EX-99.(C)(6) 11 d07253exv99wxcyx6y.txt APPRAISAL OF PLANTATION GARDENS PLANTATION GARDENS 7616 NW 5TH STREET PLANTATION, FLORIDA MARKET VALUE - FEE SIMPLE ESTATE AS OF DECEMBER 11, 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]
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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: PLANTATION GARDENS 7616 NW 5TH STREET PLANTATION, BROWARD 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 372 units with a total of 326,800 square feet of rentable area. The improvements were built in 1971. The improvements are situated on 20.83 acres. Overall, the improvements are in average condition. As of the date of this appraisal, the subject property is 97% 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 PLANTATION GARDENS, PLANTATION, 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 11, 2003 is: ($19,000,000) Respectfully submitted, AMERICAN APPRAISAL ASSOCIATES, INC. -s- Edward Zenkovich ---------------------------- December 23, 2003 Edward Zenkovich, ASA #053272 Managing Principal, Real Estate Group State of Florida, Certified General Appraiser, #0001259 Assisted By: Kim Cook AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3 PLANTATION GARDENS, PLANTATION, 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 ................................................... 15 Improvement Analysis ............................................ 15 Highest and Best Use ............................................ 16 VALUATION Valuation Procedure ............................................. 17 Sales Comparison Approach ....................................... 19 Income Capitalization Approach .................................. 25 Reconciliation and Conclusion ................................... 36
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 PLANTATION GARDENS, PLANTATION, FLORIDA EXECUTIVE SUMMARY PART ONE - PROPERTY DESCRIPTION PROPERTY NAME: Plantation Gardens LOCATION: 7616 NW 5th Street Plantation, Florida INTENDED USE OF ASSIGNMENT: Court Settlement PURPOSE OF APPRAISAL: "As Is" Market Value of the Fee Simple Estate INTEREST APPRAISED: Fee Simple DATE OF VALUE: December 11, 2003 DATE OF REPORT: December 23, 2003 PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS: SITE: Size: 20.83 acres, or 907,355 square feet Assessor Parcel No.: 5041-04-06-0010 Floodplain: Community Panel No. 120054 0215F (August 18, 1992) Flood Zone X, an area outside the floodplain. Zoning: PRD - 17Q (Planned Residential Development Multifamily - Density 17 units/acre) BUILDING: No. of Units: 372 Units Total NRA: 326,800 Square Feet Average Unit Size: 878 Square Feet Apartment Density: 17.9 units per acre Year Built: 1971 UNIT MIX AND MARKET RENT: GROSS RENTAL INCOME PROJECTION
Market Rent Square --------------------- Monthly Annual Unit Type Feet Per Unit Per SF Income Income ----------------------------------------------------------------------------- 1Bdrm/1Ba-1A10 750 $ 750 $ 1.00 $ 31,500 $ 378,000 2Bdrm/2Ba-2A20 850 $ 800 $ 0.94 $ 145,600 $1,747,200 2Bdrm/2Ba-2B20 950 $ 850 $ 0.89 $ 125,800 $1,509,600 ---------- ---------- Total $ 302,900 $3,634,800 ========== ==========
OCCUPANCY: 97% ECONOMIC LIFE: 45 Years EFFECTIVE AGE: 20 Years REMAINING ECONOMIC LIFE: 25 Years AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5 PLANTATION GARDENS, PLANTATION, FLORIDA SUBJECT PHOTOGRAPHS AND LOCATION MAP: SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] EXTERIOR - APARTMENT ENTRANCE EXTERIOR - 4-STORY APARTMENT BUILDING AREA MAP [MAP] AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6 PLANTATION GARDENS, PLANTATION, FLORIDA NEIGHBORHOOD 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 PLANTATION GARDENS, PLANTATION, FLORIDA PART TWO - ECONOMIC INDICATORS INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION Amount $/Unit --------------------- ------ ------ Potential Rental Income $ 3,634,800 $ 9,771 Effective Gross Income $ 3,557,916 $ 9,564 Operating Expenses $ 1,786,796 $ 4,803 50.2% of EGI Net Operating Income: $ 1,678,120 $ 4,511 Capitalization Rate 8.75% DIRECT CAPITALIZATION VALUE $ 18,900,000 * $50,806 / UNIT DISCOUNTED CASH FLOW ANALYSIS: Holding Period 10 years 2002 Economic Vacancy 10% Stabilized Vacancy & Collection Loss: 8% Lease-up / Stabilization Period N/A Terminal Capitalization Rate 9.25% Discount Rate 11.00% Selling Costs 2.00% Growth Rates: Income 3.00% Expenses: 3.00% DISCOUNTED CASH FLOW VALUE $ 19,500,000 * $52,419 / UNIT RECONCILED INCOME CAPITALIZATION VALUE $ 19,000,000 $51,075 / UNIT
SALES COMPARISON APPROACH PRICE PER UNIT: Range of Sales $/Unit (Unadjusted) $43,710 to $66,667 Range of Sales $/Unit (Adjusted) $49,875 to $55,967 VALUE INDICATION - PRICE PER UNIT $ 19,100,000 * $51,344 / UNIT EGIM ANALYSIS Range of EGIMs from Improved Sales 4.99 to 6.94 Selected EGIM for Subject 5.50 Subject's Projected EGI $ 3,557,916 EGIM ANALYSIS CONCLUSION $ 19,300,000 * $51,882 / UNIT NOI PER UNIT ANALYSIS CONCLUSION $ 19,100,000 * $51,344 / UNIT RECONCILED SALES COMPARISON VALUE $ 19,100,000 $51,344 / 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 PLANTATION GARDENS, PLANTATION, FLORIDA PART THREE - SUMMARY OF VALUE CONCLUSIONS SALES COMPARISON APPROACH: Price Per Unit $ 19,100,000 NOI Per Unit $ 19,100,000 EGIM Multiplier $ 19,300,000 INDICATED VALUE BY SALES COMPARISON $ 19,100,000 $51,344 / UNIT INCOME APPROACH: Direct Capitalization Method: $ 18,900,000 Discounted Cash Flow Method: $ 19,500,000 INDICATED VALUE BY THE INCOME APPROACH $ 19,000,000 $51,075 / UNIT RECONCILED OVERALL VALUE CONCLUSION: $ 19,000,000 $51,075 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9 PLANTATION GARDENS, PLANTATION, FLORIDA INTRODUCTION IDENTIFICATION OF THE SUBJECT The subject property is located at 7616 NW 5th Street, Plantation, Broward County, Florida. Plantation identifies it as 5041-04-06-0010. SCOPE OF THE ASSIGNMENT The property, neighborhood, and comparables were inspected by Kim Cook on December 11, 2003. Edward Zenkovich, ASA has not made a personal inspection of the subject property. Kim Cook assisted Edward Zenkovich, ASA in the research, valuation analysis and writing the report. Both, Edward Zenkovich, ASA and Kim Cook 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 11, 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 defined in The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10 PLANTATION GARDENS, PLANTATION, FLORIDA 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 Consolidated Capital Equity Partners. 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 PLANTATION GARDENS, PLANTATION, 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 Plantation, Florida. Overall, the neighborhood is characterized as a suburban setting with the predominant land use being residential/retail. The subject's neighborhood is generally defined by the following boundaries. NEIGHBORHOOD BOUNDARIES East - Florida Turnpike West - North University Drive South - Interstate 595 North - Sunrise Boulevard MAJOR EMPLOYERS Major employers in the subject's area include American Express, Motorola, JM Family Enterprises, Nova Southeastern University, Sun Sentinel, Holy Cross Medical Group, Bank of America, Ed Morse Automotive Group, University Hospital and Alamo Rental Car. The overall economic outlook for the area is considered favorable. 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 PLANTATION GARDENS, PLANTATION, FLORIDA NEIGHBORHOOD DEMOGRAPHICS
