A. Fehribach, MAI reviewed the report and concurs with the value. Frank A. Fehribach, MAI and Alice MacQueen have extensive experience in appraising similar properties and meet the USPAP competency provision. The scope of this investigation comprises the inspection of the property and the collection, verification, and analysis of general and specific data pertinent to the subject property. We have researched current improved sales and leases of similar properties, analyzing them as to their comparability, and adjusting them accordingly. We completed the Sales Comparison and Income Capitalization Approaches to value. From these approaches to value, a concluded overall value was made. DATE OF VALUE AND REPORT This appraisal was made to express the opinion of value as of December 8, 2003. The date of the report is December 23, 2003. PURPOSE AND USE OF APPRAISAL The purpose of the appraisal is to estimate the market value of the fee simple interest in the subject property. It is understood that the appraisal is intended to assist the clients in litigation settlement proceedings. The appraisal was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. PROPERTY RIGHTS APPRAISED We have appraised the Fee Simple Estate in the subject property (as applied in the Sales & Income Approaches), subject to the existing short-term leases. A Fee Simple Estate is AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10 PALM LAKE, TAMPA, FLORIDA defined in The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, 1993), as: "Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat." MARKETING/EXPOSURE PERIOD MARKETING PERIOD: 6 to 12 months EXPOSURE PERIOD: 6 to 12 months HISTORY OF THE PROPERTY Ownership in the subject property is currently vested in CCIP Palm Lake LLC. To the best of our knowledge, no transfers of ownership or offers to purchase the subject are known to have occurred during the past three years. AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 11 PALM LAKE, TAMPA, FLORIDA AREA / NEIGHBORHOOD ANALYSIS NEIGHBORHOOD ANALYSIS A neighborhood is a group of complementary land uses. The function of the neighborhood analysis is to describe the immediate surrounding environs. The subject is located in the city of Tampa, Florida. Overall, the neighborhood is characterized as a suburban setting with the predominant land use being institutional. The subject's neighborhood is generally defined by the following boundaries. NEIGHBORHOOD BOUNDARIES East - Interstate 75 West - Interstate 275 South - East Hillsborough Avenue North - University of South Florida and Bruce B. Downs Boulevard DEMOGRAPHICS We have reviewed demographic data within the neighborhood. The following table summarizes the key data points. AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 12 PALM LAKE, TAMPA, FLORIDA NEIGHBORHOOD DEMOGRAPHICS
AREA ---------------------------------------------- CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA ----------------------------------------------------------------------------------------------------- POPULATION TRENDS Current Population 15,973 95,011 279,469 2,442,120 5-Year Population 16,429 98,558 287,221 2,591,303 % Change CY-5Y 2.9% 3.7% 2.8% 6.1% Annual Change CY-5Y 0.6% 0.7% 0.6% 1.2% HOUSEHOLDS Current Households 6,042 39,430 113,376 1,029,700 5-Year Projected Households 6,141 40,743 116,943 1,095,882 % Change CY - 5Y 1.6% 3.3% 3.1% 6.4% Annual Change CY-5Y 0.3% 0.7% 0.6% 1.3% INCOME TRENDS Median Household Income $29,292 $ 31,369 $ 32,460 $ 35,241 Per Capita Income $15,615 $ 17,971 $ 19,429 $ 22,508 Average Household Income $40,831 $ 43,505 $ 47,882 $ 53,389
Source: Demographics Now The subject neighborhood's population is expected to show increases below that of the region. The immediate market offers inferior income levels as compared to the broader market. The following table illustrates the housing statistics in the subject's immediate area, as well as the MSA region. HOUSING TRENDS
AREA ---------------------------------------------- CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA ----------------------------------------------------------------------------------------------------- HOUSING TRENDS % of Households Renting 43.56% 41.74% 38.20% 24.86% 5-Year Projected % Renting 41.65% 41.25% 37.73% 24.59% % of Households Owning 48.28% 49.10% 50.91% 60.90% 5-Year Projected % Owning 50.27% 49.82% 51.70% 61.88%
Source: Demographics Now AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13 PALM LAKE, TAMPA, FLORIDA SURROUNDING IMPROVEMENTS The following uses surround the subject property: North - University of South Florida South - Multifamily Apartments East - Multifamily Apartments West - University of South Florida CONCLUSIONS The subject is well located within the city of Tampa. The neighborhood is characterized as being mostly suburban in nature and is currently in the stable stage of development. The economic outlook for the neighborhood is judged to be favorable with a good economic base. AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 14 PALM LAKE, TAMPA, FLORIDA MARKET ANALYSIS The subject property is located in the city of Tampa in Hillsborough County. The overall pace of development in the subject's market is more or less stable. Recent construction in the area includes the final 52 units at Avalon Heights. This community rents apartments by the bedroom and caters to the student population. The Preserve at Tampa Palms also recently completed 175 units. The following table illustrates historical vacancy rates for the subject's market.
HISTORICAL VACANCY RATE ----------------------------------------------------------------------------------- Period Region Submarket ------ ------ --------- May-01 6.9% 7.5% Nov-01 7.7% 9.1% May-02 9.0% 8.3% Nov-02 8.9% 8.3% May-03 8.7% 9.8%
Source: Apartment Index Report, May 2003, by Carolinas Real Data Occupancy trends in the subject's market are decreasing. Historically speaking, the subject's submarket has equated the overall market. Market rents in the subject's market have been following an increasing trend. The following table illustrates historical rental rates for the subject's market.
HISTORICAL AVERAGE RENT --------------------------------------------------------------------------------- Period Region % Change Submarket % Change ------ ------ -------- --------- -------- May-01 $693 - $670 - Nov-01 $708 2.2% $693 3.4% May-02 $725 2.4% $688 -0.7% Nov-02 $726 0.1% $698 1.5% May-03 $725 -0.1% $710 1.7%
Source: Apartment Index Report, May 2003, by Carolinas Real Data The following table illustrates a summary of the subject's competitive set.
COMPETITIVE PROPERTIES ----------------------------------------------------------------------------------------------------------------------- No. Property Name Units Ocpy. Year Built Proximity to subject --- ------------- ----- ----- ---------- -------------------- R-1 Excellence 165 91% 1992 Adjacent to the south R-2 Willow Brooke 248 98% 1976 Same general area near University R-3 Park Terrace 150 95% 1986 Same general area near the University R-4 Campus Walk 297 91% 1973 Same general area near the University R-5 Rivertree Landing 223 80% 1969 Off N 56th and Sligh Avenue Subject Palm Lake 150 96% 1974
AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15 PALM LAKE, TAMPA, FLORIDA The average rent of $710 per month in the Tampa-Northeast submarket is the lowest of all area submarkets. However, the average rents in this submarket have steadily increased over the past couple of years. AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16 PALM LAKE, TAMPA, FLORIDA PROPERTY DESCRIPTION SITE ANALYSIS Site Area 9.33 acres, or 406,415 square feet Shape Generally rectangular Topography Level Utilities All necessary utilities are available to the site. Soil Conditions Stable Easements Affecting Site None other than typical utility easements Overall Site Appeal Average Flood Zone: Community Panel 120112 0210E, dated August 15, 1989 Flood Zone Zone C Zoning SPIUC, the subject improvements represent a legal conforming use of the site. REAL ESTATE TAXES
ASSESSED VALUE - 2003 ----------------------- TAX RATE / PROPERTY PARCEL NUMBER LAND BUILDING TOTAL MILL RATE TAXES -------------------------------------------------------------------------------------------------------------- U-10-28-19-ZZZ-000001-31320 $900,000 $3,159,900 $4,059,900 0.02352 $95,485
IMPROVEMENT ANALYSIS Year Built 1974 Number of Units 150 Net Rentable Area 153,700 Square Feet Construction: Foundation Reinforced concrete slab Frame Heavy or light wood Exterior Walls Wood or vinyl siding Roof Composition shingle over a wood truss structure Project Amenities Amenities at the subject include a swimming pool, laundry room, business office, freshwater lake, and parking area. Unit Amenities Individual unit amenities include a balcony, and washer dryer connection. Appliances available in each unit include a refrigerator, stove, dishwasher, water eater, garbage disposal, and oven. AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17 PALM LAKE, TAMPA, FLORIDA Unit Mix:
Unit Area Unit Type Number of Units (Sq. Ft.) --------- --------------- ---------- 1Br/1Ba 24 775 2Br/1Ba 95 900 4Br/2Ba 31 1,600