AREA ------------------------------------------- CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA ------------------------------------------------------------------------------------------- POPULATION TRENDS Current Population 10,615 105,296 270,413 2,297,162 5-Year Population 10,872 107,521 280,767 2,441,631 % Change CY-5Y 2.4% 2.1% 3.8% 6.3% Annual Change CY-5Y 0.5% 0.4% 0.8% 1.3% HOUSEHOLDS Current Households 4,053 35,821 92,780 785,413 5-Year Projected Households 4,168 36,301 95,299 822,309 % Change CY - 5Y 2.8% 1.3% 2.7% 4.7% Annual Change CY-5Y 0.6% 0.3% 0.5% 0.9% INCOME TRENDS Median Household Income $ 69,296 $ 66,227 $ 56,401 $ 33,054 Per Capita Income $ 34,299 $ 31,295 $ 27,366 $ 18,389 Average Household Income $ 94,678 $ 91,781 $ 79,745 $ 53,787
Source: Demographics Now The subject neighborhood's population is expected to show increases below that of the region. The immediate market offers superior 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 27.43% 22.20% 25.62% 37.56% 5-Year Projected % Renting 29.46% 22.33% 25.10% 36.46% % of Households Owning 67.68% 72.71% 68.67% 52.69% 5-Year Projected % Owning 65.84% 72.66% 69.33% 54.16%
Source: Demographics Now AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13 PLANTATION GARDENS, PLANTATION, FLORIDA SURROUNDING IMPROVEMENTS The following uses surround the subject property: North - Residential, church and private school South - Residential and Commercial East - Residential/Municipal complex West - Residential/Retail CONCLUSIONS The subject is well located within the city of Plantation. 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 PLANTATION GARDENS, PLANTATION, FLORIDA MARKET ANALYSIS The subject property is located in the city of Plantation in Broward County. The overall pace of development in the subject's market is more or less stable. There were no new units added in the Plantation submarket in the last year. The following table illustrates historical vacancy rates for the subject's market. HISTORICAL VACANCY RATE
Period Region Submarket --------------------------------------------- 1998 - 4.0% 1999 - 3.2% 2000 - 1.8% 2001 - 5.0% 2002 5.2% 5.7% 3rd Quarter 2003 5.7% 5.0%
Source: REIS Subtrend Futures, Fort Lauderdale Apartment Market, 3rd Quarter 2003 Occupancy trends in the subject's market are stable. Historically speaking, the subject's submarket has equated the overall market. Concessions are found throughout this 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 ----------------------------------------------------------- 1998 N/A - $ 926 - 1999 N/A N/A $ 919 -0.8% 2000 N/A N/A $ 952 3.6% 2001 N/A N/A $ 940 -1.3% 2002 N/A N/A $ 948 0.9% 3rd Quarter 2003 N/A N/A $ 954 0.6%
Source: REIS Subtrend Futures, Fort Lauderdale Apartment Market, 3rd Quarter 2003 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 Southern Pointe 300 97% 1985 0.5 mile west of the subject R-2 Carlyle Club 150 94% 1997 1 mile northwest of the subject R-3 Jacaranda Village NA 90% 1987 2 miles northwest of the subject R-4 Lakepointe at Jacaranda 246 95% 1986 0.5 mile west of subject Subject Plantation Gardens 372 97% 1971
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 15 PLANTATION GARDENS, PLANTATION, FLORIDA PROPERTY DESCRIPTION SITE ANALYSIS Site Area 20.83 acres, or 907,355 square feet Shape Irregular 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 Good Flood Zone: Community Panel 120054 0215F, dated August 18, 1992 Flood Zone Zone X Zoning PRD - 17Q, 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 -------------------------------------------------------------------------------------------------------------- 5041-04-06-0010 $4,083,170 $12,243,520 $16,326,690 0.02359 $385,196
IMPROVEMENT ANALYSIS Year Built 1971 Number of Units 372 Net Rentable Area 326,800 Square Feet Construction: Foundation Reinforced concrete slab Frame Heavy or light wood Exterior Walls Stucco wall Roof Composition shingle over a wood truss structure Project Amenities Amenities at the subject include a swimming pool, spa/jacuzzi, basketball court, tennis court, gym room, barbeque equipment, meeting hall, laundry room, business office, and parking area. Unit Amenities Individual unit amenities include a garage, balcony, cable TV connection, vaulted ceiling, and washer dryer connection. Appliances available in each unit include a refrigerator, stove, dishwasher, water heater, garbage
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16 PLANTATION GARDENS, PLANTATION, FLORIDA disposal, and oven. Unit Mix:
Unit Area Unit Type Number of Units (Sq. Ft.) -------------------------------------------------------- 1Bdrm/1Ba-1A10 42 750 2Bdrm/2Ba-2A20 182 850 2Bdrm/2Ba-2B20 148 950
Overall Condition Average Effective Age 20 years Economic Life 45 years Remaining Economic Life 25 years Deferred Maintenance The deferred maintenance at the subject property was estimated for a total amount of $280,000. 