Overall Condition Average Effective Age 20 years Economic Life 45 years Remaining Economic Life 25 years Deferred Maintenance None HIGHEST AND BEST USE ANALYSIS In accordance with the definition of highest and best use, an analysis of the site relating to its legal uses, physical possibilities, and financial feasibility is appropriate. The highest and best use as vacant is to hold for future multi-family development. The subject improvements were constructed in 1974 and consist of a 150-unit multifamily project. The highest and best use as improved is for a continued multifamily use. Overall, the highest and best use of the subject property is the continued use of the existing apartment project. AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 18 PALM LAKE, TAMPA, FLORIDA THE VALUATION PROCEDURE There are three traditional approaches, which can be employed in establishing the market value of the subject property. These approaches and their applicability to the valuation of the subject are summarized as follows: THE COST APPROACH The application of the Cost Approach is based on the principle of substitution. This principle may be stated as follows: no one is justified in paying more for a property than that amount by which he or she can obtain, by purchase of a site and construction of a building, without undue delay, a property of equal desirability and utility. In the case of a new building, no deficiencies in the building should exist. In the case of income-producing real estate, the cost of construction plays a minor and relatively insignificant role in determining market value. The Cost Approach is typically only a reliable indicator of value for: (a) new properties; (b) special use properties; and (c) where the cost of reproducing the improvements is easily and accurately quantified and there is no economic obsolescence. In all instances, the issue of an appropriate entrepreneurial profit - the reward for undertaking the risk of construction, remains a highly subjective factor especially in a market lacking significant speculative development. THE SALES COMPARISON APPROACH The Sales Comparison Approach is an estimate of value based upon a process of comparing recent sales of similar properties in the surrounding or competing areas to the subject property. Inherent in this approach is the principle of substitution. The application of this approach consists of comparing the subject property with similar properties of the same general type which have been sold recently or currently are available for sale in competing areas. This comparative process involves judgment as to the similarity of the subject property and the comparable sale with respect to many value factors such as location, contract rent levels, quality of construction, reputation and prestige, age and condition, among others. The estimated value through this approach represents the probable price at which a willing seller would sell the subject property to a willing and knowledgeable buyer as of the date of value. AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 19 PALM LAKE, TAMPA, FLORIDA THE INCOME CAPITALIZATION APPROACH The theory of the Income Capitalization Approach is based on the premise that present value is the value of the cash flow and reversionary value the property will produce over a reasonable holding (ownership) period. The Discounted Cash Flow Analysis will convert equity cash flows (including cash flows and equity reversion) into a present value utilizing an internal rate of return (or discount rate). The Internal Rate of Return (IRR) will be derived from a comparison of alternate investments, a comparative analysis of IRR's used by recent buyers of similar properties, and a review of published industry surveys. The Direct Capitalization Analysis converts one year of income into an overall value using overall capitalization rates from similar sales. The overall rates take into consideration buyers assumptions of the market over the long-term. The results of the Income Capitalization Analysis are usually the primary value indicator for income producing properties. Investors expect a reasonable rate of return on their equity investment based on the ownership risks involved; this approach closely parallels the investment decision process. RECONCILIATION In this instance, we have completed the Sales Comparison and Income Capitalization Approaches to value. As an income producing property, the income approach is a primary approach to value. The Sales Comparison Approach is also considered reliable as investors are buying similar buildings in the market. Our research indicates that market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, we have decided that the Cost Approach is not a reliable indicator of value for the subject, and this approach has not been utilized. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 20 PALM LAKE, TAMPA, FLORIDA SALES COMPARISON APPROACH Use of market or comparable sales requires the collection and analysis of comparable sales data. Similar properties recently sold are compared to the subject and adjusted based on any perceived differences. This method is based on the premise that the costs of acquiring a substitute property would tend to establish a value for the subject property. The premise suggests that if a substitute is unavailable in the market, the reliability of the approach may be subordinate to the other approaches. The reliance on substitute properties produces shortcomings in the validity of this approach. Geographic and demographic characteristics from each submarket restrict which sales may be selected. Recent sales with a similar physical characteristics, income levels, and location are usually limited. The sales we have identified, however, do establish general valuation parameters as well as provide support to our conclusion derived through the income approach method. The standard unit of comparison among similar properties is the sales price per unit and price per square foot of net rentable area. To accurately adjust prices to satisfy the requirements of the sales comparison approach, numerous calculations and highly subjective judgments would be required including consideration of numerous income and expense details for which information may be unreliable or unknown. The sales price per unit and square foot are considered relevant to the investment decision, but primarily as a parameter against which value estimates derived through the income approach can be judged and compared. In examining the comparable sales, we have applied a subjective adjustment analysis, which includes specific adjustments derived from our experience and consulting with the market participants. SALES COMPARISON ANALYSIS Detailed on the following pages are sales transactions involving properties located in the subject's competitive investment market. Photographs of the sale transactions are located in the Addenda. Following the summary of sales is an adjustment grid that is used to arrive at a value. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 21 PALM LAKE, TAMPA, FLORIDA SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 I - 3 -------------------------------- ----------------------- ----------------------- -------------------------- ------------------------ Property Name Palm Lake Hidden River Country Crossing Rivertree Landing LOCATION: Address 13401 North 50th Street 8024 Hidden River Drive 7903 Holly Lea Court 6909 Indian River Drive City, State Tampa, Florida Tampa, FL Tampa, FL Tampa, FL County Hillsborough Hillsborough Hillsborough Hillsborough PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 153,700 N/A 204,335 228,352 Year Built 1974 1973 1974 1969 Number of Units 150 232 232 223 Unit Mix: Type Total Type Total Type Total Type Total 1Br/1Ba 24 1Br/1BA 1Br/1BA 128 1Br/1BA 90 2Br/1Ba 95 2Br/2BA 2Br/2BA 74 2Br/2BA 106 4Br/2Ba 31 3Br/2BA 3Br/2BA 30 3Br/2BA 27 Average Unit Size (SF) 1,025 881 1,024 Land Area (Acre) 9.3300 12.5100 11.8800 Unknown Density (Units/Acre) 16.1 18.5 19.5 Parking Ratio (Spaces/Unit) Adequate Adequate Adequate Adequate Parking Type (Gr., Cov., etc.) Garage, Open Covered Open Open Open CONDITION: Fair to Average Average Good Average APPEAL: Average Average Average Average AMENITIES: Pool/Spa Yes/No Yes/No Yes/No Yes/No Gym Room No Yes Yes Yes Laundry Room Yes Yes Yes Yes Secured Parking No No No No Sport Courts No No No No Washer/Dryer Connection Yes No No No Other Other OCCUPANCY: 96% 95% 90% 75% TRANSACTION DATA: Sale Date June, 2003 July, 2002 April, 2002 Sale Price ($) $5,500,000 $5,800,000 $5,150,000 Grantor Centennial Equity, LLC TCI Country Crossing, Inc. Grantee Hidden River Grande Centurion Partners II, LLC Barfield Bay Holdings Apartments LLC Sale Documentation Doc# 12764-1947 Doc# 11829-0478 Doc# Verification CoStar Realty CoStar Realty Carolinas Real Data Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income N/A $1,604,832 $6,917 $7.85 $1,488,814 $6,676 $6.52 Vacancy/Credit Loss N/A $ 160,483 $ 692 $0.79 $ 372,204 $1,669 $1.63 Effective Gross Income N/A $1,444,349 $6,226 $7.07 $1,116,611 $5,007 $4.89 Operating Expenses N/A $ 893,200 $3,850 $4.37 $ 502,475 $2,253 $2.20 Net Operating Income N/A $ 551,149 $2,376 $2.70 $ 614,136 $2,754 $2.69 NOTES: Located near the subject Situated in same in the same neighborhood. submarket but inferior A community w/limited land in terms of location. - scaping/curb appeal Similar age and condition. PRICE PER UNIT $23,707 $25,000 $23,094 PRICE PER SQUARE FOOT $ 28.38 $ 22.55 EXPENSE RATIO N/A 61.8% 45.0% EGIM N/A 4.02 4.61 OVERALL CAP RATE N/A 9.50% 11.92% Cap Rate based on Pro Forma or Actual Income? PRO FORMA PRO FORMA PRO FORMA COMPARABLE COMPARABLE DESCRIPTION I - 4 I - 5 ------------------------------ --------------------------- ---------------------------- Property Name Sherwood Lake Campus Walk LOCATION: Address 1811 Tinsley Circle 13725 Plaza Court City, State Tampa, FL Tampa, FL County Hillsborough Hillsborough PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 145,080 363,825 Year Built 1973 1973 Number of Units 156 297 Unit Mix: Type Total Type Total 2Br/1.5Ba 156 1Br/1BA 12 2Br/2BA 200 3Br/2BA 85 Average Unit Size (SF) 930 1, 225 Land Area (Acre) Unknown Unknown Density (Units/Acre) Parking Ratio (Spaces/Unit) Adequate Adequate Parking Type (Gr., Cov., etc.) Open Open CONDITION: Average Good APPEAL: Average Average AMENITIES: Pool/Spa Yes/No Yes/No Gym Room Yes Yes Laundry Room Yes Yes Secured Parking No No Sport Courts No No Washer/Dryer Connection No No Other Other OCCUPANCY: 86% 95% TRANSACTION DATA: Sale Date April, 2002 March, 2001 Sale Price ($) $3,140,000 $8,500,000 Grantor Grantee Carlisle Group Blackhawk Realty Advisors Sale Documentation Doc# Doc# Verification Carolinas Real Data Carolinas Real Data Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $997,776 $6,396 $6.88 $2,772,347 $9,335 $7.62 Vacancy/Credit Loss $139,689 $ 895 $0.96 $ 277,235 $ 933 $0.76 Effective Gross Income $858,087 $5,501 $5.91 $2,495,112 $8,401 $6.86 Operating Expenses $386,139 $2,475 $2.66 $1,122,800 $3,780 $3.09 Net Operating Income $471,948 $3,025 $3.25 $1,372,312 $4,621 $3.77 NOTES: Located in same submarket Located near the subject in but with inferior location. the same neighborhood. Similar condition This property is also listed compared to the subject. as a Rent Comparable. PRICE PER UNIT $20,128 $28,620 PRICE PER SQUARE FOOT $ 21.64 $ 23.36 EXPENSE RATIO 45.0% 45.0% EGIM 3.66 3.41 OVERALL CAP RATE 15.03% 16.14% Cap Rate based on Pro Forma or Actual Income? PRO FORMA PRO FORMA