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 1971 and consist of a 372-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 17 PLANTATION GARDENS, PLANTATION, 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 18 PLANTATION GARDENS, PLANTATION, 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 19 PLANTATION GARDENS, PLANTATION, 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 20 PLANTATION GARDENS, PLANTATION, FLORIDA SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 ------------------------------------------------------------------------------------------------------------------------- Property Name Plantation Gardens Townhomes of Plantation Cimarron Apartments LOCATION: Address 7616 NW 5th Street 4790 NW 9th Court 850 E. Commercial Blvd City, State Plantation, Florida Plantation, Florida Oakland Park County Broward Broward County Broward County PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 326,800 150,168 105,816 Year Built 1971 1973 1973 Number of Units 372 183 106 Unit Mix: Type Total Type Total Type Total 1Bdrm/1Ba -1A10 42 1Bedroom 54 1 Bedroom 4 2Bdrm/2Ba -2A20 182 2Bedroom 129 2 Bedroom 86 2Bdrm/2Ba -2B20 148 3 Bedroom 16 3 Bedroom 2 Average Unit Size (SF) 878 821 998 Land Area (Acre) 20.8300 9.0200 4.9900 Density (Units/Acre) 17.9 20.3 21.2 Parking Ratio (Spaces/Unit) 1.08 Parking Type (Gr., Cov., etc.) Open parking lot Open Open CONDITION: Average Average Average APPEAL: Average Average Average AMENITIES: Pool/Spa Yes/Yes Yes/No No/No Gym Room Yes No No Laundry Room Yes Yes Yes Secured Parking No No No Sport Courts Yes No No OCCUPANCY: 97% 97% NA TRANSACTION DATA: Sale Date September, 2002 May, 2003 Sale Price ($) $9,100,000 $5,650,000 Grantor Chisolm Realty Company, Ltd Triad Lauderdale (LP) Grantee Advenir Townhomes, LLC Cimarron Apartments of Broward Sale Documentation Bk 33787 Pg 0896 Bk 35269 Pg 0233 Verification Broker, Marcus & Millichap Broker, Marcus & Millichap Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $1,654,545 $9,041 $11.02 $0 $0 $0.00 Vacancy/Credit Loss ($ 57,413) ($ 314) ($ 0.38) $0 $0 $0.00 Effective Gross Income $1,597,132 $8,727 $10.64 $0 $0 $0.00 Operating Expenses $ 842,675 $4,605 $ 5.61 $0 $0 $0.00 Net Operating Income $ 754,457 $4,123 $ 5.02 $0 $0 $0.00 NOTES: Seller's downleg in a 1031 exchange PRICE PER UNIT $49,727 $53,302 PRICE PER SQUARE FOOT $ 60.60 $ 53.39 EXPENSE RATIO 52.8% N/A EGIM 5.70 N/A OVERALL CAP RATE 8.29% N/A Cap Rate based on Pro Forma or Actual Income? PRO FORMA N/A COMPARABLE COMPARABLE COMPARABLE DESCRIPTION I - 3 I - 4 I - 5 ------------------------------------------------------------------------------------------------------------------------------------ Property Name Spring Crest Royal Sheridan Apartments Boardwalk at Inverrary LOCATION: Address 4245 N. University Drive 4200 Sheridan Street 2915 NW 60th Ave City, State Plantation, Florida Hollywood, Florida Sunrise, Florida County Broward County Broward County Broward County PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 176,688 88,778 267,470 Year Built 1980 1974 1973 Number of Units 168 100 310 Unit Mix: Type Total Type Total Type Total 1 Bedroom 14 1 Bedroom 48 1 Bedroom 186 2 Bedroom 154 2 Bedroom 52 2 Bedroom 124 3 Bedroom N/A Average Unit Size (SF) 1,052 888 863 Land Area (Acre) NA 3.8800 11.2600 Density (Units/Acre) 25.8 27.5 Parking Ratio (Spaces/Unit) 0.00 0.00 Parking Type (Gr., Cov., etc.) Open Open Open CONDITION: Average Average Fair APPEAL: Average Fair Fair AMENITIES: Pool/Spa Yes/No Yes/No Yes/No Gym Room No No No Laundry Room Yes Yes Yes Secured Parking No No No Sport Courts Yes No Yes OCCUPANCY: 94% NA 94% TRANSACTION DATA: Sale Date September, 2003 March, 2001 July, 2003 Sale Price ($) $11,200,000 $5,250,000 $13,550,000 Grantor Waterton Crest, LLC Royal Sheridan Apartments Pelican Run Associates Grantee Springcrest LLC Sheridan Apartments, LLC MSRH Boardwalk, LLC Sale Documentation Bk 36063 Pg 1045 Bk 31333 Pg 0945 Bk 35639 Pg 0911 Verification Broker, Marcus & Millichap Seller's Broker Grantee Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $1,716,584 $10,218 $9.72 $2,896,209 $9,343 $10.83 Vacancy/Credit Loss $ 102,995 $ 613 $0.58 $ 182,172 $ 588 $ 0.68 Effective Gross Income $1,613,589 $ 9,605 $9.13 $859,200 $8,592 $9.68 $2,714,037 $8,755 $10.15 Operating Expenses $ 672,000 $ 4,000 $3.80 $310,000 $3,100 $3.49 $1,581,000 $5,100 $ 5.91 Net Operating Income $1,008,000 $ 6,000 $5.70 $549,200 $5,492 $6.19 $1,133,037 $3,655 $ 4.24 NOTES: PRICE PER UNIT $66,667 $52,500 $43,710 PRICE PER SQUARE FOOT $ 63.39 $ 59.14 $ 50.66 EXPENSE RATIO 41.6% 36.1% 58.3% EGIM 6.94 6.11 4.99 OVERALL CAP RATE 9.00% 10.46% 8.36% Cap Rate based on Pro Forma or Actual Income? PRO FORMA PRO FORMA PRO FORMA
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 21 PLANTATION GARDENS, PLANTATION, FLORIDA IMPROVED SALES MAP [MAP] IMPROVED SALES ANALYSIS The improved sales indicate a sales price range from $43,710 to $66,667 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 $49,875 to $55,967 per unit with a mean or average adjusted price of $52,101 per unit. The median adjusted price is $52,213 per unit. Based on the following analysis, we have concluded to a value of $52,000 per unit, which results in an "as is" value of $19,100,000 (rounded after necessary adjustment, if any). AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22 PLANTATION GARDENS, PLANTATION, FLORIDA SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 ----------------------------------------------------------------------------------------------------------------- Property Name Plantation Gardens Townhomes of Plantation Cimarron Apartments Address 7616 NW 5th Street 4790 NW 9th Court 850 E. Commercial Blvd City Plantation, Florida Plantation, Florida Oakland Park Sale Date September, 2002 May, 2003 Sale Price ($) $9,100,000 $5,650,000 Net Rentable Area (SF) 326,800 150,168 105,816 Number of Units 372 183 106 Price Per Unit $49,727 $53,302 Year Built 1971 1973 1973 Land Area (Acre) 20.8300 9.0200 4.9900 VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Date of Sale (Time) 09-2002 0% 05-2003 0% VALUE AFTER TRANS. ADJUST. ($/UNIT) $49,727 $53,302 Location Comparable 0% Inferior 15% Number of Units 372 183 -10% 106 -15% Quality / Appeal Average Inferior 10% Inferior 10% Age / Condition 1971 1973 / Average 0% 1973 / Average 0% Occupancy at Sale 97% 97% 0% NA 0% Amenities Average Inferior 5% Inferior 5% Average Unit Size (SF) 878 821 0% 998 -10% PHYSICAL ADJUSTMENT 5% 5% FINAL ADJUSTED VALUE ($/UNIT) $52,213 $55,967 COMPARABLE COMPARABLE COMPARABLE DESCRIPTION I - 3 I - 4 I - 5 ----------------------------------------------------------------------------------------------------------------- Property Name Spring Crest Royal Sheridan Apartments Boardwalk at Inverrary Address 4245 N. University Drive 4200 Sheridan Street 2915 NW 60th Ave City Plantation, Florida Hollywood, Florida Sunrise, Florida Sale Date September, 2003 March, 2001 July, 2003 Sale Price ($) $11,200,000 $5,250,000 $13,550,000 Net Rentable Area (SF) 176,688 88,778 267,470 Number of Units 168 100 310 Price Per Unit $66,667 $52,500 $43,710 Year Built 1980 1974 1973 Land Area (Acre) NA 3.8800 11.2600 VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple 0% Estate Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0% Date of Sale (Time) 09-2003 0% 03-2001 0% 07-2003 0% VALUE AFTER TRANS. ADJUST. ($/UNIT) $66,667 $52,500 $43,710 Location Comparable 0% Inferior 10% Inferior 20% Number of Units 168 -10% 100 -15% 310 0% Quality / Appeal Comparable 0% Comparable 0% Comparable 0% Age / Condition 1980 / Average -5% 1974 / Average 0% 1973 / Fair 0% Occupancy at Sale 94% 0% NA 0% 94% 0% Amenities Comparable 0% Comparable 0% Comparable 0% Average Unit Size (SF) 1,052 -10% 888 0% 863 0% PHYSICAL ADJUSTMENT -25% -5% 20% FINAL ADJUSTED VALUE ($/UNIT) $50,000 $49,875 $52,452
SUMMARY VALUE RANGE (PER UNIT) $49,875 TO $55,967 MEAN (PER UNIT) $52,101 MEDIAN (PER UNIT) $52,213 VALUE CONCLUSION (PER UNIT) $52,000
VALUE OF IMPROVEMENT & MAIN SITE $19,344,000 DEFERRED MAINTENANCE -$ 280,000 VALUE INDICATED BY SALES COMPARISON APPROACH $19,064,000 ROUNDED $19,100,000
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 23 PLANTATION GARDENS, PLANTATION, 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-1 183 $ 9,100,000 8.29% $ 754,457 $1,678,120 1.094 $54,411 $ 49,727 $ 4,123 $ 4,511 I-2 106 $ 5,650,000 0.00% $1,678,120 $ 53,302 $ 4,511 I-3 168 $11,200,000 N/A $1,008,000 $1,678,120 0.752 $50,123 $ 66,667 $ 6,000 $ 4,511 I-4 100 $ 5,250,000 10.46% $ 549,200 $1,678,120 0.821 $43,123 $ 52,500 $ 5,492 $ 4,511 I-5 310 $13,550,000 8.36% $1,133,037 $1,678,120 1.234 $53,948 $ 43,710 $ 3,655 $ 4,511
PRICE/UNIT
Low High Average Median $43,123 $54,411 $50,401 $52,036
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT Estimated Price Per Unit $ 52,000 ----------- Number of Units 372 Value $19,344,000 Deferred Maintenance -$ 280,000 ----------- Value Based on NOI Analysis $19,064,000 Rounded $19,100,000
The adjusted sales indicate a range of value between $43,123 and $54,411 per unit, with an average of $50,401 per unit. Based on the subject's competitive position within the improved sales, a value of $52,000 per unit is estimated. This indicates an "as is" market value of $19,100,000 (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. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 24 PLANTATION GARDENS, PLANTATION, FLORIDA 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-1 183 $ 9,100,000 $1,597,132 $ 842,675 52.76% 5.70 $ 49,727 I-2 106 $ 5,650,000 $ 53,302 I-3 168 $11,200,000 $1,613,589 $ 672,000 41.65% 6.94 50.22% $ 66,667 I-4 100 $ 5,250,000 $ 859,200 $ 310,000 36.08% 6.11 $ 52,500 I-5 310 $13,550,000 $2,714,037 $1,581,000 58.25% 4.99 $ 43,710
EGIM
Low High Average Median 4.99 6.94 5.94 5.90
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES Estimate EGIM 5.50 ------------ Subject EGI $ 3,557,916 Value $19,568,538 Deferred Maintenance -$ 280,000 ------------ Value Based on EGIM Analysis $19,288,538 Rounded $19,300,000 Value Per Unit $ 51,882
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 50.22% before reserves. The comparable sales indicate a range of expense ratios from 36.08% to 58.25%, while their EGIMs range from 4.99 to 6.94. Overall, we conclude to an EGIM of 5.50, which results in an "as is" value estimate in the EGIM Analysis of $19,300,000. 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 $19,100,000. Price Per Unit $19,100,000 NOI Per Unit $19,100,000 EGIM Analysis $19,300,000 Sales Comparison Conclusion $19,100,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 25 PLANTATION GARDENS, PLANTATION, 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 26 PLANTATION GARDENS, PLANTATION, 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 -------------------------------------------------------------- 1Bdrm/1Ba-1A10 750 $719 $0.96 97.6% 2Bdrm/2Ba-2A20 850 $763 $0.90 97.8% 2Bdrm/2Ba-2B20 950 $816 $0.86 95.3%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 27 PLANTATION GARDENS, PLANTATION, FLORIDA RENT ANALYSIS
COMPARABLE RENTS ------------------------------------------ R1 R2 R3 R4 ------------------------------------------ SOUTHERN CARLYLE TACARANDA LAKEPOINT AT POINT CLUB VILLAGE TACARANDA ------------------------------------------ SUBJECT SUBJECT COMPARISON TO SUBJECT DESCRIPTION SUBJECT UNIT ACTUAL ASKING ------------------------------------------ TYPE RENT RENT Superior Superior Superior Superior -------------------------------------------------------------------------------------------------------------- Monthly Rent 1Bdrm/1Ba-1A10 $ 719 $ 772 $ 930 $ 785 $ 795 Unit Area (SF) 750 750 760 800 810 Monthly Rent Per Sq. Pt $ 0.96 $1.05 $ 1.22 $ 0.98 $ 0.98 Monthly Rent 2Bdrm/2Ba-2A20 $ 765 $ 829 $ 950 $1.050 $ 899 Unit Area (SF) 850 850 974 963 1,035 Monthly Rent Per Sq. Pt $ 0.90 $0.98 $0.98 $ 1.09 $ 0.87 Monthly Rent 2Bdrm/2Ba-2B20 $ 816 $ 899 $1,150 $ 930 $1,046 Unit Area (SF) 950 950 1,093 1,100 1,100 Monthly Rent Per Sq. Pt $ 0.86 $0.95 $ 1.05 $ 0.84 $ 0.95 DESCRIPTION MIN MAX MEDIAN AVERAGE ------------------------------------------------------------------- Monthly Rent $ 785 $ 930 $ 795 $ 837 Unit Area (SF) 760 810 800 790 Monthly Rent Per Sq. Pt $ 1.98 $ 1.22 $ 0.98 $ 1.06 Monthly Rent $ 899 $1,050 $ 954 $ 966 Unit Area (SF) 963 1,035 974 991 Monthly Rent Per Sq. Pt $ 0.87 $ 1.09 $ 0.98 $ 0.97 Monthly Rent $ 950 $1,150 $1,046 $1,042 Unit Area (SF) 1,093 1,102 1,100 1098 Monthly Rent Per Sq. Pt $ 0.84 $ 1.05 $ 0.93 $ 0.93
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 ------------------------------------------------------------------------------------------------- 1Bdrm/1Ba-1A10 42 750 $ 750 $ 1.00 $ 31,500 $ 378,000 2Bdrm/2Ba-2A20 182 850 $ 800 $ 0.94 $ 145,600 $1,747,200 2Bdrm/2Ba-2B20 148 950 $ 850 $ 0.89 $ 125,800 $1,509,600 ------------------------------------- Total $ 302,900 $3,634,800 =====================================
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 28 PLANTATION GARDENS, PLANTATION, FLORIDA SUMMARY OF HISTORICAL INCOME & EXPENSES