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22 PALM LAKE, TAMPA, FLORIDA IMPROVED SALES MAP [MAP] IMPROVED SALES ANALYSIS The improved sales indicate a sales price range from $20,128 to $28,620 per unit. Adjustments have been made to the sales to reflect differences in location, age/condition and quality/appeal. Generally speaking, larger properties typically have a lower price per unit when compared to smaller properties, all else being equal. Similarly, those projects with a higher average unit size will generally have a higher price per unit. After appropriate adjustments are made, the improved sales demonstrate an adjusted range for the subject from $25,915 to $29,613 per unit with a mean or average adjusted price of $27,728 per unit. The median adjusted price is $27,303 per unit. Based on the following analysis, we have concluded to a value of $27,000 per unit, which results in an "as is" value of $4,100,000 (rounded after necessary adjustment, if any). AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23 PALM LAKE, TAMPA, FLORIDA SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 I - 3 ----------------------------------- ----------------------- ----------------------- ----------------------- ------------------------ Property Name Palm Lake Hidden River Country Crossing Rivertree Landing Address 13401 North 50th Street 8024 Hidden River Drive 7903 Holly Lea Court 6909 Indian River Drive City Tampa, Florida Tampa, FL Tampa, FL Tampa, FL Sale Date June, 2003 July, 2002 April, 2002 Sale Price ($) $5,500,000 $5,800,000 $5,150,000 Net Rentable Area (SF) 153,700 N/A 204,335 228,352 Number of Units 150 232 232 223 Price Per Unit $23,707 $25,000 $23,094 Year Built 1974 1973 1974 1969 Land Area (Acre) 9.3300 12.5100 11.8800 Unknown VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0% Date of Sale (Time) 06-2003 0% 07-2002 3% 04-2002 3% VALUE AFTER TRANS. ADJUST. ($/UNIT) $23,707 $25,750 $23,787 Location Inferior 10% Inferior 10% Inferior 5% Number of Units 150 232 5% 232 5% 223 5% Quality / Appeal Good Comparable 0% Comparable 0% Comparable 0% Age / Condition 1974 1973 / Average 0% 1974 / Good -5% 1969 / Average 0% Occupancy at Sale 96% 95% 0% 90% 0% 75% 10% Amenities Good Comparable 0% Comparable 0% Comparable 0% Average Unit Size (SF) 1,025 0% 881 5% 1,024 0% PHYSICAL ADJUSTMENT 15% 15% 20% FINAL ADJUSTED VALUE ($/UNIT) $27,263 $29,613 $28,544 COMPARABLE COMPARABLE DESCRIPTION I - 4 I - 5 ----------------------------------- ---------------------- ----------------------- Property Name Sherwood Lake Campus Walk Address 1811 Tinsley Circle 13725 Plaza Court City Tampa, FL Tampa, FL Sale Date April, 2002 March, 2001 Sale Price ($) $3,140,000 $8,500,000 Net Rentable Area (SF) 145,080 363,825 Number of Units 156 297 Price Per Unit $20,128 $28,620 Year Built 1973 1973 Land Area (Acre) Unknown Unknown VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Date of Sale (Time) 04-2002 3% 03-2001 6% VALUE AFTER TRANS. ADJUST. ($/UNIT) $20,732 $30,337 Location Inferior 15% Comparable 0% Number of Units 156 0% 297 5% Quality / Appeal Comparable 0% Comparable 0% Age / Condition 1973 / Average 0% 1973 / Good -5% Occupancy at Sale 86% 10% 95% 0% Amenities Comparable 0% Comparable 0% Average Unit Size (SF) 930 0% 1,225 -10% PHYSICAL ADJUSTMENT 25% -10% FINAL ADJUSTED VALUE ($/UNIT) $25,915 $27,303
SUMMARY VALUE RANGE (PER UNIT) $25,915 TO $29,613 MEAN (PER UNIT) $27,728 MEDIAN (PER UNIT) $27,303 VALUE CONCLUSION (PER UNIT) $27,000
VALUE INDICATED BY SALES COMPARISON APPROACH $4,050,000 ROUNDED $4,100,000
NET OPERATING INCOME (NOI) ANALYSIS We have also conducted a net operating income (NOI) comparison analysis. The NOI effectively takes into account the various physical, location, and operating aspects of the sale. When the subject's NOI is compared to the sale NOI, a percent adjustment can be arrived at. The following table illustrates this analysis. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 24 PALM LAKE, TAMPA, FLORIDA NOI PER UNIT COMPARISON
SALE PRICE NOI/ SUBJECT NOI COMPARABLE NO. OF ---------- -------- -------------- ADJUSTMENT INDICATED NO. UNITS PRICE/UNIT OAR NOI/UNIT SUBJ. NOI/UNIT FACTOR VALUE/UNIT ---------- ------ ---------- ------- ---------- -------------- ---------- ---------- I-1 232 $5,500,000 N/A N/A $446,185 N/A N/A $ 23,707 N/A $ 2,975 I-2 232 $5,800,000 9.50% $ 551,149 $446,185 1.252 $ 31,303 $ 25,000 $ 2,376 $ 2,975 I-3 223 $5,150,000 11.92% $ 614,136 $446,185 1.080 $ 24,944 $ 23,094 $ 2,754 $ 2,975 I-4 156 $3,140,000 15.03% $ 471,948 $446,185 0.983 $ 19,791 $ 20,128 $ 3,025 $ 2,975 I-5 297 $8,500,000 16.14% $1,372,312 $446,185 0.644 $ 18,424 $ 28,620 $ 4,621 $ 2,975
PRICE/UNIT
Low High Average Median $18,424 $31,303 $23,615 $22,367
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT Estimated Price Per Unit $ 28,000 ---------- Number of Units 150 ---------- Value Based on NOI Analysis $4,200,000 Rounded $4,200,000
The adjusted sales indicate a range of value between $18,424 and $31,303 per unit, with an average of $23,615 per unit. Based on the subject's competitive position within the improved sales, a value of $28,000 per unit is estimated. This indicates an "as is" market value of $4,200,000 (rounded after necessary adjustment, if any) for the NOI Per Unit Analysis. EFFECTIVE GROSS INCOME MULTIPLIER (EGIM) ANALYSIS The effective gross income multiplier (EGIM) is derived by dividing the sales price by the total effective gross income. The following table illustrates the EGIMs for the comparable improved sales. EFFECTIVE GROSS INCOME MULTIPLIER COMPARISON
SALE PRICE COMPARABLE NO. OF ---------- EFFECTIVE OPERATING SUBJECT NO. UNITS PRICE/UNIT GROSS INCOME EXPENSE OER PROJECTED OER EGIM ---------- ------ ---------- ------------ ---------- ------ ------------- ---- I-1 232 $5,500,000 N/A N/A N/A N/A $ 23,707 I-2 232 $5,800,000 $1,444,349 $ 893,200 61.84% 4.02 $ 25,000 I-3 223 $5,150,000 $1,116,611 $ 502,475 45.00% 4.61 $ 23,094 55.23% I-4 156 $3,140,000 $ 858,087 $ 386,139 45.00% 3.66 $ 20,128 I-5 297 $8,500,000 $2,495,112 $1,122,800 45.00% 3.41 $ 28,620
EGIM
Low High Average Median 3.41 4.61 3.92 3.84
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES Estimate EGIM 3.70 ---------- Subject EGI $1,164,120 ---------- Value Based on EGIM Analysis $4,307,244 Rounded $4,300,000 Value Per Unit $ 28,667
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 25 PALM LAKE, TAMPA, FLORIDA There is an inverse relationship, which generally holds among EGIMs and operating expenses. Properties, which have higher expense ratios, typically sell for relatively less and therefore produce a lower EGIM. As will be illustrated in the Income Capitalization Approach of this report, the subject's operating expense ratio (OER) is estimated at 55.23% before reserves. The comparable sales indicate a range of expense ratios from 45.00% to 61.84%, while their EGIMs range from 3.41 to 4.61. Overall, we conclude to an EGIM of 3.70, which results in an "as is" value estimate in the EGIM Analysis of $4,300,000. SALES COMPARISON CONCLUSION The three valuation methods in the Sales Comparison Approach are shown below. The overall value via the Sales Comparison Approach is estimated at $4,200,000. Price Per Unit $4,100,000 NOI Per Unit $4,200,000 EGIM Analysis $4,300,000 Sales Comparison Conclusion $4,200,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26 PALM LAKE, TAMPA, FLORIDA INCOME CAPITALIZATION APPROACH The income capitalization approach is based on the premise that value is created by the expectation of future benefits. We estimated the present value of those benefits to derive an indication of the amount that a prudent, informed purchaser-investor would pay for the right to receive them as of the date of value. This approach requires an estimate of the NOI of a property. The estimated NOI is then converted to a value indication by use of either the direct capitalization or the discounted cash flow analysis (yield capitalization). Direct capitalization uses a single year's stabilized NOI as a basis for a value indication by dividing the income by a capitalization rate. The rate chosen accounts for a recapture of the investment by the investor and should reflect all factors that influence the value of the property, such as tenant quality, property condition, neighborhood change, market trends, interest rates, and inflation. The rate may be extracted from local market transactions or, when transaction evidence is lacking, obtained from trade sources. A discounted cash flow analysis focuses on the operating cash flows expected from the property and the proceeds of a hypothetical sale at the end of a holding period (the reversion). The cash flows and reversion are discounted to their present values using a market-derived discount rate and are added together to obtain a value indication. Because benefits to be received in the future are worth less than the same benefits received in the present, this method weights income in the early years more heavily than the income and the sale proceeds