FISCAL YEAR 2001 FISCAL YEAR 2002 FISCAL YEAR 2003 --------------------------------------------------------------------------- ACTUAL ACTUAL MANAGEMENT BUDGET --------------------------------------------------------------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT ------------------------------------------------------------------------------------------------------ Revenues Rental Income $3,559,658 $ 9,569 $3,608,966 $ 9,702 $3,638,000 $ 9,780 Vacancy $ 166,432 $ 447 $ 318,849 $ 857 $ 235,500 $ 633 Credit Loss/Concessions $ 33,382 $ 90 $ 45,582 $ 123 $ 72,000 $ 194 ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 199,814 $ 537 $ 364,431 $ 980 $ 307,500 $ 827 Laundry Income $ 43,175 $ 116 $ 38,126 $ 102 $ 60,000 $ 161 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 177,338 $ 477 $ 166,732 $ 448 $ 162,000 $ 435 ---------- ---------- ---------- ---------- ---------- ---------- Subtotal Other Income $ 220,513 $ 593 $ 204,858 $ 551 $ 222,000 $ 597 ---------- ---------- ---------- ---------- ---------- ---------- Effective Gross Income $3,580,357 $ 9,625 $3,449,393 $ 9,273 $3,552,500 $ 9,550 Operating Expenses Taxes $ 332,993 $ 895 $ 345,788 $ 930 $ 375,836 $ 1,010 Insurance $ 144,526 $ 389 $ 151,502 $ 407 $ 133,608 $ 359 Utilities $ 289,742 $ 779 $ 309,605 $ 832 $ 170,400 $ 458 Repair & Maintenance $ 166,893 $ 449 $ 182,278 $ 490 $ 286,800 $ 771 Cleaning $ 29,074 $ 78 $ 55,845 $ 150 $ 61,200 $ 165 Landscaping $ 40,145 $ 108 $ 39,022 $ 105 $ 0 $ 0 Security $ 16,792 $ 45 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 70,073 $ 188 $ 79,355 $ 213 $ 70,800 $ 190 General Administrative $ 352,013 $ 946 $ 297,272 $ 799 $ 340,080 $ 914 Management $ 190,024 $ 511 $ 169,939 $ 457 $ 163,420 $ 439 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- ---------- Total Operating Expenses $1,632,275 $ 4,388 $1,630,606 $ 4,383 $1,602,144 $ 4,307 Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- ---------- Net Income $1,948,082 $ 5,237 $1,818,787 $ 4,889 $1,950,356 $ 5,243 ANNUALIZED 2003 ----------------------- ACTUAL AAA PROJECTION ------------------------------------------------------------ DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT % --------------------------------------------------------------------------------------- Revenues Rental Income $3,588,877 $ 9,648 $3,634,800 $ 9,771 100.0% Vacancy $ 284,856 $ 766 $ 218,088 $ 586 6.0% Credit Loss/Concessions $ 95,584 $ 257 $ 72,696 $ 195 2.0% ---------- ---------- ---------- ---------- ----- Subtotal $ 380,440 $ 1,023 $ 290,784 $ 782 8.0% Laundry Income $ 36,372 $ 98 $ 46,500 $ 125 1.3% Garage Revenue $ 0 $ 0 $ 0 0.0% Other Misc. Revenue $ 167,788 $ 451 $ 167,400 $ 450 4.6% ---------- ---------- ---------- ---------- ----- Subtotal Other Income $ 204,160 $ 549 $ 213,900 $ 575 5.9% ---------- ---------- ---------- ---------- ----- Effective Gross Income $3,412,597 $ 9,174 $3,557,916 $ 9,564 100.0% Operating Expenses Taxes $ 338,191 $ 909 $ 385,020 $ 1,035 10.8% Insurance $ 158,865 $ 427 $ 148,800 $ 400 4.2% Utilities $ 312,104 $ 839 $ 312,480 $ 840 8.8% Repair & Maintenance $ 231,345 $ 622 $ 241,800 $ 650 6.8% Cleaning $ 71,319 $ 192 $ 66,960 $ 180 1.9% Landscaping $ 53,064 $ 143 $ 46,500 $ 125 1.3% Security $ 15,616 $ 42 $ 16,740 $ 45 0.5% Marketing & Leasing $ 150,825 $ 405 $ 74,400 $ 200 2.1% General Administrative $ 280,028 $ 753 $ 316,200 $ 850 8.9% Management $ 165,000 $ 444 $ 177,896 $ 478 5.0% Miscellaneous $ 0 $ 0 $ 0 $ 0 0.0% ---------- ---------- ---------- ---------- ----- Total Operating Expenses $1,776,357 $ 4,775 $1,786,796 $ 4,803 50.2% Reserves $ 0 $ 0 $ 93,000 $ 250 2.6% ---------- ---------- ---------- ---------- ----- Net Income $1,636,240 $ 4,398 $1,678,120 $ 4,511 47.2%
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. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 29 PLANTATION GARDENS, PLANTATION, FLORIDA We have projected a stabilized vacancy and collection loss rate of 8% based on the subject's historical performance, as well as the anticipated future market conditions. 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 $250 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 some major items remaining in need of repair or replacement that would require an expense beyond our reserves for replacement. Therefore an additional $280,000 has been deducted. 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. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30 PLANTATION GARDENS, PLANTATION, FLORIDA KORPACZ NATIONAL INVESTOR SURVEY 3RD 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%
SUMMARY OF OVERALL CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR ------------------------------------------------------- I-1 Sep-02 97% $49,727 8.29% I-2 May-03 NA $53,302 N/A I-3 Sep-03 94% $66,667 9.00% I-4 Mar-01 NA $52,500 10.46% I-5 Jul-03 94% $43,710 8.36% High 10.46% Low 8.29% Average 9.03%
Based on this information, we have concluded the subject's overall capitalization rate should be 8.75%. 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 9.25%. 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 11.00%. 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 AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31 PLANTATION GARDENS, PLANTATION, FLORIDA 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 11.00% indicates a value of $19,500,000. In this instance, the reversion figure contributes approximately 41% of the total value. Investors surveyed for this assignment indicated they 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 32 PLANTATION GARDENS, PLANTATION, FLORIDA DISCOUNTED CASH FLOW ANALYSIS PLANTATION GARDENS
YEAR JAN-2004 JAN-2005 JAN-2006 JAN-2007 JAN-2008 JAN-2009 FISCAL YEAR 1 2 3 4 5 6 --------------------------------------------------------------------------------------------------------------------- REVENUE Base Rent $3,634,800 $3,707,496 $3,781,646 $3,895,095 $4,011,948 $4,132,307 Vacancy $ 191,736 $ 122,347 $ 113,449 $ 116,853 $ 120,358 $ 247,938 Credit Loss $ 72,696 $ 74,150 $ 75,633 $ 77,902 $ 80,239 $ 82,646 Concessions $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 264,432 $ 196,497 $ 189,082 $ 194,755 $ 200,597 $ 330,585 Laundry Income $ 46,500 $ 47,430 $ 48,379 $ 49,830 $ 51,325 $ 52,865 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 167,400 $ 170,748 $ 174,163 $ 179,388 $ 184,769 $ 190,313 ---------- ---------- ---------- ---------- ---------- ---------- Subtotal Other Income $ 213,900 $ 218,178 $ 222,542 $ 229,218 $ 236,094 $ 243,177 ---------- ---------- ---------- ---------- ---------- ---------- EFFECTIVE GROSS INCOME $3,584,268 $3,729,177 $3,815,105 $3,929,558 $4,047,445 $4,044,899 OPERATING EXPENSES: Taxes $ 385,020 $ 396,571 $ 408,468 $ 420,722 $ 433,343 $ 446,344 Insurance $ 148,800 $ 153,264 $ 157,862 $ 162,598 $ 167,476 $ 172,500 Utilities $ 312,480 $ 321,854 $ 331,510 $ 341,455 $ 351,699 $ 362,250 Repair & Maintenance $ 241,800 $ 249,054 $ 256,526 $ 264,221 $ 272,148 $ 280,312 Cleaning $ 66,960 $ 68,969 $ 71,038 $ 73,169 $ 75,364 $ 77,625 Landscaping $ 46,500 $ 47,895 $ 49,332 $ 50,812 $ 52,336 $ 53,906 Security $ 16,740 $ 17,242 $ 17,759 $ 18,292 $ 18,841 $ 19,406 Marketing & Leasing $ 74,400 $ 76,632 $ 78,931 $ 81,299 $ 83,738 $ 86,250 General Administrative $ 316,200 $ 325,686 $ 335,457 $ 345,520 $ 355,886 $ 366,562 Management $ 179,213 $ 186,459 $ 190,755 $ 196,478 $ 202,372 $ 202,245 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL OPERATING EXPENSES $1,788,113 $1,843,626 $1,897,637 $1,954,566 $2,013,203 $2,067,401 Reserves $ 93,000 $ 95,790 $ 98,664 $ 101,624 $ 104,672 $ 107,812 ---------- ---------- ---------- ---------- ---------- ---------- NET OPERATING INCOME $1,703,155 $1,789,761 $1,818,804 $1,873,368 $1,929,569 $1,869,686 Operating Expense Ratio (% of EGI) 49.9% 49.4% 49.7% 49.7% 49.7% 51.1% Operating Expense Per Unit $ 4,807 $ 4,956 $ 5,101 $ 5,254 $ 5,412 $ 5,558 YEAR JAN-2010 JAN-2011 JAN-2012 JAN-2013 JAN-2014 FISCAL YEAR 7 8 9 10 11 ------------------------------------------------------------------------------------------------------- REVENUE Base Rent $4,256,276 $4,383,964 $4,515,483 $4,650,947 $4,790,476 Vacancy $ 255,377 $ 263,038 $ 270,929 $ 279,057 $ 287,429 Credit Loss $ 85,126 $ 87,679 $ 90,310 $ 93,019 $ 95,810 Concessions $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- Subtotal $ 340,502 $ 350,717 $ 361,239 $ 372,076 $ 383,238 Laundry Income $ 54,451 $ 56,084 $ 57,767 $ 59,500 $ 61,285 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 196,022 $ 201,903 $ 207,960 $ 214,198 $ 220,624 ---------- ---------- ---------- ---------- ---------- Subtotal Other Income $ 250,472 $ 257,987 $ 265,726 $ 273,698 $ 281,909 ---------- ---------- ---------- ---------- ---------- EFFECTIVE GROSS INCOME $4,166,246 $4,291,234 $4,419,971 $4,552,570 $4,689,147 OPERATING EXPENSES: Taxes $ 459,734 $ 473,526 $ 487,732 $ 502,364 $ 517,435 Insurance $ 177,675 $ 183,005 $ 188,495 $ 194,150 $ 199,975 Utilities $ 373,117 $ 384,311 $ 395,840 $ 407,716 $ 419,947 Repair & Maintenance $ 288,722 $ 297,384 $ 306,305 $ 315,494 $ 324,959 Cleaning $ 79,954 $ 82,352 $ 84,823 $ 87,368 $ 89,989 Landscaping $ 55,523 $ 57,189 $ 58,905 $ 60,672 $ 62,492 Security $ 19,988 $ 20,588 $ 21,206 $ 21,842 $ 22,497 Marketing & Leasing $ 88,837 $ 91,503 $ 94,248 $ 97,075 $ 99,987 General Administrative $ 377,559 $ 388,886 $ 400,553 $ 412,569 $ 424,946 Management $ 208,312 $ 214,562 $ 220,999 $ 227,628 $ 234,457 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- TOTAL OPERATING EXPENSES $2,129,423 $2,193,306 $2,259,105 $2,326,878 $2,396,684 Reserves $ 111,047 $ 114,378 $ 117,810 $ 121,344 $ 124,984 ---------- ---------- ---------- ---------- ---------- NET OPERATING INCOME $1,925,776 $1,983,550 $2,043,056 $2,104,348 $2,167,478 Operating Expense Ratio (% of EGI) 51.1% 51.1% 51.1% 51.1% 51.1% Operating Expense Per Unit $ 5,724 $ 5,896 $ 6,073 $ 6,255 $ 6,443
Estimated Stabilized NOI $1,678,120 Sales Expense Rate 2.00% Months to Stabilized 1 Discount Rate 11.00% Stabilized Occupancy 94.0% Terminal Cap Rate 9.25%
"DCF" VALUE ANALYSIS Gross Residual Sale Price $23,432,197 Deferred Maintenance -$ 280,000 Less: Sales Expense $ 468,644 Add: Excess Land $ 0 ----------- Other Adjustments $ 0 Net Residual Sale Price $22,963,553 ----------- PV of Reversion $ 8,087,407 Value Indicated By "DCF" $19,518,832 Add: NPV of NOI $11,711,425 Rounded $19,500,000 ----------- PV Total $19,798,832
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE ------------------------------------------------------------------- TOTAL VALUE 10.50% 10.75% 11.00% 11.25% 11.50% ----------------------------------------------------------------------------------------- 8.75% $20,933,929 $20,593,735 $20,260,969 $19,935,444 $19,616,978 9.00% $20,685,474 $20,350,832 $20,023,482 $19,703,240 $19,389,928 TERMINAL CAP 9.25% $20,450,449 $20,121,059 $19,798,832 $19,483,588 $19,175,151 RATE 9.50% $20,227,794 $19,903,379 $19,586,005 $19,275,496 $18,971,678 9.75% $20,016,557 $19,696,862 $19,384,093 $19,078,075 $18,778,639
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 33 PLANTATION GARDENS, PLANTATION, 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 8.75% percent is applicable to the subject. The results of our direct capitalization analysis are as follows: AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34 PLANTATION GARDENS, PLANTATION, FLORIDA PLANTATION GARDENS
TOTAL PER SQ. FT. PER UNIT %OF EGI ----- ----------- -------- ------- REVENUE Base Rent $ 3,634,800 $11.12 $ 9,771 Less: Vacancy & Collection Loss 8.00% $ 290,784 $ 0.89 $ 782 Plus: Other Income Laundry Income $ 46,500 $ 0.14 $ 125 1.31% Garage Revenue $ 0 $ 0.00 $ 0 0.00% Other Misc. Revenue $ 167,400 $ 0.51 $ 450 4.71% ----------- ------ ------- ----- Subtotal Other Income $ 213,900 $ 0.65 $ 575 6.01% EFFECTIVE GROSS INCOME $ 3,557,916 $10.89 $ 9,564 OPERATING EXPENSES: Taxes $ 385,020 $ 1.18 $ 1,035 10.82% Insurance $ 148,800 $ 0.46 $ 400 4.18% Utilities $ 312,480 $ 0.96 $ 840 8.78% Repair & Maintenance $ 241,800 $ 0.74 $ 650 6.80% Cleaning $ 66,960 $ 0.20 $ 180 1.88% Landscaping $ 46,500 $ 0.14 $ 125 1.31% Security $ 16,740 $ 0.05 $ 45 0.47% Marketing & Leasing $ 74,400 $ 0.23 $ 200 2.09% General Administrative $ 316,200 $ 0.97 $ 850 8.89% Management 5.00% $ 177,896 $ 0.54 $ 478 5.00% Miscellaneous $ 0 $ 0.00 $ 0 0.00% TOTAL OPERATING EXPENSES $ 1,786,796 $ 5.47 $ 4,803 50.22% Reserves $ 93,000 $ 0.28 $ 250 2.61% ----------- ------ ------- ----- NET OPERATING INCOME $ 1,678,120 $ 5.14 $ 4,511 47.17% =========== ====== ======= ===== "GOING IN" CAPITALIZATION RATE 8.75% VALUE INDICATION $19,178,517 $58.69 $51,555 DEFERRED MAINTENANCE ($ 280,000) "AS IS" VALUE INDICATION (DIRECT CAPITALIZATION APPROACH) $18,898,517 ROUNDED $18,900,000 $57.83 $50,806
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35 PLANTATION GARDENS, PLANTATION, FLORIDA DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF ---------------------------------------------------------- 8.00% $20,696,503 $20,700,000 $55,645 $ 63.34 8.25% $20,060,851 $20,100,000 $54,032 $ 61.51 8.50% $19,462,591 $19,500,000 $52,419 $ 59.67 8.75% $18,898,517 $18,900,000 $50,806 $ 57.83 9.00% $18,365,780 $18,400,000 $49,462 $ 56.30 9.25% $17,861,840 $17,900,000 $48,118 $ 54.77 9.50% $17,384,423 $17,400,000 $46,774 $ 53.24
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD Applying the capitalization rate to our estimated NOI results in an estimated value of $18,900,000. 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 $19,500,000 Direct Capitalization Method $18,900,000
Giving consideration to the indicated values provided by both techniques, we have concluded the estimated value by the income capitalization approach to be $19,000,000. AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 36 PLANTATION GARDENS, PLANTATION, 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 $19,100,000 Income Approach $19,000,000 Reconciled Value $19,000,000