to be received later. The strength of the discounted cash flow method is its ability to recognize variations in projected net income, such as those caused by inflation, stepped leases, neighborhood change, or tenant turnover. Its weakness is that it requires many judgments regarding the actions of likely buyers and sellers of the property in the future. In some situations, both methods yield a similar result. The discounted cash flow method is typically more appropriate for the analysis of investment properties with multiple or long-term leases, particularly leases with cancellation clauses or renewal options. It is especially useful for multi-tenant properties in volatile markets. The direct capitalization AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 27 PALM LAKE, TAMPA, FLORIDA method is normally more appropriate for properties with relatively stable operating histories and expectations. A pro forma analysis for the first year of the investment is made to estimate a reasonable potential net operating income for the Subject Property. Such an analysis entails an estimate of the gross income the property should command in the marketplace. From this total gross income must be deducted an allowance for vacancy/collection loss and operating expenses as dictated by general market conditions and the overall character of the subject's tenancy and leased income to arrive at a projected estimate of net operating income. Conversion of the net operating income to an indication of value is accomplished by the process of capitalization, as derived primarily from market data. MARKET RENT ANALYSIS In order to determine a market rental rate for the subject, a survey of competing apartment communities was performed. This survey was displayed previously in the market analysis section of the report. Detailed information pertaining to each of the comparable rental communities, along with photographs, is presented in the Addenda of this report. The following charts display the subject's current asking and actual rent rates as well as a comparison with the previous referenced comparable rental properties. SUMMARY OF ACTUAL AVERAGE RENTS
Average Unit Area -------------------- Unit Type (Sq. Ft.) Per Unit Per SF %Occupied ----------------------------------------------------------- 1Br/1Ba 775 $ 517 $ 0.67 100.0% 2Br/1Ba 900 $ 586 $ 0.65 95.8% 4Br/2Ba 1600 $ 989 $ 0.62 93.5%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28 PALM LAKE, TAMPA, FLORIDA RENT ANALYSIS
COMPARABLE RENTS -------------------------------------------------- R-1 R-2 R-3 R-4 R-5 -------------------------------------------------- WILLOW PARK CAMPUS RIVERTREE EXCELLENCE BROOKE TERRACE WALK LANDING -------------------------------------------------- COMPARISON TO SUBJECT SUBJECT SUBJECT -------------------------------------------------- SUBJECT UNIT ACTUAL ASKING SLIGHTLY SLIGHTLY DESCRIPTION TYPE RENT RENT SUPERIOR SUPERIOR SUPERIOR SUPERIOR SUPERIOR MIN MAX MEDIAN AVERAGE ----------------------------------------------------------------------------------------------------------------------------------- Monthly Rent 1Br/1Ba $ 517 $ 575 $ 700 $ (550) $ (545) $ 425 $ 425 $ (700) $ 548 $ 555 Unit Area (SF) (775) 775 600 680 (650) 800 600 800 665 683 Monthly Rent per Sq. Ft. $ 0.67 $ 0.74 $ 1.17 $ 0.81 $ 0.84 $ 0.53 $ (.53) $ 1.17 $ (.82) $ (.84) Monthly Rent 2Br/1Ba $ (586) $ 649 $ 850 $ 520 $ 765 $ 525 $ 520 $ 850 $ 645 $ 665 Unit Area (SF) 900 (900) 860 940 1,250 1,065 860 1,250 1,003 1,029 Monthly Rent per Sq. Ft. $ (.65) $ 0.72 $ 0.99 $ 0.55 $ 0.61 $ 0.49 $ (.49) $ 0.99 $ (.58) $ (.66) Monthly Rent 4Br\2Ba $ (989) $1,050 $1,120 $1,071 $ 822 $ (822) $1,120 $1,077 $(1006) Unit Area(SF) 1,600 1,600 1,441 1,567 (1248) 1,248 (1567) 1,441 1,419 Monthly Rent per Sq. Ft. $ 0.62 $ (.66) $ (.78) $ 0.69 $ 0.66 $ 0.66 $ 0.78 $ 0.69 $ 0.71
CONCLUDED MARKET RENTAL RATES AND TERMS Based on this analysis above, the subject's concluded market rental rates and gross rental income is calculated as follows: GROSS RENTAL INCOME PROJECTION
Market Rent Unit Area ----------------- Monthly Annual Unit Type Number of Units (Sq. Ft.) Per Unit Per SF Income Income -------------------------------------------------------------------------------------- 1Br/1Ba 24 775 $ 525 $ 0.68 $ 12,600 $ 151,200 2Br/1Ba 95 900 $ 600 $ 0.67 $ 57,000 $ 684,000 4Br/2Ba 31 1,600 $1,000 $ 0.63 $ 31,000 $ 372,000 -------- ---------- Total $100,600 $1,207,200 ======== ==========
PRO FORMA ANALYSIS For purposes of this appraisal, we were provided with income and expense data for the subject property. A summary of this data is presented on the following page. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 29 PALM LAKE, TAMPA, FLORIDA SUMMARY OF HISTORICAL INCOME & EXPENSES
FISCAL YEAR 2000 FISCAL YEAR 2001 FISCAL YEAR 2002 FISCAL YEAR 2003 ACTUAL ACTUAL ACTUAL MANAGEMENT BUDGET ----------------------- ----------------------- ------------------------ ----------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT ---------------------------------------------------------------------------------------------------------------------------------- Revenues Rental Income $1,179,981 $ 7,867 $1,223,238 $ 8,155 $1,202,653 $ 8,018 $1,213,500 $ 8,090 Vacancy $ 120,831 $ 806 $ 182,549 $ 1,217 $ 144,058 $ 960 $ 127,830 $ 852 Credit Loss/Concessions $ 37,787 $ 252 $ 65,713 $ 438 $ 36,370 $ 242 $ 18,000 $ 120 ------------------------------------------------------------------------------------------------------ Subtotal $ 158,618 $ 1,057 $ 248,262 $ 1,655 $ 180,428 $ 1,203 $ 145,830 $ 972 Laundry Income $ 9,000 $ 60 $ 10,630 $ 71 $ 10,397 $ 69 $ 13,344 $ 89 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 76,165 $ 508 $ 90,684 $ 605 $ 169,019 $ 1,127 $ 164,148 $ 1,094 ------------------------------------------------------------------------------------------------------ Subtotal Other Income $ 85,165 $ 568 $ 101,314 $ 675 $ 179,416 $ 1,196 $ 177,492 $ 1,183 ------------------------------------------------------------------------------------------------------ Effective Gross Income $1,106,528 $ 7,377 $1,076,290 $ 7,175 $1,201,641 $ 8,011 $1,245,162 $ 8,301 Operating Expenses Taxes $ 109,085 $ 727 $ 110,780 $ 739 $ 104,367 $ 696 $ 117,348 $ 782 Insurance $ 14,731 $ 98 $ 48,641 $ 324 $ 46,103 $ 307 $ 41,674 $ 278 Utilities $ 101,912 $ 679 $ 89,285 $ 595 $ 93,394 $ 623 $ 102,000 $ 680 Repair & Maintenance $ 41,678 $ 278 $ 48,911 $ 326 $ 33,124 $ 221 $ 38,400 $ 256 Cleaning $ 69,684 $ 465 $ 60,630 $ 404 $ 49,161 $ 328 $ 50,200 $ 335 Landscaping $ 64,544 $ 430 $ 63,804 $ 425 $ 68,961 $ 460 $ 69,540 $ 464 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 30,051 $ 200 $ 29,139 $ 194 $ 33,487 $ 223 $ 34,008 $ 227 General Administrative $ 175,951 $ 1,173 $ 201,478 $ 1,343 $ 158,577 $ 1,057 $ 165,048 $ 1,100 Management $ 58,475 $ 390 $ 60,324 $ 402 $ 59,637 $ 398 $ 61,403 $ 409 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ------------------------------------------------------------------------------------------------------ Total Operating Expenses $ 666,111 $ 4,441 $ 712,992 $ 4,753 $ 646,811 $ 4,312 $ 679,621 $ 4,531 Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ------------------------------------------------------------------------------------------------------ Net Income $ 440,417 $ 2,936 $ 363,298 $ 2,422 $ 554,830 $ 3,699 $ 565,541 $ 3,770 ------------------------------------------------------------------------------------------------------ ANNUALIZED 2003 PROJECTION AAA PROJECTION ----------------------- ------------------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT % ------------------------------------------------------------------------------------- Revenues Rental Income $1,209,407 $ 8,063 $1,207,200 $ 8,048 100.0% Vacancy $ 143,351 $ 956 $ 144,864 $ 966 12.0% Credit Loss/Concessions $ 45,477 $ 303 $ 36,216 $ 241 3.0% --------------------------------------------------------- Subtotal $ 188,828 $ 1,259 $ 181,080 $ 1,207 15.0% Laundry Income $ 10,603 $ 71 $ 10,500 $ 70 0.9% Garage Revenue $ 0 $ 0 $ 0 $ 0 0.0% Other Misc. Revenue $ 126,968 $ 846 $ 127,500 $ 850 10.6% --------------------------------------------------------- Subtotal Other Income $ 137,571 $ 917 $ 138,000 $ 920 11.4% --------------------------------------------------------- Effective Gross Income $1,158,149 $ 7,721 $1,164,120 $ 7,761 100.0% Operating Expenses Taxes $ 106,829 $ 712 $ 95,550 $ 637 8.2% Insurance $ 34,827 $ 232 $ 37,500 $ 250 3.2% Utilities $ 94,917 $ 633 $ 93,750 $ 625 8.1% Repair & Maintenance $ 28,621 $ 191 $ 33,750 $ 225 2.9% Cleaning $ 63,723 $ 425 $ 60,000 $ 400 5.2% Landscaping $ 70,507 $ 470 $ 71,250 $ 475 6.1% Security $ 0 $ 0 $ 0 $ 0 0.0% Marketing & Leasing $ 27,109 $ 181 $ 33,750 $ 225 2.9% General Administrative $ 146,871 $ 979 $ 165,000 $ 1,100 14.2% Management $ 58,471 $ 390 $ 52,385 $ 349 4.5% Miscellaneous $ 0 $ 0 $ 0 $ 0 0.0% --------------------------------------------------------- Total Operating Expenses $ 631,875 $ 4,212 $ 642,935 $ 4,286 55.2% Reserves $ 0 $ 0 $ 75,000 $ 500 11.7% --------------------------------------------------------- Net Income $ 526,275 $ 3,508 $ 446,185 $ 2,975 38.3% ---------------------------------------------------------