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 11, 2003 the market value of the fee simple estate in the property is: $19,000,000 AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA PLANTATION GARDENS, PLANTATION, FLORIDA ADDENDA AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A PLANTATION GARDENS, PLANTATION, FLORIDA EXHIBIT A SUBJECT PHOTOGRAPHS AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A PLANTATION GARDENS, PLANTATION, FLORIDA SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] EXTERIOR - APARTMENT ENTRANCE EXTERIOR - 4 - STORY APARTMENT BUILDING [PICTURE] [PICTURE] EXTERIOR - SITE IMPROVEMENTS EXTERIOR - TYPICAL BUILDINGS [PICTURE] [PICTURE] EXTERIOR - TYPICAL BUILDING NEEDING PAINT EXTERIOR - CLUBHOUSE AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A PLANTATION GARDENS, PLANTATION, FLORIDA SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] EXTERIOR - POOL INTERIOR - LIVING AREA OF MODEL [PICTURE] [PICTURE] INTERIOR - KITCHEN OF MODEL INTERIOR - BEDROOM OF MODEL [PICTURE] [PICTURE] INTERIOR - VACANT UNIT LIVING AREA INTERIOR - VACANT UNIT KITCHEN AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PLANTATION GARDENS, PLANTATION, FLORIDA EXHIBIT B SUMMARY OF RENT COMPARABLES AND PHOTOGRAPH OF COMPARABLES AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PLANTATION GARDENS, PLANTATION, FLORIDA PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3 TOWNHOMES OF PLANTATION CIMARRON APARTMENTS SPRING CREST 4790 NW 9th Court 850 E. Commercial Blvd 4245 N. University Drive Plantation, Florida Oakland Park Plantation, Florida [PICTURE] [PICTURE] [PICTURE] COMPARABLE I-4 COMPARABLE I-5 ROYAL SHERIDAN APARTMENTS BOARDWALK AT INVERRARY 4200 Sheridan Street 2915 NW 60th Ave Hollywood, Florida Sunrise, Florida [PICTURE] [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PLANTATION GARDENS, PLANTATION, FLORIDA SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE DESCRIPTION SUBJECT R - 1 ------------------------------- ------------------------------------------ --------------------------------------------- Property Name Plantation Gardens Southern Pointe Management Company AIMCO Kennedy-Wilson LOCATION: Address 7616 NW 5th Street 8080 NW 10 Court City, State Plantation, Florida Plantation, FL County Broward Broward Proximity to Subject 0.5 mile west of the subject PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 326,800 NA Year Built 1971 1985 Effective Age 20 18 Building Structure Type Wood/Masonry/Stucco Wood/Masonry/Stucco Parking Type (Gr., Cov., etc.) Open Open Number of Units 372 300 Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo. 1 1Bdrm/1Ba-1A10 750 42 $719 2 1 Bdrm/1Ba 862 $ 855 2 2Bdrm/2Ba-2A20 850 182 $763 2 2 Bdrm/2Ba 950 $ 975 3 2Bdrm/2Ba-2B20 950 148 $816 2 2 Bdrm/2Ba 1,111 $1,020 Average Unit Size (SF) 878 Unit Breakdown: Efficiency 2-Bedroom Efficiency 2-Bedroom 1-Bedroom 3-Bedroom 1-Bedroom 3-Bedroom CONDITION: Average Good APPEAL: Average Good AMENITIES: Unit Amenities X Attach. Garage X Vaulted Ceiling Attach. Garage X Vaulted Ceiling X Balcony X W/D Connect. X Balcony X W/D Connect. Fireplace Fireplace X Cable TV Ready X Cable TV Ready Project Amenities X Swimming Pool X Swimming Pool X Spa/Jacuzzi Car Wash X Spa/Jacuzzi Car Wash X Basketball Court X BBQ Equipment Basketball Court BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room Sand Volley Ball X Meeting Hall Sand Volley Ball X Meeting Hall X Tennis Court Secured Parking Tennis Court Secured Parking Racquet Ball X Laundry Room Racquet Ball Laundry Room Jogging Track X Business Office Jogging Track X Business Office X Gym Room Gym Room OCCUPANCY: 97% 97% LEASING DATA: Available Leasing Terms 7 to 12 12 months Concessions 1-2 months free $500 off 1BD, $600 off 2D, $700 off large 2BD Pet Deposit $250 $450 deposit, $250 non-refundable pet fee Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas X Water Trash X Water Trash Confirmation Brenda Williams, Manager Leasing Agent Telephone Number 954-473-5050 1-866-738-8578 NOTES: This complex located with the Jacaranda Community, a good quality planned development located northwest of the subject. COMPARISON TO SUBJECT: Superior COMPARABLE COMPARABLE DESCRIPTION R - 2 R - 3 ----------------------------- ------------------------------------------- ----------------------------------------- Property Name Carlyle Club Jacaranda Village Management Company ZOM Residential Services Scully Company LOCATION: Address 781 N. Pine Island 461 NW 87 Road City, State Plantation, FL Plantation, FL County Broward Broward Proximity to Subject 1 mile northwest of the subject 2 miles northwest of the subject PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) NA N/A Year Built 1997 1987 Effective Age 6 16 Building Structure Type Wood/Masonry/Stucco Wood/Masonry/Stucco Parking Type (Gr., Cov., etc.) Some garages, carports None Number of Units 150 NA Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo. 1 1Bdrm/1Ba 760 $ 930 1 1Bdrm/1Ba 800 $785 2 2Bdrm/1Ba 963 $1,050 3 2Bdrm/2Ba 1,102 $930 3 2Bdrm/2Ba 1,093 $1,150 Average Unit Size (SF) Unit Breakdown: Efficiency 2-Bedroom Efficiency 2-Bedroom 1-Bedroom 3-Bedroom 1-Bedroom 3-Bedroom CONDITION: Good Average APPEAL: Good Average AMENITIES: Unit Amenities X Attach. Garage X Vaulted Ceiling Attach. Garage X Vaulted Ceiling X Balcony X W/D Connect. X Balcony X W/D Connect. Fireplace Fireplace X Cable TV Ready X Cable TV Ready Project Amenities X Swimming Pool X Swimming Pool X Spa/Jacuzzi X Car Wash Spa/Jacuzzi Car Wash Basketball Court BBQ Equipment X Basketball Court BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room Sand Volley Ball X Meeting Hall Sand Volley Ball X Meeting Hall X Tennis Court Secured Parking X Tennis Court Secured Parking Racquet Ball Laundry Room Racquet Ball X Laundry Room Jogging Track X Business Office Jogging Track X Business Office X Gym Room X Gym Room OCCUPANCY: 94% 90% LEASING DATA: Available Leasing Terms 7 to 12 months 12 months Concessions $750 off 1 BD, $1,000 off 3 BD NA Pet Deposit $500 deposit; $300 non-refundable $150 deposit Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas X Water Trash X Water Trash Confirmation Susan, Leasing Agent Leasing Agent Telephone Number 1-866-674-1291 1-866-744-3710 NOTES: COMPARISON TO SUBJECT: Superior Superior COMPARABLE DESCRIPTION R - 4 ----------------------------- ------------------------------------------ Property Name Lakepointe at Jacaranda Management Company Lincoln Property Company LOCATION: Address 1171 Lake Pointe Landing City, State Plantation, FL County Broward Proximity to Subject 0.5 mile west of subject PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) N/A Year Built 1986 Effective Age 17 Building Structure Type Wood/Masonry/Stucco Parking Type (Gr., Cov., etc. Carports available Number of Units 246 Unit Mix: Type Unit Qty. Mo. 1 1Bdrm/1Ba 810 $ 795 2 2Bdrm/2Ba 1,035 $ 899 3 2Bdrm/2Ba 1,100 $1,046 Average Unit Size (SF) Unit Breakdown: Efficiency 2-Bedroom 1-Bedroom 3-Bedroom CONDITION: Fair APPEAL: Excellent AMENITIES: Unit Amenities Attach. Garage X Vaulted Ceiling X Balcony X W/D Connect. Fireplace X Cable TV Ready Project Amenities X Swimming Pool X Spa/Jacuzzi Car Wash Basketball Court BBQ Equipment Volleyball Court Theater Room Sand Volley Ball X Meeting Hall X Tennis Court Secured Parking Racquet Ball X Laundry Room Jogging Track X Business Office Gym Room OCCUPANCY: 95% LEASING DATA: Available Leasing Terms 12 months Concessions $500 off up to 1 month free Pet Deposit N/A Utilities Paid by Tenant: X Electric X Natural Gas X Water Trash Confirmation Leasing Agent Telephone Number 321-777-7070 NOTES: COMPARISON TO SUBJECT: Superior