REVENUES AND EXPENSES The subject's revenue and expense projections are displayed on the previous chart. Rental income is based on the market analysis previously discussed. Other income consists of forfeited deposits, laundry income, late rent payments, month to month fees, pet fees, vending machine revenue, etc. We forecasted the property's annual operating expenses after reviewing its historical performance at the subject property. We analyzed each item of expense and attempted to forecast amounts a typical informed investor would consider reasonable. VACANCY AND COLLECTION LOSS An investor is primarily interested in the annual revenue an income property is likely to produce over a specified period of time, rather than the income it could produce if it were always 100% occupied and all tenants were paying their rent in full and on time. An investor normally expects some income loss as tenants vacate, fail to pay rent, or pay their rent late. We have projected a stabilized vacancy and collection loss rate of 15% based on the subject's historical performance, as well as the anticipated future market conditions. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30 PALM LAKE, TAMPA, FLORIDA RESERVES FOR REPLACEMENT "Reserves for replacements" is a contingency account allocated to the expenses of the property to provide for replacement of short-lived items and for unforeseen necessary capital expenditures. We have utilized the Korpacz Real Estate Investor Survey of the national apartment market, which reports a range of replacement reserves between $150 and $400 per unit. For purposes of this analysis, we have included an allowance of $500 per unit for reserves for replacement. CAPITAL EXPENDITURES Capital expenditures represent expenses for immediate repair or replacement of items that have average to long lives. Based on our inspection of the property as well as discussions with property management personnel, there are no major items remaining in need of repair or replacement that would require an expense beyond our reserves for replacement. Therefore an allowance of $500 per unit should be satisfactory in our reserves for replacement to cover future capital expenditures. DISCOUNTED CASH FLOW ANALYSIS As the subject is a multi-tenant income property, the Discounted Cash Flow Method is considered appropriate. This method is especially meaningful in that it isolates the timing of the annual cash flows and discounts them, along with the expected equity reversion, to a present value. The present value of the cash flow is added to the present value of the reversion, resulting in a total property value. INVESTMENT CRITERIA Appropriate investment criteria will be derived for the subject based upon analysis of comparable sales and a survey of real estate investors. The following table summarizes the findings of Korpacz National Investor Survey for the most recent period. KORPACZ NATIONAL INVESTOR SURVEY 1ST QUARTER 2003 NATIONAL APARTMENT MARKET
CAPITALIZATION RATES GOING-IN TERMINAL --------------------- ---------------------- LOW HIGH LOW HIGH --------------------- ---------------------- RANGE 5.50% 9.50% 6.00% 10.00% AVERAGE 7.61% 8.14%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31 PALM LAKE, TAMPA, FLORIDA SUMMARY OF OVERALL CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR ------------------------------------------------ I-1 Jun-03 95% $ 23,707 N/A I-2 Jul-02 90% $ 25,000 9.50% I-3 Apr-02 75% $ 23,094 11.92% I-4 Apr-02 86% $ 20,128 15.03% I-5 Mar-01 95% $ 28,620 16.14% High 16.14% Low 9.50% Average 13.15%
Based on this information, we have concluded the subject's overall capitalization rate should be 10.00%. The terminal capitalization rate is applied to the net operating income estimated for the year following the end of the holding period. Based on the concluded overall capitalization rate, the age of the property and the surveyed information, we have concluded the subject's terminal capitalization rate to be 10.50%. Finally, the subject's discount rate or yield rate is estimated based on the previous investor survey and an examination of returns available on alternative investments in the market. Based on this analysis, the subject's discount rate is estimated to be 12.00%. HOLDING PERIOD The survey of investors indicates that most investors are completing either 10-year cash flows or extending the analysis to the end of the lease if it is more than 10-years. A 10-year period has been used in the analysis of the subject with the eleventh year stabilized NOI used to determine the reversion. SELLING COSTS Sales of similar size properties are typically accomplished with the aid of a broker and will also incur legal and other transaction related cost. Based on our survey of brokers and a review of institutional investor projections, an allowance of 2.00% of the sale amount is applied. DISCOUNTED CASH FLOW CONCLUSION Discounting the annual cash flows and the equity reversion at the selected rate of 12.00% indicates a value of $4,400,000. In this instance, the reversion figure contributes approximately 36% of the total value. Investors surveyed for this assignment indicated they AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32 PALM LAKE, TAMPA, FLORIDA would prefer to have the cash flow contribute anywhere from 50% to 60%. Overall, the blend seems reasonable. The cash flow and pricing matrix are located on the following pages. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 33 PALM LAKE, TAMPA, FLORIDA DISCOUNTED CASH FLOW ANALYSIS PALM LAKE
YEAR JAN-2004 JAN-2005 JAN-2006 JAN-2007 JAN-2008 JAN-2009 FISCAL YEAR 1 2 3 4 5 6 ------------------------------------------------------------------------------------------------------------------ REVENUE Base Rent $1,207,200 $1,237,380 $1,268,315 $1,300,022 $1,332,523 $1,365,836 Vacancy $ 144,864 $ 148,486 $ 152,198 $ 156,003 $ 159,903 $ 163,900 Credit Loss $ 36,216 $ 37,121 $ 38,049 $ 39,001 $ 39,976 $ 40,975 Concessions $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 --------------------------------------------------------------------------- Subtotal $ 181,080 $ 185,607 $ 190,247 $ 195,003 $ 199,878 $ 204,875 Laundry Income $ 10,500 $ 10,763 $ 11,032 $ 11,307 $ 11,590 $ 11,880 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 127,500 $ 130,688 $ 133,955 $ 137,304 $ 140,736 $ 144,255 --------------------------------------------------------------------------- Subtotal Other Income $ 138,000 $ 141,450 $ 144,986 $ 148,611 $ 152,326 $ 156,134 --------------------------------------------------------------------------- EFFECTIVE GROSS INCOME $1,164,120 $1,193,223 $1,223,054 $1,253,630 $1,284,971 $1,317,095 OPERATING EXPENSES: Taxes $ 95,550 $ 98,417 $ 101,369 $ 104,410 $ 107,542 $ 110,769 Insurance $ 37,500 $ 38,625 $ 39,784 $ 40,977 $ 42,207 $ 43,473 Utilities $ 93,750 $ 96,563 $ 99,459 $ 102,443 $ 105,516 $ 108,682 Repair & Maintenance $ 33,750 $ 34,763 $ 35,805 $ 36,880 $ 37,986 $ 39,126 Cleaning $ 60,000 $ 61,800 $ 63,654 $ 65,564 $ 67,531 $ 69,556 Landscaping $ 71,250 $ 73,388 $ 75,589 $ 77,857 $ 80,193 $ 82,598 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 33,750 $ 34,763 $ 35,805 $ 36,880 $ 37,986 $ 39,126 General Administrative $ 165,000 $ 169,950 $ 175,049 $ 180,300 $ 185,709 $ 191,280 Management $ 52,385 $ 53,695 $ 55,037 $ 56,413 $ 57,824 $ 59,269 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 --------------------------------------------------------------------------- TOTAL OPERATING EXPENSES $ 642,935 $ 661,962 $ 681,552 $ 701,723 $ 722,493 $ 743,879 Reserves $ 75,000 $ 77,250 $ 79,568 $ 81,955 $ 84,413 $ 86,946 --------------------------------------------------------------------------- NET OPERATING INCOME $ 446,185 $ 454,011 $ 461,934 $ 469,952 $ 478,065 $ 486,271 Operating Expense Ratio (% of EGI) 55.2% 55.5% 55.7% 56.0% 56.2% 56.5% Operating Expense Per Unit $ 4,286 $ 4,413 $ 4,544 $ 4,678 $ 4,817 $ 4,959 YEAR JAN-2010 JAN-2011 JAN-2012 JAN-2013 JAN-2014 FISCAL YEAR 7 8 9 10 11 ----------------------------------------------------------------------------------------------------- REVENUE Base Rent $1,399,982 $1,434,981 $1,470,856 $1,507,627 $1,545,318 Vacancy $ 167,998 $ 172,198 $ 176,503 $ 180,915 $ 185,438 Credit Loss $ 41,999 $ 43,049 $ 44,126 $ 45,229 $ 46,360 Concessions $ 0 $ 0 $ 0 $ 0 $ 0 -------------------------------------------------------------- Subtotal $ 209,997 $ 215,247 $ 220,628 $ 226,144 $ 231,798 Laundry Income $ 12,177 $ 12,481 $ 12,793 $ 13,113 $ 13,441 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 147,861 $ 151,557 $ 155,346 $ 159,230 $ 163,211 -------------------------------------------------------------- Subtotal Other Income $ 160,038 $ 164,039 $ 168,140 $ 172,343 $ 176,652 -------------------------------------------------------------- EFFECTIVE GROSS INCOME $1,350,022 $1,383,773 $1,418,367 $1,453,826 $1,490,172 OPERATING EXPENSES: Taxes $ 114,092 $ 117,514 $ 121,040 $ 124,671 $ 128,411 Insurance $ 44,777 $ 46,120 $ 47,504 $ 48,929 $ 50,397 Utilities $ 111,942 $ 115,301 $ 118,760 $ 122,322 $ 125,992 Repair & Maintenance $ 40,299 $ 41,508 $ 42,753 $ 44,036 $ 45,357 Cleaning $ 71,643 $ 73,792 $ 76,006 $ 78,286 $ 80,635 Landscaping $ 85,076 $ 87,629 $ 90,257 $ 92,965 $ 95,754 Security $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 40,299 $ 41,508 $ 42,753 $ 44,036 $ 45,357 General Administrative $ 197,019 $ 202,929 $ 209,017 $ 215,288 $ 221,746 Management $ 60,751 $ 62,270 $ 63,827 $ 65,422 $ 67,058 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 -------------------------------------------------------------- TOTAL OPERATING EXPENSES $ 765,899 $ 788,572 $ 811,918 $ 835,956 $ 860,708 Reserves $ 89,554 $ 92,241 $ 95,008 $ 97,858 $ 100,794 -------------------------------------------------------------- NET OPERATING INCOME $ 494,570 $ 502,961 $ 511,442 $ 520,012 $ 528,671 Operating Expense Ratio (% of EGI) 56.7% 57.0% 57.2% 57.5% 57.8% Operating Expense Per Unit $ 5,106 $ 5,257 $ 5,413 $ 5,573 $ 5,738
Estimated Stabilized NOI $446,185 Sales Expense Rate 2.00% Months to Stabilized 1 Discount Rate 12.00% Stabilized Occupancy 88.0% Terminal Cap Rate 10.50%
"DCF" VALUE ANALYSIS Gross Residual Sale Price $5,034,959 Deferred Maintenance $ 0 Less: Sales Expense $ 100,699 Add: Excess Land $ 0 ---------- Net Residual Sale Price $4,934,260 Other Adjustments $ 0 ---------- PV of Reversion $1,588,700 Value Indicated By "DCF" $4,424,796 Add: NPV of NOI $2,836,096 Rounded $4,400,000 ---------- PV Total $4,424,796
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE ------------------------------------------------------------------ TOTAL VALUE 11.50% 11.75% 12.00% 12.25% 12.50% ------------------------------ ------------------------------------------------------------------ 10.00% $4,645,707 $4,574,210 $4,504,231 $4,435,733 $4,368,678 10.25% $4,603,159 $4,532,605 $4,463,545 $4,395,943 $4,329,764 TERMINAL CAP RATE 10.50% $4,562,637 $4,492,980 $4,424,796 $4,358,049 $4,292,703 10.75% $4,524,000 $4,455,199 $4,387,850 $4,321,917 $4,257,367 11.00% $4,487,119 $4,419,135 $4,352,583 $4,287,428 $4,223,636
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34 PALM LAKE, TAMPA, FLORIDA INCOME LOSS DURING LEASE-UP The subject is currently near or at a stabilized condition. Therefore, there is no income loss during lease-up at the subject property. CONCESSIONS Concessions have historically not been utilized at the subject property or in the subject's market. Therefore, no adjustment was included for concessions. DIRECT CAPITALIZATION METHOD After having projected the income and expenses for the property, the next step in the valuation process is to capitalize the net income into an estimate of value. The selected overall capitalization rate ("OAR") covers both return on and return of capital. It is the overall rate of return an investor expects. After considering the market transactions and the investor surveys, we previously conclude that an overall rate of 10.00% percent is applicable to the subject. The results of our direct capitalization analysis are as follows: AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35 PALM LAKE, TAMPA, FLORIDA PALM LAKE
TOTAL PER SQ. FT. PER UNIT %OF EGI --------------------------------------------------------------------------------------------------- REVENUE Base Rent $ 1,207,200 $ 7.85 $ 8,048 Less: Vacancy & Collection Loss 15.00% $ 181,080 $ 1.18 $ 1,207 Plus: Other Income Laundry Income $ 10,500 $ 0.07 $ 70 0.90% Garage Revenue $ 0 $ 0.00 $ 0 0.00% Other Misc. Revenue $ 127,500 $ 0.83 $ 850 10.95% --------------------------------------------- Subtotal Other Income $ 138,000 $ 0.90 $ 920 11.85% EFFECTIVE GROSS INCOME $ 1,164,120 $ 7.57 $ 7,761 OPERATING EXPENSES: Taxes $ 95,550 $ 0.62 $ 637 8.21% Insurance $ 37,500 $ 0.24 $ 250 3.22% Utilities $ 93,750 $ 0.61 $ 625 8.05% Repair & Maintenance $ 33,750 $ 0.22 $ 225 2.90% Cleaning $ 60,000 $ 0.39 $ 400 5.15% Landscaping $ 71,250 $ 0.46 $ 475 6.12% Security $ 0 $ 0.00 $ 0 0.00% Marketing & Leasing $ 33,750 $ 0.22 $ 225 2.90% General Administrative $ 165,000 $ 1.07 $ 1,100 14.17% Management 4.50% $ 52,385 $ 0.34 $ 349 4.50% Miscellaneous $ 0 $ 0.00 $ 0 0.00% TOTAL OPERATING EXPENSES $ 642,935 $ 4.18 $ 4,286 55.23% Reserves $ 75,000 $ 0.49 $ 500 6.44% --------------------------------------------- NET OPERATING INCOME $ 446,185 $ 2.90 $ 2,975 38.33% ============================================= "GOING IN" CAPITALIZATION RATE 10.00% VALUE INDICATION $ 4,461,846 $ 29.03 $ 29,746 "AS IS" VALUE INDICATION (DIRECT CAPITALIZATION APPROACH) $ 4,461,846 ROUNDED $ 4,500,000 $ 29.28 $ 30,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36 PALM LAKE, TAMPA, FLORIDA DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF ----------------------------------------------------------------------- 9.25% $4,823,617 $4,800,000 $32,000 $31.23 9.50% $4,696,680 $4,700,000 $31,333 $30.58 9.75% $4,576,252 $4,600,000 $30,667 $29.93 10.00% $4,461,846 $4,500,000 $30,000 $29.28 10.25% $4,353,020 $4,400,000 $29,333 $28.63 10.50% $4,249,377 $4,200,000 $28,000 $27.33 10.75% $4,150,554 $4,200,000 $28,000 $27.33
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD Applying the capitalization rate to our estimated NOI results in an estimated value of $4,500,000. CORRELATION AND CONCLUSION BY THE INCOME APPROACH The two methods used to estimate the market value of the subject property by the income approach resulted in the following indications of value: Discounted Cash Flow Analysis $4,400,000 Direct Capitalization Method $4,500,000 Giving consideration to the indicated values provided by both techniques, we have concluded the estimated value by the income capitalization approach to be $4,400,000. AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37 PALM LAKE, TAMPA, FLORIDA RECONCILIATION AND CONCLUSION This appraisal was made to express an opinion as of the Market Value of the fee simple estate in the property. AS IS MARKET VALUE OF THE FEE SIMPLE ESTATE Cost Approach Not Utilized Sales Comparison Approach $4,200,000 Income Approach $4,400,000 Reconciled Value $4,300,000
The Income Capitalization Method is considered a reliable indicator of value. Income and expenses were estimated and projected based on historical operating statements and market oriented expenses. This method is primarily used by investors in their underwriting analysis. Furthermore, there was good support for an overall rate in the Direct Capitalization Method. The Sales Comparison Approach to value supported the value conclusion by the Income Approach and was given secondary consideration. Investment-grade, income-producing properties such as the subject are not typically traded based on cost. Therefore, the Cost Approach has not been considered in our valuation. FINAL VALUE - FEE SIMPLE ESTATE Based on the investigation and premise outlined, it is our opinion that as of December 8, 2003 the market value of the fee simple estate in the property is: $4,300,000 AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA PALM LAKE, TAMPA, FLORIDA ADDENDA AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A PALM LAKE, TAMPA, FLORIDA EXHIBIT A SUBJECT PHOTOGRAPHS AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A PALM LAKE, TAMPA, FLORIDA SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] APARTMENT COMPLEX ENTRANCE TYPICAL APARTMENT BUILDING - FRONT VIEW [PICTURE] [PICTURE] EXTERIOR FRONT VIEW - LEASING OFFICE INTERIOR VIEW - LEASING OFFICE [PICTURE] [PICTURE] TYPICAL APARTMENT BUILDING - POND VIEW SWIMMING POOL AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A PALM LAKE, TAMPA, FLORIDA SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] MAILBOXES LAUNDRY ROOM AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PALM LAKE, TAMPA, FLORIDA EXHIBIT B SUMMARY OF RENT COMPARABLES AND PHOTOGRAPH OF COMPARABLES AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PALM LAKE, TAMPA, FLORIDA PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3 HIDDEN RIVER COUNTRY CROSSING RIVERTREE LANDING 8024 Hidden River Drive 7903 Holly Lea Court 6909 Indian River Drive Tampa, FL Tampa, FL Tampa, FL [PICTURE] [PICTURE] [PICTURE] COMPARABLE I-4 COMPARABLE I-5 SHERWOOD LAKE CAMPUS WALK 1811 Tinsley Circle 13725 Plaza Court Tampa, FL Tampa, FL [PICTURE] [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PALM LAKE, TAMPA, FLORIDA SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE DESCRIPTION SUBJECT R - 1 -------------------------------- ----------------------------------------- ----------------------------------------------- Property Name Palm Lake Excellence Management Company AIMCO Partners Management Company LOCATION: Address 13401 North 50th Street 5005 Excellent Boulevard City, State Tampa, Florida Tampa, FL County Hillsborough Hillsborough Proximity to Subject Adjacent to the south PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 153,700 202,620 Year Built 1974 1992 Effective Age 20 11 Building Structure Type Wood/Stucco Stucco Parking Type (Gr., Cov., etc.) Open Open Number of Units 150 165 Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo. --------- ----- ---- -------- ----------- ----- ---- ------ 1 1Br/1Ba 775 24 $517 1 1Br/1Ba 600 12 $ 700 2 2Br/1Ba 900 95 $586 2 2Br/2Ba 860 10 $ 850 3 4Br/2Ba 1,600 31 $989 3 4Br/3.5Ba 1,525 15 $1,399 3 3Br/2Ba 1,420 59 $1,049 Average Unit Size (SF) 1,025 1,276 Unit Breakdown: Efficiency 2-Bedroom Efficiency 2-Bedroom 1-Bedroom 3-Bedroom 1-Bedroom 3-Bedroom CONDITION: Average APPEAL: Average AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling X Balcony X W/D Connect. X Balcony X W/D Connect. Fireplace Fireplace Cable TV Ready Cable TV Ready Project Amenities X Swimming Pool X Swimming Pool Spa/Jacuzzi Car Wash Spa/Jacuzzi X Car Wash Basketball Court BBQ Equipment Basketball Court BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room Sand Volley Ball Meeting Hall X Sand Volley Ball Meeting Hall Tennis Court Secured Parking X Tennis Court Secured Parking Racquet Ball X Laundry Room X Racquet Ball X Laundry Room Jogging Track X Business Office Jogging Track Business Office Gym Room X Freshwater Lake X Gym Room X Freshwater Lake OCCUPANCY: 96% 91% LEASING DATA: Available Leasing Terms 6 to 12 months 6 to 12 months Concessions On specified units only Pet Deposit No Pets Allowed Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas X Water X Trash X Water X Trash Confirmation Manager Leasing Agent Telephone Number 813-933-2449 813-988-7263 NOTES: Attractive apartment community located adjacent to the subject property to the south. Far superior overall and in all respects to the subject property. COMPARISON TO SUBJECT: Slightly Superior COMPARABLE COMPARABLE DESCRIPTION R - 2 R - 3 -------------------------------- ---------------------------------------------- ----------------------------------------------- Property Name Willow Brooke Park Terrace Management Company Gulf Atlantic Management Park Terrace Management LOCATION: Address 14419 Hellenic Drive 12201 N 50th Street City, State Tampa, FL Tampa, FL County Hillsborough Hillsborough Proximity to Subject Same general area near University Same general area near the University PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 200,880 228,750 Year Built 1976 1986 Effective Age 27 17 Building Structure Type Stucco Wood /stucco Parking Type (Gr., Cov., etc.) Open Open Number of Units 248 150 Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo. --------- ---- ---- ---- ------------ ----- ---- ------ 1 1Br/1Ba 680 124 $550 3 3Br/3.5 Ba 1,300 24 $ 900 2 2Br/1Ba 940 124 $520 3 3Br/3.5 Ba 1,370 24 $ 900 3 3Br/3.5 Ba 1,820 24 $1,275 3 4Br/4.5 