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PLANTATION GARDENS, PLANTATION, FLORIDA PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3 SOUTHERN POINTE CARLYLE CLUB JACARANDA VILLAGE 8080 NW 10 Court 781 N. Pine Island 461 NW 87 Road Plantation, FL Plantation, FL Plantation, FL [PICTURE] [PICTURE] [PICTURE] COMPARABLE R-4 LAKEPOINTE AT JACARANDA 1171 Lake Pointe Landing N/A Plantation, FL [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C PLANTATION GARDENS, PLANTATION, FLORIDA EXHIBIT C ASSUMPTIONS AND LIMITING CONDITIONS (3 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C PLANTATION GARDENS, PLANTATION, 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 PLANTATION GARDENS, PLANTATION, 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 PLANTATION GARDENS, PLANTATION, 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 PLANTATION GARDENS, PLANTATION, FLORIDA EXHIBIT D CERTIFICATE OF APPRAISER (1 PAGE) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PLANTATION GARDENS, PLANTATION, 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 Uniform Standards of Professional Appraisal Practice and the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers. The analysis, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. I personally did not inspect the subject property. Kim Cook provided significant real property appraisal assistance in the preparation of this report. The American Society of Appraisers has a mandatory recertification program for all of its senior members. I am in compliance with the requirements of that program. -s- Edward Zenkovich --------------------------------- Edward Zenkovich, ASA Managing Principal, Real Estate Group State of Florida, Certified General Appraiser, #0001259 AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PLANTATION GARDENS, PLANTATION, FLORIDA EXHIBIT E QUALIFICATIONS OF APPRAISER (5 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PLANTATION GARDENS, PLANTATION, FLORIDA EDWARD J. ZENKOVICH, ASA SENIOR VICE PRESIDENT AND MANAGING PRINCIPAL, REAL ESTATE GROUP POSITION Edward J. Zenkovich serves as Senior Vice President and Managing Principal of the Atlanta Real Estate Group of American Appraisal Associates, Inc. ("AAA"). EXPERIENCE Valuation In the Public Sector Services Group of AAA, Mr. Zenkovich assisted clients with the establishment of fixed asset records for insurance, property control, and property accounting purposes for the appraisal of buildings, land improvements, and machinery and equipment. Mr. Zenkovich was also responsible for the planning and management of large multiple-location engagements. In the Real Estate Valuation Group, Mr. Zenkovich completed valuations of various types of real estate including commercial, investment, manufacturing, retail, and warehouse properties. As a member of the Real Estate Group, Mr. Zenkovich specialized in the valuation of investment real estate. Property interests he has appraised include fee simple, leased fee, and leasehold. He has completed appraisals for financial reporting, financing, litigation support, portfolio valuation, purchase, purchase price allocation, and sale. Specific properties he has appraised include apartments, hotels, land developments, nursing homes, office buildings, regional and community shopping centers, and warehouses. He has additional appraisal experience in heavy industrial property valuations, as well as investment portfolios for major institutional clients. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PLANTATION GARDENS, PLANTATION, FLORIDA Court Mr. Zenkovich is a qualified expert witness of the U.S. Bankruptcy Court, Western District. Business Mr. Zenkovich joined AAA in 1980 as an assistant appraiser in the Public Sector Services Group, advancing to staff appraiser the following year. In 1985, he transferred to the Real Estate Valuation Group and was promoted to senior appraiser in 1988. Mr. Zenkovich was appointed area manager of the Real Estate Group's Tampa, Florida, office and was promoted to principal in 1994. He was named a Vice President of AAA in 1995 and a Managing Principal in 1997. From 2001 to 2003, Mr. Zenkovich was the national director of AAA's Real Estate Group. He currently serves as Managing Principal of the Real Estate Group in Atlanta, Georgia. EDUCATION University of Wisconsin - Milwaukee Bachelor of Business Administration - Real Estate and Urban Development STATE CERTIFICATIONS State of Colorado, Certified General Appraiser, #CG01325475 State of Florida, Certified General Appraiser, #RZ0001259 State of Florida, Licensed Real Estate Broker, #BK0468540 State of Georgia, Certified General Real Property Appraiser, #005263 State of Minnesota, Certified General Real Property Appraiser, #4003673 PROFESSIONAL American Society of Appraisers, Accredited Senior AFFILIATIONS Appraiser ASA Designation - Urban Real Property Institute of Property Taxation, Candidate AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PLANTATION GARDENS, PLANTATION, FLORIDA VALUATION AND American Society of Appraisers SPECIAL COURSES Introduction to Business Valuation, Part One Appraisal Institute Basic Valuation Procedures Capitalization Theory and Techniques, Parts A and B Case Studies in Real Estate Valuation Real Estate Appraisal Principles Standards of Professional Practice, Parts A and B Valuation Analysis and Report Writing AMERICAN APPRAISAL ASSOCIATES, INC. PLANTATION GARDENS, PLANTATION, FLORIDA GENERAL SERVICE CONDITIONS AMERICAN APPRAISAL ASSOCIATES, INC. PLANTATION GARDENS, PLANTATION, 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.