Ba 2,200 8 $1,540 Average Unit Size (SF) 810 1,567 Unit Breakdown: Efficiency 2-Bedroom Efficiency 2-Bedroom 1-Bedroom 3-Bedroom 1-Bedroom 3-Bedroom CONDITION: Slightly Superior Slightly Superior APPEAL: Good Slightly Superior AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling X Balcony W/D Connect. X Balcony X W/D Connect. Fireplace Fireplace Cable TV Ready Cable TV Ready X W/D in Units Project Amenities X Swimming Pool X Swimming Pool Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash Basketball Court BBQ Equipment Basketball Court BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall Tennis Court Secured Parking Tennis Court Secured Parking Racquet Ball X Laundry Room Racquet Ball Laundry Room Jogging Track X Business Office Jogging Track Business Office X Gym Room X Freshwater Lake X Gym Room Freshwater Lake OCCUPANCY: 98% 95% LEASING DATA: Available Leasing Terms 6 to 13 months 6 to 12 months Concessions On specified units only One Month Free Rent Pet Deposit Yes Yes Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas X Water X Trash X Water X Trash Confirmation Leasing Agent Leasing Agent Telephone Number 813-971-9727 813-985-8854 NOTES: Apartment community located near the subject Located along the same street as the subject in the University area. It is superior to the property and across from the university campus. subject in terms of overall condition and curb Similar in terms of overall design but superior appeal. in terms of age, condition and appeal. Appears to have been renovated recently. COMPARISON TO SUBJECT: Superior Superior COMPARABLE COMPARABLE DESCRIPTION R - 4 R - 5 -------------------------------- ------------------------------------------------ ------------------------------------------------ Property Name Campus Walk Rivertree Landing Management Company Owners Property Management Barfield Bay Holdings LOCATION: Address 13725 Plaza Court 6909 Indian River Drive City, State Tampa, FL Tampa, FL County Hillsborough Hillsborough Proximity to Subject Same general area near the University Off N 56th and Sligh Avenue PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 363,825 228,352 Year Built 1973 1969 Effective Age 30 34 Building Structure Type Stucco Stucco/frame Parking Type (Gr., Cov., etc.) Open Open Number of Units 297 223 Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo. --------- ----- ---- ----- --------- ----- ---- ---- 1 1Br/1Ba 650 12 $545 1 1Br/1Ba 800 90 $425 2 2Br/2Ba 1,250 200 $765 2 2Br/1Ba 1,065 50 $525 3 3Br/3Ba 1,250 75 $818 3 4Br/4Ba 1,230 10 $850 Average Unit Size (SF) 1,225 895 Unit Breakdown: Efficiency 2-Bedroom Efficiency 2-Bedroom 1-Bedroom 3-Bedroom 1-Bedroom 3-Bedroom CONDITION: Average Average APPEAL: Average Average AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling X Balcony W/D Connect. X Balcony W/D Connect. Fireplace Fireplace Cable TV Ready Cable TV Ready Project Amenities X Swimming Pool X Swimming Pool Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash Basketball Court BBQ Equipment Basketball Court BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall X Tennis Court Secured Parking Tennis Court Secured Parking Racquet Ball X Laundry Room Racquet Ball X Laundry Room Jogging Track X Business Office Jogging Track Business Office X Gym Room Freshwater Lake Gym Room Freshwater Lake OCCUPANCY: 91% 80% LEASING DATA: Available Leasing Terms 6 to 12 months 6 to 12 months Concessions One Month Free, No Deposit, No App. Fee $99 Move-in special Pet Deposit Yes Yes Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas X Water X Trash X Water X Trash Confirmation Leasing Agent Leasing Agent Telephone Number 813-972-2507 813-983-8362 NOTES: Located in university area, off 42nd St. Similar Slightly inferior location and overall design to the subject in terms of location and age, but appears to be in superior condition compared but superior in terms of overall condition. to the subject property. COMPARISON TO SUBJECT: Slightly Superior Superior
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PALM LAKE, TAMPA, FLORIDA PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3 EXCELLENCE WILLOW BROOKE PARK TERRACE 5005 Excellent Boulevard 14419 Hellenic Drive 12201 N 50th Street Tampa, FL Tampa.FL Tampa, FL [PICTURE] [PICTURE] N/A COMPARABLE R-4 COMPARABLE R-5 CAMPUS WALK RIVERTREE LANDING 13725 Plaza Court 6909 Indian River Drive Tampa, FL Tampa, FL [PICTURE] [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C PALM LAKE, TAMPA, FLORIDA EXHIBIT C ASSUMPTIONS AND LIMITING CONDITIONS (3 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C PALM LAKE, TAMPA, FLORIDA No responsibility is assumed for matters legal in nature. No investigation has been made of the title to or any liabilities against the property appraised. In this appraisal, it is presumed that, unless otherwise noted, the owner's claim is valid, the property rights are good and marketable, and there are no encumbrances which cannot be cleared through normal processes. To the best of our knowledge, all data set forth in this report are true and accurate. Although gathered from reliable sources, no guarantee is made nor liability assumed for the accuracy of any data, opinions, or estimates identified as being furnished by others which have been used in formulating this analysis. Land areas and descriptions used in this appraisal were obtained from public records and have not been verified by legal counsel or a licensed surveyor. No soil analysis or geological studies were ordered or made in conjunction with this report, nor were any water, oil, gas, or other subsurface mineral and use rights or conditions investigated. Substances such as asbestos, urea-formaldehyde foam insulation, other chemicals, toxic wastes, or other potentially hazardous materials could, if present, adversely affect the value of the property. Unless otherwise stated in this report, the existence of hazardous substance, which may or may not be present on or in the property, was not considered by the appraiser in the development of the conclusion of value. The stated value estimate is predicated on the assumption that there is no material on or in the property that would cause such a loss in value. No responsibility is assumed for any such conditions, and the client has been advised that the appraiser is not qualified to detect such substances, quantify the impact on values, or develop the remedial cost. No environmental impact study has been ordered or made. Full compliance with applicable federal, state, and local environmental regulations and laws is assumed unless otherwise stated, defined, and considered in the report. It is also assumed that all required licenses, consents, or other legislative or administrative authority from any local, state, or national government or private entity organization either have been or can be obtained or renewed for any use which the report covers. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C PALM LAKE, TAMPA, FLORIDA It is assumed that all applicable zoning and use regulations and restrictions have been complied with unless a nonconformity has been stated, defined, and considered in the appraisal report. Further, it is assumed that the utilization of the land and improvements is within the boundaries of the property described and that no encroachment or trespass exists unless noted in the report. The Americans with Disabilities Act ("ADA") became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the act. If so, this fact could have a negative effect on the value of the property. Since we have no direct evidence relating to this issue, we did not consider the possible noncompliance with the requirements of ADA in estimating the value of the property. We have made a physical inspection of the property and noted visible physical defects, if any, in our report. This inspection was made by individuals generally familiar with real estate and building construction. However, these individuals are not architectural or structural engineers who would have detailed knowledge of building design and structural integrity. Accordingly, we do not opine on, nor are we responsible for, the structural integrity of the property including its conformity to specific governmental code requirements, such as fire, building and safety, earthquake, and occupancy, or any physical defects which were not readily apparent to the appraiser during the inspection. The value or values presented in this report are based upon the premises outlined herein and are valid only for the purpose or purposes stated. The date of value to which the conclusions and opinions expressed apply is set forth in this report. The value opinion herein rendered is based on the status of the national business economy and the purchasing power of the U.S. dollar as of that date. Testimony or attendance in court or at any other hearing is not required by reason of this appraisal unless arrangements are previously made within a reasonable time in advance for AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C PALM LAKE, TAMPA, FLORIDA such testimony, and then such testimony shall be at American Appraisal Associates, Inc.'s, prevailing per diem for the individuals involved. Possession of this report or any copy thereof does not carry with it the right of publication. No portion of this report (especially any conclusion to use, the identity of the appraiser or the firm with which the appraiser is connected, or any reference to the Appraisal Institute or the designations awarded by this organization) shall be disseminated to the public through prospectus, advertising, public relations, news, or any other means of communication without the written consent and approval of American Appraisal Associates, Inc. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D PALM LAKE, TAMPA, FLORIDA EXHIBIT D CERTIFICATE OF APPRAISER (1 PAGE) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D PALM LAKE, TAMPA, FLORIDA CERTIFICATE OF APPRAISER I certify that, to the best of my knowledge and belief: The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and represent the unbiased professional analyses, opinions, and conclusions of American Appraisal Associates, Inc. American Appraisal Associates, Inc. and I personally, have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. Compensation for American Appraisal Associates, Inc. is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. The analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. I personally did not inspect the subject property. Alice MacQueen provided significant real property appraisal assistance in the preparation of this report. I am currently in compliance with the Appraisal Institute's continuing education requirements. -s- Frank Fehribach ----------------------------------------- Frank Fehribach, MAI Managing Principal, Real Estate Group Texas State Certified General Real Estate Appraiser #TX-1323954-G AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D PALM LAKE, TAMPA, FLORIDA CERTIFICATE OF APPRAISER I certify that, to the best of my knowledge and belief: The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and represent the unbiased professional analyses, opinions, and conclusions of American Appraisal Associates, Inc. American Appraisal Associates, Inc. and I personally, have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. Compensation for American Appraisal Associates, Inc. is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. The analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. I personally inspected the subject property and provided significant real property appraisal assistance in the preparation of this report. -s- Alice MacQueen -------------------------- Alice MacQueen Florida Certified General Real Estate Appraiser #RZ0002202 AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PALM LAKE, TAMPA, FLORIDA EXHIBIT E QUALIFICATIONS OF APPRAISER (4 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PALM LAKE, TAMPA, FLORIDA FRANK A. FEHRIBACH, MAI MANAGING PRINCIPAL, REAL ESTATE GROUP POSITION Frank A. Fehribach is a Managing Principal for the Dallas Real Estate Group of American Appraisal Associates, Inc. ("AAA"). EXPERIENCE Valuation Mr. Fehribach has experience in valuations for resort hotels; Class A office buildings; Class A multifamily complexes; industrial buildings and distribution warehousing; multitract mixed-use vacant land; regional malls; residential subdivision development; and special-purpose properties such as athletic clubs, golf courses, manufacturing facilities, nursing homes, and medical buildings. Consulting assignments include development and feasibility studies, economic model creation and maintenance, and market studies. Mr. Fehribach also has been involved in overseeing appraisal and consulting assignments in Mexico and South America. Business Mr. Fehribach joined AAA as an engagement director in 1998. He was promoted to his current position in 1999. Prior to that, he was a manager at Arthur Andersen LLP. Mr. Fehribach has been in the business of real estate appraisal for over ten years. EDUCATION University of Texas - Arlington Master of Science - Real Estate University of Dallas Master of Business Administration - Industrial Management Bachelor of Arts - Economics AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PALM LAKE, TAMPA, FLORIDA STATE CERTIFICATIONS State of Arizona, Certified General Real Estate Appraiser, #30828 State of Arkansas, State Certified General Appraiser, #CG1387N State of Colorado, Certified General Appraiser, #CG40000445 State of Georgia, Certified General Real Property Appraiser, #218487 State of Michigan, Certified General Appraiser, #1201008081 State of Texas, Real Estate Salesman License, #407158 (Inactive) State of Texas, State Certified General Real Estate Appraiser, #TX-1323954-G PROFESSIONAL Appraisal Institute, MAI Designated Member AFFILIATIONS Candidate Member of the CCIM Institute pursuing Certified Commercial Investment Member (CCIM) designation PUBLICATIONS "An Analysis of the Determinants of Industrial Property Valuation," Co-authored with Dr. Ronald C. Rutherford and Dr. Mark Eakin, The Journal of Real Estate Research, Vol. 8, No. 3, Summer 1993, p. 365. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PALM LAKE, TAMPA, FLORIDA ALICE MACQUEEN STATE CERTIFIED GENERAL REAL ESTATE APPRAISER POSITION Alice MacQueen is a State Certified General Real Estate Appraiser and principal member of 3P, Inc., a consulting firm with offices in Georgia and Utah. EXPERIENCE BUSINESS Mrs. MacQueen was employed by American Appraisal Associates, Inc., from 1983 until 2003 when she formed 3P, Inc. During her 20 year tenure with AAA, Ms. MacQueen held numerous positions within the firm, advancing from the professional staff levels to serve as Regional Director for the Southeastern United States (1987 to 1992) and as National Director of the Real Estate Valuation Group (1992 to 1995). During her later years with the firm, Ms. MacQueen continued to serve as an officer in the company, working as Principal/Vice President actively involved in the valuation of a wide variety of property types, including numerous types of special purpose properties. Prior to joining American Appraisal, Ms. MacQueen was involved in property management for five years and spent an additional five years as an appraiser, consultant and research analyst. VALUATION Ms. MacQueen has extensive experience in the appraisal of residential, commercial, industrial and special purpose properties and is annually involved in the valuation of several billion dollars of real property. She has also been involved in land planning analysis for major mixed use developments. Special purpose properties appraised include campgrounds, churches, country clubs and golf courses, data centers, historic landmarks, proprietary cemeteries and schools. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PALM LAKE, TAMPA, FLORIDA More recently, she has had extensive experience in appraising residential and industrial properties on Indian reservations as was instrumental in developing a major housing study for the Navajo reservation. The purposes of these valuations have included allocation of purchase price, charitable donation, financing, purchase and sale, syndication, and financial reporting. Ms. MacQueen has completed appraisals of commercial and residential real estate. He has also generated discounted cash flow and sensitivity analyses for investment-grade real estate, securitization, and pension funds/insurance industries. Analyses he has performed involve various types of investment-grade real estate throughout the continental United States including apartments, cooperatives, hotels, industrial and research and development parks, office buildings, regional shopping centers, and undeveloped acreage. To date, she has provided appraisal and consulting services in 48 states, Mexico and Puerto Rico. EDUCATION Greenbrier College for Women, Liberal Arts Realtors Institute of Virginia VALUATION AND SPECIAL Ms. MacQueen completes several courses annually as part COURSES of the continuing education requirements of the various states in which she is certified. She also attends real estate and financial industry-related conferences and seminars. In recent years, she prepared background information for HUD pertaining to valuation requirements for Indian lands and presented findings related to housing needs and financing issues on reservations. STATE-CERTIFICATED GENERAL APPRAISER Florida, No. RZ0002202, expires 11/30/04 Georgia, No. 239776, expires 7/31/04 New Mexico, No. 001626, expires 4/30/05 North Carolina, No. A5096, expires 6/30/04 Utah, No. CG 00057001, expires 7/1/05 AMERICAN APPRAISAL ASSOCIATES, INC. PALM LAKE, TAMPA, FLORIDA GENERAL SERVICE CONDITIONS AMERICAN APPRAISAL ASSOCIATES, INC. PALM LAKE, TAMPA, FLORIDA GENERAL SERVICE CONDITIONS The services(s) provided by AAA will be performed in accordance with professional appraisal standards. Our compensation is not contingent in any way upon our conclusions of value. We assume, without independent verification, the accuracy of all data provided to us. We will act as an independent contractor and reserve the right to use subcontractors. All files, workpapers or documents developed by us during the course of the engagement will be our property. We will retain this data for at least five years. Our report is to be used only for the specific purpose stated herein; and any other use is invalid. No reliance may be made by any third party without our prior written consent. You may show our report in its entirety to those third parties who need to review the information contained herein. No one should rely on our report as a substitute for their own due diligence. We understand that our reports will be described in public tender offer documents distributed to limited partners. We reserve the right to review the public tender offer documents prior to their issuance to confirm that disclosures of facts from the current appraisals are accurate. No reference to our name or our report, in whole or in part, in any other SEC filing or private placement memorandum you prepare and/or distribute to third parties may be made without our prior written consent. The Tender Offer Partnerships, as that term is defined in the Settlement Agreement, agree to indemnify and hold us harmless against and from any and all losses, claims, actions, damages, expenses or liabilities, including reasonable attorneys' fees, to which we may become subject in connection with this engagement except where such losses, claims, actions, damages, expenses or liabilities, including reasonable attorney's fees, arise or result from AAA's misconduct, bad faith or negligence. Co-Clients will not be liable for any of our acts or omissions. AAA is an equal opportunity employer.